What’s Wrong With the Market?
Yes, the slowdown in China (to say nothing of the opaqueness of that economic system) and the headwinds created by rate hikes have increased volatility and a sense that the market may back up this year.
But there are some market internals at work here early in the new year. Firstly, we’ve lost leadership from internet related stocks as large money managers try to secure profits on those positions. These folks are the market’s elephants. The market can’t do much positive until the big funds stop selling their biggest positions.
As well, many of the big hedge funds are having to meet redemptions. their investors seem to be growing weary of paying 2% fees on assets plus 20% on profits. Only problem is, there hasn’t been much in the way of profits for the past several years in big hedge fund land.
Now a little good news, sort of percolating under the surface. Since so few stocks finished the year in positive territory, and many are way off their highs of several months ago, we are starting to see fewer new lows on down days in the market. This is often a sign of a market that wants to stabilize.