2016 Ends With A Whimper: Stocks Slide On Last Minute Pension Fund Selling

Tyler Durden's picture

When we first warned 8 days ago that in the last week of trading a "Red Flag For Markets Has Emerged: Pension Funds To Sell "Near Record Amount Of Stocks In The Next Few Days", and may have to "rebalance", i.e. sell as much as $58 billion of equity to debt ahead of year end, many scoffed wondering who would be stupid enough to leave such a material capital reallocation for the last possible moment in a market that is already dangerously thin as is, and in which such a size order would be sure to move markets lower, and not just one day.

Today we got the answer, and yes - pension funds indeed left the reallocation until the last possible moment, because three days after the biggest drop in the S&P in over two months, the equity selling persisted as the reallocation trade continued, leading to the S&P closing off the year with a whimper, not a bang, as Treasurys rose, reaching session highs minutes before the 1pm ET futures close when month-end index rebalancing took effect.

10Y yields were lower by 2bp-3bp after the 2pm cash market close, with the 10Y below closing levels since Dec. 8. Confirming it was indeed a substantial rebalancing trade, volumes surged into the futures close, which included a 5Y block trade with ~$435k/DV01 according to Bloomberg while ~80k 10Y contracts traded over a 3- minute period.

The long-end led the late rally, briefly flattening 5s30s back to little changed at 112.5bps. Month-end flows started to pick up around noon amid reports of domestic real money demand; +0.07yr duration extension was estimated for Bloomberg Barclays Treasury Index. Earlier, TSYs were underpinned by declines for U.S. equities that accelerated after Dec. Chicago PMI fell more than expected.

Looking further back, the Treasury picture is one of "sell in December 2015 and go away" because as shown in the chart below, the 10Y closed 2016 just shy of where it was one year ago while the 30Y is a "whopping" 4 bps wider on the year, and considering the recent drop in yields as doubts about Trumpflation start to swirl, we would not be surprised to see a sharp drop in yields in the first weeks of 2017. Already in Europe, German Bunds are back to where they were on the day Trump was elected.

So with a last minute scramble for safety in Treasurys, it was only logical that stocks would slide, closing the year off on a weak note. Sure enough, the S&P500 pared its fourth annual gain in the last five years, as it slipped to a three-week low in light holiday trading, catalyzed by the abovementioned pension fund selling.

The day started off, appropriately enough, with a Dollar flash crash, which capped any potential gains in the USD early on, and while a spike in the euro trimmed the dollar’s fourth straight yearly advance, the greenback still closed just shy of 13 year highs, up just shy of 3% for the year. 

Meanwhile, the year's best surprising performing asset, crude, trimmed its gain in 2016 to 52%.

The S&P 500 Index cut its advance this year to 9.7 percent as it headed for the first three-days slide since the election. The Dow Jones Industrial Average was poised to finish the year 200 points below 20,000 after climbing within 30 points earlier in the week. It appears the relentless cheerleading by CNBC's Bob Pisani finally jinxed the Dow's chances at surpassing 20,000 in 2016. Trading volume was at least 34 percent below the 30-day average at this time of day. A rapid surge in the euro disturbed the calm during the Asian morning, as a rush of computer-generated orders caught traders off guard. That sent a measure of the dollar lower for a second day, trimming its rally this year below 3 percent.

Actually, did we say crude was the best performing asset of the year? We meant Bitcoin, the same digital currency which we said in September 2015 (when it was trading at $250) is set to soar as Chinese residents start using it more actively to circumvent capital controls, soared, and in 2016 exploded higher by over 120%.

For those nostalgic about 2016, the chart below breaks down the performance of major US indices in 2016 - what began as the worst start to a year on record, ended up as a solid year performance wise, with the S&P closing up just shy of 10%, with more than half of the gains coming courtesy of an event which everyone was convinced would lead to a market crash and/or recession, namely Trump's election, showing once again that when dealing with artificial, centrally-planned market nobody has any idea what will happen, or frankly, what is happening.

Looking at the breakdown between the main asset classes, while 30Y TSYs are closing the year effectively unchanged, the biggest equity winners were financials which after hugging the flatline, soared after the Trump election on hopes of deregulation, reduced taxes and a Trump cabinet comprised of former Wall Streeters, all of which would boost financial stocks, such as Goldman Sachs, which singlehandedly contributed nearly a quarter of the Dow Jones "Industrial" Average's upside since the election.

The FX world was anything but boring this year: while the dollar soared on expectations of reflation and recovery, the biggest moves relative to the USD belonged to sterling, with cable plunging after Brexit and never really recovering, while the Yen unexpectedly soared for most of the year, only to cut most of its gains late in the year, when the Trump election proved to be more powerful for Yen devaluation that the BOJ's QE and NIRP.

The largely unspoken story of the year is that while stocks, if only in the US - both Europe and Japan closed down on the year - jumped on the back of the Trump rally, bonds tumbled. The problem is that with many investors and retirees' funds have been tucked away firmly in the rate-sensitive space, read bonds, so it is debatable if equity gains offset losses suffered by global bondholders.

And speaking of the divergence between US equities and, well, everything else, no other chart shows the Trump "hope" trade of 2016 better than this one: spot thee odd "market" out.

So as we close out 2016 and head into 2017, all we can add is that the Trump "hope" better convert into something tangible fast, or there will be a lot of very disappointed equity investors next year.

And with that brief walk down the 2016 memory lane, we wish all readers fewer centrally-planned, artificial "markets" and more true price discovery and, of course, profits.  See you all on the other side.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
HokumYTrader's picture

Something sure wanted 2240 bad

Raffie's picture

An the powers that be gave the PM a last FU for 2016 beat down.

Conax's picture

They wanted dow 20K- DENIED

They then turned their baleful gaze on gold and silver, they still have the monkey hammer brigade. Their arms ain't half tired.

Lorca's Novena's picture

Who are the serial downvoter/s...? At least 'splain yourself.

Conax's picture

Fuck me I don't know, I'm shitfaced.

Happy mnew Years

Lorca's Novena's picture

lol, me too... Merry New Feliz Navidad Year!

Sudden Debt's picture

there's carnage in retail for the moment. Q1 for 2017 will be fun to watch

gatorengineer's picture

retail what, there werent any sales, before or after xmas......  I would presume that means they were doing good.  Perhaps not

 

 

Jayda1850's picture

The headline shouldn't be about pension fund selling, but that pension funds are simply another ponzi scheme dressed up nicely as another financial product.

jamesmmu's picture

If you bought your DOW 20k hat, sorry, not gonna happen for another 10 years.

HokumYTrader's picture

What about the Dow 10,000 hat I got for 50 cents on eBay?

HokumYTrader's picture

SHLONGWAVE says Dow 20 K next week.

HokumYTrader's picture

John Bullshit works for SCHLONGWAVE and so can you for 50 cents an hour.

HokumYTrader's picture

Where is Dr. Carl tonight, doing rounds at the Schlongspital?

HokumYTrader's picture

Maybe Dr Carl is doing brain surgery with Ben Carson or having a knife fight with him.

jmack's picture

I am sure newsweek already printed a magazine with dow 20k on the cover to commemorate the event...

jamesmmu's picture

Everything is red today, next Monday is going to be fun!

buzzsaw99's picture

when i see financials and trannies greatly outperforming the broader "markets" and this late into a multiyear runup it gives me pause.

insert :smells like bullshit: meme [here].

Seasmoke's picture

Look at those Financials fly past Gold since November 8. I wonder what happened during that time. Oh yeah the guy who is sucking Lloyd and Jamie's shriveled dicks got elected Puppet of the USSA. Meet the new boss, Same as the old boss. Happy New Year You're Fired !!!!

Citizen_x's picture

 

    Meet the new boss, Same as the old boss.... The Who    Won't Get Fooled Again...

https://www.youtube.com/watch?v=BrHUD2XmLN4

 

John Beau's picture

Where is my friend Traderone.

Boy, you were right. Shepwave nailed it again this week. 

Good job my wigga!!!!!!!!!!!!!!

Go fo-shizel!!!!!!!!!!!!!! 

Remember speaking of Shepwave. Their sell signal at Wednesday's open for the QQQ this past week made me a whole lot of money.  Wipe away the tears, I will bring the BEERS! Another great week. 

 They never fail to amaze me. They nailed the election.

Nailed the Trump rally when all of the other pundits were saying the markets would crash if he won. 

On election night in the US when the Dow futures were down over 800 points they issued a strong buy now signal.

 

 

They even called the trading range of the past TWO WEEKS.  Market Watch cannot get anything right, ever!

Here are some of the links I found to show some of their past charts which show that they do predict market movement before the markets move.

FB post…showing QQQ chart from Dec 2nd

 

 https://t.co/LM81DZlPyF

 

 

 

 

LowerSlowerDelaware_LSD's picture

Once again, the SchlongWave spammers refuse to buy advertising on ZH, preferring to violate the ZH Terms of Service, advertising via spam comments instead.  SchlongWave signed up for a bunch of accounts at roughly same time. SchlongWave rotates through those accounts, posting spam comments (with URL hiding links, of course), then give themselves a small set of "thumbs ups," and "excellent analysis, thanks(!)," comments. All accounts are part of SchlongWave's dishonest comment-spam marketing plan.

The spam accounts, and spam comments certainly show how dishonest SchlongWave is.  They must be desperate for money. Would anyone **really** use a company that uses dishonest spam comment advertising?  No doubt SchlongWave has a few more accounts spamming ZH.  Here are a few of them:

AliSONY
Babs.St.Louis
Billy G
Chi Juan
Dr.Carl
ErikE
FemDayTrader
Irvingm
John Beau
MexInvest
MikeM54
P Christmas Carole
RonnieM
Sonya B59
StevieTexie
Van G
wisetrader224

PAY FOR ADVERTISING ON ZH, ASSHOLE.

.

Xena fobe's picture

Tylers, please develop a system for flagging spam posts.  These Schlongwave spammers are malicious.

HokumYTrader's picture

Did you make $8,993.91 working from home for SCHLONGWAVE this week?

Lorca's Novena's picture

You referred 'us' to a Facefuck link???? What are you, new?

HokumYTrader's picture

No he is a dumbass schill for SCHLONGWAVE

John Beau's picture

Where is my friend Traderone.

Boy, you were right. Shepwave nailed it again this week. 

Good job my wigga!!!!!!!!!!!!!!

Go fo-shizel!!!!!!!!!!!!!! 

Remember speaking of Shepwave. Their sell signal at Wednesday's open for the QQQ this past week made me a whole lot of money.  Wipe away the tears, I will bring the BEERS! Another great week. 

 They never fail to amaze me. They nailed the election.

Nailed the Trump rally when all of the other pundits were saying the markets would crash if he won. 

On election night in the US when the Dow futures were down over 800 points they issued a strong buy now signal.

 

 

They even called the trading range of the past TWO WEEKS.  Market Watch cannot get anything right, ever!

Here are some of the links I found to show some of their past charts which show that they do predict market movement before the markets move.

FB post…showing QQQ chart from Dec 2nd

 

 https://t.co/LM81DZlPyF

 

 

 

 

LowerSlowerDelaware_LSD's picture

Triple spam post, "John Beau," SchlongWave scam stupid fuck.

Once again, the SchlongWave spammers refuse to buy advertising on ZH, preferring to violate the ZH Terms of Service, advertising via spam comments instead.  SchlongWave signed up for a bunch of accounts at roughly same time. SchlongWave rotates through those accounts, posting spam comments (with URL hiding links, of course), then give themselves a small set of "thumbs ups," and "excellent analysis, thanks(!)," comments. All accounts are part of SchlongWave's dishonest comment-spam marketing plan.

The spam accounts, and spam comments certainly show how dishonest SchlongWave is.  They must be desperate for money. Would anyone **really** use a company that uses dishonest spam comment advertising?  No doubt SchlongWave has a few more accounts spamming ZH.  Here are a few of them:

AliSONY
Babs.St.Louis
Billy G
Chi Juan
Dr.Carl
ErikE
FemDayTrader
Irvingm
John Beau
MexInvest
MikeM54
P Christmas Carole
RonnieM
Sonya B59
StevieTexie
Van G
wisetrader224

PAY FOR ADVERTISING ON ZH, ASSHOLE.

 

Traderone's picture

Good on ya LSD. Hope you don't mind but I copied and pasted your riposte to these scamming Pricks and I'll use it against them whenever I see their posts. Fuck ' em. 

LowerSlowerDelaware_LSD's picture

Not at all. Use as you wish. Feel free to improve on it as well. I might try to condense it to keep it from approaching SchlongWave's spam post size. Maybe put their spam account names on one line with commas. I don't want to annoy people. SchlongWave obviously enjoys annoying people. That's called "good marketing" by dishonest scam companies not making any money.

HokumYTrader's picture

SCHLONGWAVE nailed you in the ass again!

LN's picture

You only posted this once here.

LN

HokumYTrader's picture

Unlike you who post the same dumbass shit every day

John Beau's picture

Where is my friend Traderone.

Boy, you were right. Shepwave nailed it again this week. 

Good job my wigga!!!!!!!!!!!!!!

Go fo-shizel!!!!!!!!!!!!!! 

Remember speaking of Shepwave. Their sell signal at Wednesday's open for the QQQ this past week made me a whole lot of money.  Wipe away the tears, I will bring the BEERS! Another great week. 

 They never fail to amaze me. They nailed the election.

Nailed the Trump rally when all of the other pundits were saying the markets would crash if he won. 

On election night in the US when the Dow futures were down over 800 points they issued a strong buy now signal.

 

 

They even called the trading range of the past TWO WEEKS.  Market Watch cannot get anything right, ever!

Here are some of the links I found to show some of their past charts which show that they do predict market movement before the markets move.

FB post…showing QQQ chart from Dec 2nd

 

 https://t.co/LM81DZlPyF

 

 

 

 

John Beau's picture

Traderone and Hokum are like two of the smartest guys I have ever seen.  Thanks for the Shepwave recommendations guys. 

HokumYTrader's picture

It is SCHLONGWAVE, you work for them get it right dumbass

Lorca's Novena's picture

YOU are the cancer destroying this website, and YOU are the reason we cant have nice things....

Kill Yourself.

Mass_hysteria's picture

I had 20 btc before it took off.

 

that was before I knew anything about investing....................................

adr's picture

I had a hacker friend who had 1000 Bitcoin he mined. He sold them when they got to $.30 thinking getting $300 was incredible. They were worth a couple pennies when he mined them. 

When I asked him what he thought about Bitcoin going to $1000, he told me everyone manipulating Bitcoin were fools. Neophytes being scammed by the latest scheme. 

When you have a Magic the Gathering trading site become the largest Bitcoin exchange, he laughed and said the fools investing real money were going to have it all stolen by the basement dwelling dweebs. 

Lorca's Novena's picture

Your friend is correct, somewhat. In the beginnig when buttcoin went nuts, people could'nt exchange it for currency... I forget the names off hand, but it was a fiasco... Same with Litecoin.

brushhog's picture

Prediction; Dow to 20k on 1-20-17

Allen_H's picture

Think we will get a repeat of the January we had this year?

adr's picture

Yeah, I'm not counting the first 20 days of January when oil was still sliding. 

Oil is up 110% in 2016. Gasoline is more expensive at $52 a barrel than it was in 2015 trading at $70. I have a gas receipt from Oct 1st 2015 for $1.85 per gallon. Today I bought gas for $2.50. $. 65 more with oil trading $20 below. 

2016 is the year they switched from the King Dong up your ass to the horse cock.