JPMorgan says $200 billion could exit stocks this quarter

JPMorgan says $200 billion could exit stocks this quarter
Sovereign wealth funds and pension funds are likely to rebalance their portfolios after the equity market's big run-up
SEP 16, 2020
By  Bloomberg

Pension and sovereign wealth funds are set to offload about $200 billion of equities as they rebalance their portfolios, posing a risk for global shares, according to JPMorgan Chase & Co.

This would be the most negative quarterly adjustment since the pandemic hit, strategists led by Nikolaos Panigirtzoglou said Tuesday. The overall figure stems from calculations spanning U.S. defined-benefit pension portfolios, Japan’s Government Pension Investment Fund and Norway’s oil fund.

“This negative rebalancing flow becomes even more problematic given this month’s sharp decline in equity market depth,” the analysts wrote in a note.

Institutions tend to adjust portfolios each quarter to maintain their target asset allocation. A gauge of global stocks has climbed about 10% since the end of June, exceeding returns from fixed income and pointing to the need for some funds to adjust their investment mix back to preferred limits.

Global shares have done better than bonds so far this quarter

The revision is one of many risks facing the equity market after a powerful rally from lows in March stalled this month. Others include stretched valuations for some segments, a choppy economic recovery, potential volatility around the U.S. election and reliance on central bank support of financial markets.

Still, the JPMorgan strategists are sanguine overall on the outlook for stocks.

“For the medium to long term, we still see plenty of upside given still low overall equity positioning,” they said. “A retreat in equity and risk markets over the coming weeks would likely represent a buying opportunity.”

Latest News

Maryland bars advisor over charging excessive fees to clients
Maryland bars advisor over charging excessive fees to clients

Blue Anchor Capital Management and Pickett also purchased “highly aggressive and volatile” securities, according to the order.

Wave of SEC appointments signals regulatory shift with implications for financial advisors
Wave of SEC appointments signals regulatory shift with implications for financial advisors

Reshuffle provides strong indication of where the regulator's priorities now lie.

US insurers want to take a larger slice of the retirement market through the RIA channel
US insurers want to take a larger slice of the retirement market through the RIA channel

Goldman Sachs Asset Management report reveals sharpened focus on annuities.

Why DA Davidson's wealth vice chairman still follows his dad's investment advice
Why DA Davidson's wealth vice chairman still follows his dad's investment advice

Ahead of Father's Day, InvestmentNews speaks with Andrew Crowell.

401(k) participants seek advice, but few turn to financial advisors
401(k) participants seek advice, but few turn to financial advisors

Cerulli research finds nearly two-thirds of active retirement plan participants are unadvised, opening a potential engagement opportunity.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today’s choppy market waters, says Myles Lambert, Brighthouse Financial.

SPONSORED Beyond the dashboard: Making wealth tech human

How intelliflo aims to solve advisors' top tech headaches—without sacrificing the personal touch clients crave