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One theory behind the biggest single-day stock turnaround since 2010 may be pension funds buying up equities after December's meltdown.
Pravit Chintawongvanich at Wells Fargo says the giant end-of-day gain could reflect end-of-quarter adjustments from pension fund that have $60B of shares to buy this month, more than the usual amount, Bloomberg reports.
Institutional investors with large holdings in stocks and bond balance out their holdings at the end of each quarter, adding to losers and cutting on winners. He said money was pulled from fixed income, which has been outperforming equities.
“While the $60 billion rebalance is historically large, its effect is probably exacerbated by the low market liquidity conditions,” Chintawongvanich said in a note. “A given dollar to buy or sell is moving the market more than it normally would.”
Pravit Chintawongvanich at Wells Fargo says the giant end-of-day gain could reflect end-of-quarter adjustments from pension fund that have $60B of shares to buy this month, more than the usual amount, Bloomberg reports.
Institutional investors with large holdings in stocks and bond balance out their holdings at the end of each quarter, adding to losers and cutting on winners. He said money was pulled from fixed income, which has been outperforming equities.
“While the $60 billion rebalance is historically large, its effect is probably exacerbated by the low market liquidity conditions,” Chintawongvanich said in a note. “A given dollar to buy or sell is moving the market more than it normally would.”
