Here's a number that should make you pause.
Institutional portfolios are sitting on 30-40% gains this year from mega-cap tech and commodities.
And right now, they're selling their losers—hard.
The S&P 500 sits near record highs. But clean energy and crypto ETFs are getting crushed. $ICLN is down 15% this month. $IBIT has shed 12%.
Is this a fundamental breakdown? No. It's tax season.
Behind the Selloff
Institutional money made serious gains in 2025.
Nvidia $NVDA delivered triple-digit returns. Gold hit new highs. Now those same funds are staring at a tax bill.
Their solution? Sell the losers before December 31st to offset capital gains. It's mechanical. It's predictable. And it happens every single year.
This isn't about company performance or sector fundamentals. It's about the tax code. Big funds need to realize losses before the calendar flips. So they dump positions—regardless of whether the underlying thesis still holds.
The pressure peaks in mid-to-late December. Portfolio managers are clearing their books. Risk managers are closing out the year. And retail investors are watching their screens turn red.
“Tax-Loss Harvesting”
Have you ever heard of "Tax-Loss Harvesting" before this article?
Here's what happens next. Retail sees the selling. Charts break support levels. Headlines turn negative. Panic sets in.
And retail sells too.
But institutional money isn't selling because these assets are broken.
They're selling because the IRS gives them 15 days to lock in tax benefits. That's the difference.
The wash sale rule adds another layer. You can't buy back the same security within 30 days and still claim the tax loss. So institutional sellers stay on the sidelines through January. That creates a void.
Prices drift lower on low volume. The pressure feels real. But it's artificial.
What January Brings
Once the 30-day window closes, capital rotates back. The same institutions that sold in December start rebuilding positions in late January and February. If the long-term thesis hasn't changed, prices snap back.
This pattern has played out for decades. It's called the January Effect. And it's one of the few predictable market anomalies that still works.
Morningstar's portfolio strategists have been tracking this for years. One recent observation: "Investors are clearing the decks. We are seeing mechanical rotation where losers are sold regardless of valuation simply to manage tax liabilities. This creates one of the few predictable inefficiencies in the market."
That gap matters more than you think.
Where the Opportunity Sits
Two sectors are getting hit hardest: crypto and solar.
Which of the mentioned sectors do you think has the most potential for a January rebound?
$IBIT tracks Bitcoin through a spot ETF structure. It's down because crypto had a volatile year and funds are harvesting losses. But Bitcoin's institutional adoption thesis hasn't changed. Custody solutions are improving. Regulatory clarity is coming. The selling is tax-driven, not thesis-driven.
$TAN tracks solar equipment and project developers. Clean energy had a rough 2025. Rising rates hurt project economics. Policy uncertainty added pressure. But the long-term energy transition is still real. And current prices reflect tax selling, not a broken sector.
If you believe in these stories over 12-24 months, December gives you a discount. Not because of business failure. Because of the tax code.
The Actionable Play
Put $IBIT and $TAN on your watchlist.
Watch how they trade through the year-end. If you have conviction in the long-term thesis, use this window to build positions.
But be precise. Don't catch falling knives. Wait for the volume to dry up. Look for stabilization in early January. Then consider entries as institutional money starts rotating back.
This isn't about calling a bottom. It's about understanding why the selling is happening. And positioning for the mechanical reversal that follows when the calendar flips.
Tax-loss harvesting creates one of the cleanest inefficiencies in modern markets.
Most investors ignore it. The ones who understand it use December to build positions that pay off in Q1.
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Disclaimer: This is not financial or investment advice. Do your own research and consult a qualified financial advisor before investing.