The major U.S. stock market indexes are likely to end 2017 as much as 5% to 10% below their opening values on November 16, according to Jeffrey Saut, chief investment strategist at Raymond James Financial Inc. (RJF), as reported by CNBC. His reasoning: a year has passed since the Trump rally began, making positions acquired at the start now eligible for preferential income tax treatment as long-term capital gains - only if investors sell their stock. He believes that the selling may be intense enough to spark a full-blown market correction, which is an equities market decline of 10% of more, CNBC says. 

Based on his placing the start of the Trump rally on November 7, 2016, the day before the Presidential election, Saut thinks it's no coincidence that both the S&P Index (SPX​) and the Dow Jones Industrial Average (DJIA​) hit post-election highs in intraday trading exactly one year later, on November 7, 2017, and have declined since. Additionally, various economic and financial indicators tracked by Saut have been registering negative signals for stocks since August 3, CNBC indicates. Thus, if Saut is right, a confluence of tax-driven and fundamental reasons finally may be spurring investors to take their gains right now.

Not So Fast

Saut notes that 29% of the S&P 500 stocks are down so far in 2017 as of Thursday's market open, per CNBC, which he takes as a cause for short-term caution. However, he is predicting a correction, not the onset of genuine bear market in which stocks drop 20% or more, and which may be of long duration. Instead, per CNBC, he believes that the secular bull market may last as much as another decade, advising that "Pullbacks are for buying." In particular, Saut has a "shopping list" of financial and technology stocks, especially the FANG foursome of Facebook Inc. (FB), Amazon.com Inc. (AMZN), Netflix Inc. (NFLX), and Google parent Alphabet Inc. (GOOGL), per CNBC. (For more, see also: Why Stock Investors Shouldn't Sell Now: Morgan Stanley.)

Dumping Junk

Meanwhile, investors are fleeing junk bond funds, according to Bloomberg, potentially a leading indicator of an impending pullback in equities. Funds that invest in corporate debt that is below investment grade, also known as high yield or junk bonds, saw $6.8 billion withdrawn by investors last week, the third-largest weekly outflow ever, per Bloomberg.

Since the start of the current stock market rally in early 2016, junk bonds and stocks have tended to move in fairly close lockstep, according to technical analyst Michael Kahn, writing in Barron's. But Kahn notes that the performance of stocks and junk has diverged since April, with junk prices going largely sideways since then, while stocks have soared. As a result, a one-week downtick in junk prices is not enough to present a clear signal for stocks, in his opinion. He suggests added caution, but not a rush to cash out of stocks right now.

A Closer Look at the Junk Sell-Off

Meanwhile, a more detailed analysis that compares junk prices to the prices of equities in the same companies shows that "They're performing in line with their historical relationship with each other," as Brad Rogoff, head of credit strategy at Barclays (BCS), told CNBC. Rogoff says that the sell-off in junk mainly has been confined to companies in telecom, health care and retail that have posted disappointing earnings. He also noted investor concerns about tax reform proposals to limit the deductibility of interest, which would present a problem for the most-indebted issuers.

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