Quarter-End Rebalancing Hits Unusual Scale as Bonds Plunge and Stocks Rally

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Summary · why it matters

Third-quarter quarter-end portfolio adjustments appear to have been far larger than in a typical year, driven by a sharp drop in bond prices and stock markets trading near record highs. Jordan Jackson, a global market strategist at JPMorgan, said this quarter's rebalancing is shaping up to be among the largest ever. According to a report published by Goldman Sachs this week, U.S. pension funds alone are expected to sell 33 billion dollars of equities and shift the proceeds into bonds around quarter-end to return to their target allocations. Michael O'Rourke, chief market strategist at JonesTrading, noted that the slump in U.S. Treasuries has created the most attractive investment opportunity in decades, while stocks look considerably overvalued. Michael Gates of BlackRock said the firm has been rebalancing in some areas, increasing allocations toward equity and bond sectors it sees as offering lower risk and greater upside heading into year-end.

Impact on assets 3

Digital Finance & Tokenization▲ · 2 stocks
BlackRock Inc
BLK
± Mixedrelevance

BlackRock's Gates says the firm is rebalancing toward lower-risk equity and bond sectors, but no specific impact on BlackRock is stated.

JPMorgan Chase & Co
JPM
± Mixedrelevance

JPMorgan strategist Jackson comments that quarter-end rebalancing is among the largest ever; no company-specific impact.

Financials▲ · 1 stocks
Goldman Sachs Group Inc
GS
± Mixedrelevance

Goldman Sachs report forecasts pension funds will sell $33B of equities into bonds at quarter-end; no direct impact on Goldman itself.

Off-coverage companies 1

JonesTrading Institutional Services LLCPrivate± Mixed
relevance

JonesTrading's O'Rourke comments on Treasuries and overvalued stocks; no company-specific impact.

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