Is tax-loss harvesting for bond funds pressuring yields higher? While patience needed, some positive divergences seen in CCC-BB spreads and Bitcoin/SPX.

The video in this report is only accessible to members
The video in this report is only accessible to members

______________________________________________________________

We discuss: how tax-loss harvesting is hitting stocks (expected) but also likely bonds where 13 of 15 largest bond mutual funds down YTD, something essentially never seen.  Divergences of small-caps vs quality spread is likely positive as is the divergence of bitcoin vs $SPY.

Please click below to view our Macro Minute (Duration: 6:31).

The video in this report is only accessible to members
The video in this report is only accessible to members

The S&P 500 is down 2% this week, bringing its loss for the month to -3.5%. Besides a few high-profile negative reactions to earnings ($GOOG $META), to me, few macro events explain the acute weakness -- in fact, US 10-yr yields have been relatively more tame than could explain the -2% decline. It is possible that mutual fund tax-loss selling is playing a bigger role in 2023 than we appreciate:

The majority of mutual funds have an October year-end (Barrons) and this means we tend to see tax-loss harvesting as we move into the end of the month. 2022 saw this on display as selling of stocks with negative YTD returns were further under pressure towards the end of October 2022. This year, not only are there equity tax losses to "harvest" but also bond fund losses. 13 of the 15 largest bond mutu...

Unlock this article with a FREE 30-Day Trial!

No Credit Card Required! Limited time only!

An FSI Pro, or FSI Macro subscription is required in order to access this content.

*Free trial available only on a monthly plan

More from the author

Disclosures (show)
;

Get invaluable analysis of the market and stocks. Cancel at any time. Start Free Trial

Articles Read 2/2

🎁 Unlock 1 extra article by joining our Community!

You’ve reached your limit of 2 free monthly articles. Please enter your email to unlock 1 more articles.

Already have an account? Sign In

Want to receive Regular Market Updates to your Inbox?

I am your default error :)