According to a report from Goldman Sachs ‘trading department, US pension funds are expected to carry out a stock sell-off of up to 20 billion US dollars by the end of this month. This action is part of their end-of-month rebalancing operation. Goldman Sachs data shows that among the net buying or selling scale involved in similar rebalancing operations since 2000, the total value of this $20 billion sell-off is at the 86th percentile, indicating that its scale is not to be underestimated.
The main reason for such a large-scale sell-off lies in the fact that many pension plans have adjusted the stock-bond allocation ratio, which can be regarded as a large-scale version of the traditional 60/40 investment portfolio. In the financial market this month, the stock market performed relatively well, while the bond market was not satisfactory. This disparity in market performance implies that in the model investment portfolio, some significant adjustments need to be made in order to bring the two types of assets, stocks and bonds, back to a balanced state.
Bret Kenwell, an American investment analyst at eToro, pointed out: “We are not accustomed to seeing such significant fluctuations in the bond market, especially for pension funds or institutional investors, the amount of funds they manage is almost all in the billions of dollars.” When these rebalancing operations are carried out rapidly, it can indeed become a “compass” for the market trend in the short to medium term. Whether it is the suspension of the 90-day trade negotiations, the postponement of the negotiation deadline with the European Union, or the emergence of legal procedures preventing Trump from implementing tariff policies, from the general view on Wall Street, all indicate that the worst period of the tariff issue may have passed and the situation is evolving in a direction of easing.
The large-scale selling plan of the US pension funds this time is expected to have a certain impact on the US stock market. On the one hand, large-scale stock selling may increase the supply of stocks in the market in the short term, exerting certain downward pressure on stock prices. Especially for those stocks that are held in large quantities by pension funds, they may face more obvious price fluctuations. On the other hand, market participants will also closely monitor the signals conveyed by this selling behavior and adjust their investment strategies accordingly, which may trigger changes in market trading activity and capital flow. How the US stock market will respond to this potential large-scale sell-off in the future and whether the overall market trend will change as a result are worth investors’ continuous attention.
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