For the first time in awhile, we’re looking at a lower tax rate scenario into 2017.  It’s different, but sets up a very interestingly into the end of the year.  Let’s just walk through this one step at a time.

From a taxes perspective, it’s wise for money managers to:

  • take all the losses they can
  • hold winners through year end more so than normal

Also there is a positive drift in the markets right now.  Investors are buying into ‘The Santa Clause’ rally.  Lazy thinkers are saying who is going to sell?

On the other hand, who is going to buy?  The NAAIM survey tells us managers are pretty fully invested.

It appears we’ve got a bit of a greater fool theory going on right now.  There’s a chance the market gives us a bit of a psychological squeeze into the end of the year

Who wants to sell winners right now even though it’s a relatively prudent time to take wins.  The market never takes it easy on the majority.  Why would this time be any different?

On an individual stock basis, this sets up very interestingly for year to date losers, particularly those with high short interest.  If you’re short a stock with a big win, why would you want to cover now and not wait until 2017?

All in all, there will be plenty of opportunity in these last 8 trading days, but it’s probably wise to keep upside bets selective.

Thanks for reading.  Trade ’em well!