1 / 4-end realignment might pose headwinds for Wall Road


© Reuters. FILE PHOTO: New York Stock Exchange (NYSE) building after the start of Thursday's trading session in New York


By Chuck Mikolajczak

NEW YORK (Reuters) – One reason US stocks struggled for a second straight week could be the quarterly and month-end retirement fund realignments, which could also keep stocks under pressure through late March next week.

With almost 2% growth for the month and more than 3% for the quarter as bond prices struggled and the 10-year US Treasury note yield to a 14-month high last week, many analysts expect it to The fixed income segment will move money.

With the benchmark index S&P struggling lately as pressure on bond prices eased and the 10-year US Treasury Department's yield hit a week-long low on Thursday, Wells Fargo (NYSE 🙂 Analysts now expect US annuities to invest an additional $ 19 billion in fixed income to offset, compared to their original March 18 estimate of $ 28 billion.

In a note on Wednesday Credit Suisse (SIX 🙂 estimated $ 32.6 billion combined sales of US stocks by pension funds that are rebalanced monthly or quarterly. Using the iShares Core US Aggregate Bond Fund ETF as a proxy, the company expects a purchase price of around $ 45 billion as funds increase their exposure to fixed-income securities.

But not all analysts expect a realignment to result in a downtrend in stock performance. Marko Kolanovic, J.P. Morgan's chief global markets strategist believes recent portfolio realignment trends have undermined the dreaded quarter-end realignment. This includes optimizations of portfolios that are opportunistic rather than rigorous at the end of the quarter, and reallocations that are geared towards volatility levels rather than fixed target weights for specific asset classes.

"A lack of these flows and a broad expectation of the 'end-of-month / quarter-end effect' could cause the market to move higher in the short term when everyone else is equal," said Kolanovic.

Each of the companies warned that the actual timing of the realignment may vary and, in some cases, has already started.

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