After a strong bull market year, many investors have locked in large gains. And they will face a big tax bill in April. This is especially true for investors who participated in the AI surge that drove tech stocks higher for much of the year.
Here’s the thing: No one likes to pay taxes.
And many will look for ways to defer or reduce taxes. One of the best ways to do this is by selling a position that currently has a LOSS. The loss can offset your gain and result in a lower tax bill.
Looking at today’s market, there are two types of stocks that will likely trade lower over the last few weeks of the year.
First, stocks that have been weak all year.
Investors can essentially throw in the towel on these poor investments and get at least SOME good out of the situation by locking in an offsetting loss to reduce taxes.
Another category includes stocks that rolled lower over the past few weeks.
Many people bought shares of certain tech stocks at recent peaks… only to watch them turn lower.
META is a perfect example. The stock peaked in August just below $800 but then began to roll lower. The stock really sold off in late October after management released plans for a significant increase in capital expenditures.
Now that META is well below its peak, the stock is a good candidate for tax loss selling. And that means shares are likely to CONTINUE to be under pressure for the rest of the year.
Shares are not extremely expensive compared to profits. And long-term, META should be a profitable investment. But in the short-term, tax loss selling will likely drive the stock lower.
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