Tailwind to equities next week – JP Morgan

Anil Panchal FXStreet

In its latest research piece, JP Morgan highlights the importance of the monthly and quarterly position rebalancing to suggest bright spot for global equities during the next week.

Key quotes

Equities have underperformed bonds month-to-date (but outperformed quarter-to-date) (by -5%).

A large majority of these portfolios rebalance on a monthly rather than quarterly frequency.

Historically, the monthly rebalance effect is over 5x stronger than the quarterly rebalance effect. Thus, the equity buying by monthly rebalancing portfolios (due to equity underperformance MTD) much more than fully offsets the selling by quarterly rebalancing portfolios, meaning these portfolios are expected to be net buyers of equities into month/quarter-end.

We would expect rebalances by these fixed weight asset allocation portfolios to provide a tailwind to equities next week.

Read: Wall Street Close: Stocks firm up led by Amazon.com's Bernstein upgrade

Author

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

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