Hedging ‘tail-risk’ in the 2nd Quarter of 2018 is a growing way for some to express deferment of concern about the stock market’s cycle potentially topping-out, for at least a correction of some degree.

And analysts saying that may actually be correct, for the fairly basic reality of money managers putting to work virtually all funds that arrive via yearly seasonal reinvestment funds. However, there’s quite a potentially rocky or downright more volatile path between here and a possible Spring period of ‘exhaustion’.

There are minimal changes to the market’s risk profile for now. The failure of a Tax Bill seems remote; but it’s a possibility. That trumps FIFO in case it were to fail. FIFO is ‘said’ not to be an issue in the Bill. The market is extended regardless, and analysts are increasingly glib in complacency about the market simply forging ahead into the new year.

Even if it does do so; hints about an early shakeout might be evident with any softness in the year’s last two trading sessions. However, the nature of the glibness out there suggests investors / money managers aren’t ready to cope with a decline ‘now’, which would force them into competitive sales to preserve gains already achieved this year. This relates to a majority of money managers who are tracked (and sometimes bonus-related) to how they perform ‘relative’ to an Index.

So ‘if’ S&P actually trends lower now; they would start selling regardless if it incurred earlier tax liability for investors. The old saying is ‘not’ to make decisions based on taxes; so that would be the case here; though normally at this point in December one tends to stay-the-course if able. Interesting if that’s the hook that finds investors selling into weakness; just in case that unfolds further. Stay tuned.