It's also a good time to keep a careful eye out for indiscriminate tax-loss selling
during times when volumes are low eI it can create some extra volatility.
We had a final run of tax-loss selling
and then dealers swooped in seeing it was an artificial sell-off," said Bill O'Neill, a partner in the commodities investment firm LOGIC Advisors.
The $600 billion of automatic tax increases and spending cuts scheduled for the beginning of next year includes higher rates for capital gains, making tax-loss selling
even more appealing than usual.
Another way to reduce taxes is to do some tax-loss selling
to offset any potential capital gains.
Further, tax-loss selling
is greater for investors who have realized gains during the year and when the overall market has risen during the about-to-end calendar year.
So, no guarantee, but with the market oversold on a technical basis, tax-loss selling
season coming to an end, unusual amounts of cash on the sideline as potential fuel, the end of the election uncertainty and anticipation of the Fed switching back to a friendly bias, the market is probably entering a period where its upside potential will be greater than its downside risk.
Because of the unique market conditions over the past few months, the logic seems even more compelling this year that decisions on tax-loss selling
should be made through the art of valuation rather than as a continuation of a seasonal practice.
We document a unique and significant relationship between excess returns and the potential for tax-loss selling
and conclude that the November effect is explained by the tax-loss-selling hypothesis.
Even if the stock market broadens in the near future, the current stealth bear market at least presents myriad opportunities for tax-loss selling
But, if the portfolio is behind where they expect it to be, they may want to take advantage of some tax-loss selling
and explore other options for catching up.
In fact, the "January effect," whereby stocks tend to exhibit sharp price appreciation at the beginning of the year, is the result of indiscriminate year-end tax-loss selling
TYT also contains tools to support tax planning, including a "What-If Wizard", which enables users to see a trade outcome beforehand to find opportunities for strategic tax-loss selling