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 $SPY.
Please click below to view our Macro Minute (Duration: 6:31).
The S&P 500 is down 2% this week, bringing its loss for the month to -3.5%. Besides a few high-profile negative reactions to earnings ($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...