Global stock markets could see a $300 billion pullout by the end of December in a rebalancing flow, according to JPMorgan Chase & Co.
Global stock markets may see a huge outflow in a money rotation into bonds for a port rebalancing by large multi-asset investors after strong equity performance so far in November.
Investors include balanced mutual funds, like 60/40 portfolios, U.S. defined-benefit pension plans and some big investors like Norges Bank and the Japanese government pension plan GPIF are among those expected a rebalancing flow by the end of this year, Nikolaos Panigirtzoglou, Managing Director of JPMorgan Chase & Co., wrote in a note along with other strategists.
“We see some vulnerability in equity markets in the near term from balanced mutual funds, a $7 trillion universe, having to sell around $160 billion of equities globally to revert to their target 60:40 allocation either by the end of November or by the end of December at the latest,” the strategists wrote.
An additional $150 billion of equity selling could be seen if the stock markets continue to rally into December.
Global equity markets have been in a positive momentum over the Covid-19 vaccine developments as concerns about the U.S. election began to fade.