- Tax loss selling finished at the end of the year. Investors need to wait 30 days to buy back “substantially identical” securities (which is easily surmountable with ETF’s these days) to ensure “wash sales” tax treatments are not enforced. Along with this are notable seasonality trends in January, especially for small caps.
- Pension Funds and large allocators usually do substantial re balancing around month and quarter end.
- Financial market employees who are compensated not only with a salary but also a bonus, often see their performance period reset to the calendar year. So a new year brings a clean slate.
- I am sure there are others I have missed and encourage readers to post in the comments section.
So the question is, which one of these consensus trades will be right and which one will be horribly wrong? Your author thinks the headlong rush into beta has the potential to seriously upset many players in the year ahead and expects that as economic surprises start to tail off along with easy earnings comps in Q2, the market may once again pull the plug on the consensus sunbathers. While on the flip side, consensus US Dollar strength may be a good trade.
Please note this is the first post from Team MM 2.0. While living up to the standards of MM or TMM will be a tough job, we hope to provide thoughtful posts and keep this blog alive and thriving. We are still working out the scheduling and writing assignments so bear with us as we might take a few weeks to get into a routine.