Aside from big moves on a handful of stocks, the mood on Wall Street remained muted as the fiscal year end machinations of thousands of big mutual funds wound down.
More than one third of mutual funds end their fiscal year at the end of September, and managers tend to engage in a fair amount of "window dressing" - eleventh-hour buying and selling to make their portfolio look a bit better for their fundholder reports. Year-end window dressing tends to add downward pressure on underperforming stocks, and money managers aim to lighten up on the losers for their books. Conversely, the winners tend to get a boost as money managers want to show investors that they have been in on the year’s solid performers.
Now that that activity has largely passed, one of the rising factors on the market in recent days is the massive betting on a rally that often ensues after a presidential election, especially one in which the incumbent wins.
"This post-election rally is the most telegraphed move in market history," said James Altucher, hedge fund manager at Subway Capital. Mr Altucher says that Wall Street is positioning itself for a victory by President George W Bush and a removal of uncertainty surrounding the election.
However, the fact that every one is making this bet leads him to believe that "today is the time to buy and Election Day is the day to sell. I think all the mutual funds positioning themselves to get ahead of the predicted post-election news is what's going to drive the market from now until election."