Yahoo Finance: “The under-appreciated force that intensified market selloff and rebound”

Excerpt from Yahoo Finance quoting DataTrek’s Nick Colas:

…. “In a note last month, Nick Colas from DataTrek explained that tax-loss selling intensified the sell-off. Tax-loss selling is a maneuver money managers make to help clients offset the tax liability from profitable trades by selling money-losing positions. In other words, selling investments at a loss can help reduce that tax bill that comes with realized capital gains.

“Up until December 13th, the S&P 500 had managed to hold onto flat/slightly positive YTD total returns,” Colas wrote in a new note. “When it started to break down on December 14th, investors shifted gears and started to sell losing positions to minimize the taxable effect of their Tech stock sales in what was shaping up to be a down year for the S&P.”

Colas added that the tax-loss selling “could not have come at a worse time, with illiquid year-end markets unable to soak up the incremental supply”….

Read the full article here on Yahoo Finance!

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