FAST FIVE: JPMorgan Estimates Up To $310 Billion In Forced Selling By Year-End
Notably, according to Goldman, this is the fourth largest sell estimate on record going back to 2000, and ranks in the 96th percentile among all buy and sell estimates in absolute dollar-value.
In response to client interest sparked by the Goldman report, JPM's Nick Panigirtzoglou writes that as we approach month-end, “the equity rebalancing flow question is resurfacing in our client conversations” to wit: “How much of equity rebalancing flow should we expect into month-end, i.e.
However, this was offset by the moves at the start of the month, when the beta of US balanced mutual funds rose steeply at the beginning of November, rising to well above the neutral or average line by the middle of the month, as balanced mutual funds appear to have boosted their equity exposures over the first two weeks of November.
Assuming they were fully rebalanced at the end of September, and by taking into account the QTD performance of US equities and bonds, JPM believes that the pending equity rebalancing flow by US defined benefit pension plans into the current quarter-end is negative at around -$110bn.
In short: nearly a trillion dollars worth of stock selling by rebalancing funds may be on deck, begging the question: when will traders start frontrunning this potentially massive wall of money, which could hit just as market liquidity is at record lows.