Red Flag For Markets: Pension Funds To Sell “Near Record” Amount Of Stocks In The Next Few Days
by Tyler Durden
ZeroHedge.com
Dec 22, 2016
One of the recurring comments about the “Trumpflation” rally, which has sent US stock markets to constant record highs and pushed the Dow Jones just shy of 20,000 has been that there is virtually nobody selling. According to a poll released today by Reuters, which surveyed 45 fund managers and CIOs around the globe, investors’ equity holdings rose to six-month highs in December on bets that buying at all time highs would mean selling even higher.
“Be ready to buy dips,” Trevor Greetham, head of multi-asset at Royal London Asset Management, told Reuters however for the most part there have been no dips. In fact, as Carl Icahn lamented earlier on CNBC, “nobody is selling.”
However, according to a new analysis from Credit Suisse, a “seller” may emerge, and a very determined one at that.
In a report by the Swiss Bank’s Victor Lin, pension funds that rebalance monthly and quarterly would need to sell $38 billion of U.S. equities in coming days to rebalance to prior asset allocation levels.
While regular readers are well aware, there has been a massive capital shift out of global bonds and into stocks in the 4th quarter, leading ironically to a mirror image result: while the value of global stocks has risen by $3 trillion since the US election according to Deutsche Bank, the value of debt has declined by an identical amount.
But while Mark-To- Market values of key asset holdings in pension portfolios have shifted violently, pensions have specific quotas to adhere to, which in this case means selling winners and buying losers to return to their mandated allocation percentages.
As a result, according to Lin’s analysis, the “estimated rotation out of domestic U.S. equities would be one of the largest on record” with relatively large outperformance versus other asset classes both on a monthly and quarterly basis. Additionally, Lin estimates selling of $864 million in developed market international stocks.
The Rest…HERE
