End of the Quarter Window Dressing
Today is the end of the quarter. Considering that we have had one of the best quarters in years, it would not be surprising to see the market close strong this afternoon. Why is that?…two simple words, “window dressing”. What exactly does that mean? To put it simply, it means that portfolio managers typically report their holdings to their investors at the end of the quarter. And what better way to impress your investors, then to hold stocks that have been performing very well. In other words, portfolio managers tend to “dress-up” their portfolios, by buying the quarter’s outperformers, and selling the laggards.
Therefore, stocks that have had a good quarter, often have a good couple of days at the end of the quarter as fund managers accumulate positions in those issues. For example, take Coke (KO), it has had crazy buy imbalances at the end of the close the last two days, probably due to some institutional investors trying to accumulate stock. It very well may have a large buy imbalance again today for the same reason, this would press a stock like KO higher into the close. Overall, since the entire quarter has been very strong, there could be some significant accumulation in a number of issues at the end of the day today.
These gains are typically short lived, as these stocks will often give back their gains in the following week or two. In any regard, if stocks do rally into the close, it may be a good idea to lighten up on some of your longs.