Rebalancing May See $300 Billion Out Of Stocks By Year-End: JPMorgan

Rebalancing May See $300 Billion Out Of Stocks By Year-End: JPMorgan

It's time to have the rebalancing discussion again. Or at least if you're a JPMorgan client it is. As documented here over the weekend, US equities are on track to post one of their best November performances on record. And many analysts see scope for the rally to continue into year-end for a variety of reasons, ranging from generic "vaccine optimism" to mechanical flow catalysts tied to, for example, re-leveraging from vol-sensitive strats. Read more: Stocks Are Really Enjoying Themselves In
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5 thoughts on “Rebalancing May See $300 Billion Out Of Stocks By Year-End: JPMorgan

  1. interesting.

    I’d be curious to read about any expected impacts the pros, e.g., JPM, MS, Goldman, DB, BoA, or independents, see on what a dollar amount range might be for selling for tax-loss purposes.

  2. So Mike Wilson of Morgan is a “steadfast bull” while Morgan sees end of the year rebalancing resulting in 150 billion dollars in stock liquidation. Thus Morgan customers and Heisenberg readers are a bit uncertain as to how to proceed.

    1. Well, no. Morgan Stanley is not JPMorgan. Those are two different banks.

      And JPMorgan is still generally bullish into year-end. You have to remember that these are just tidbits from longer notes and not every note is a “call.” $150 billion in rebalancing flows at month-end or $300 billion from now through December could mean next to nothing depending on countervailing flows from retail investors, hedge funds, institutional investors who don’t have fixed weights, the $1 trillion universe of systematic strats, etc. etc.

  3. Market cap of the Russell 2000 Value is approx $2.8TR, the Russell 2000 is approx $5.1TR.

    The market cap of FAANNMG is $7.7TR, the S&P 500 is roughly $27TR (oddly, different sources vary widely), the Russell 3000 is approx $31TR.

    So $300BN is around 1% of market cap and >>90% of selling will likely be of large caps. Granted liquidity means that the impact on small caps could be greater. Many investors will use that as a buying oppty.

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