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Investing.com - JPMorgan analysts estimate approximately $57 billion in equity selling and bond buying will occur during third-quarter rebalancing by major institutional investors, according to a research note published Thursday.
The bank attributes this selling pressure to the rally in equities combined with more modest bond returns since the end of June, creating an imbalance that requires portfolio adjustments.
Of the total estimated rebalancing, U.S. defined benefit pension plans with approximately $9.4 trillion in assets under management may account for about $18 billion in equity selling, rather than their theoretical $55 billion imbalance.
The Norwegian oil fund (Norges Bank), with $1.9 trillion in assets, is expected to sell around $15 billion in equities by September-end. Similarly, Japan’s Government Pension Investment Fund (GPIF), managing $1.8 trillion, is projected to sell approximately $17 billion in equities while increasing bond holdings.
The Swiss National Bank (SNB), which invests a portion of its foreign currency reserves in equities, is estimated to sell about $7 billion in stocks. JPMorgan notes the SNB maintains a 25% equity allocation target and does not purchase bank equities to avoid conflicts of interest.
JPMorgan characterizes the projected $57 billion in equity selling as "rather modest by historical standards" compared to previous quarterly rebalancing periods, suggesting limited market impact despite the substantial dollar amount.
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