Goldman Warns Of "Massive" $36BN Month-End Pension Selling, 4th Largest On Record

With month-end fast approaching, banks are publishing their estimates of what upcoming pension rebalancings will mean for stock and bond flows.

The first such forecast came from Goldman Sachs, whose month-end pension rebalancing estimates a net $36bln of equities to sell following a month of substantial outperformance of stocks vs bonds, according to NewsSquawk.

What is notable about the month-end rebal is that according to Goldman, this is the fourth largest sell estimate on record going back to 2000, and ranks in the 96th percentile among all buy and sell estimates in absolute dollar-value.

Here are the details:

  • Goldman's model-based assumption estimates a net $36BN of equities to sell from pensions given the moves in equities and bonds over the month
  • This is due to equity outperforming fixed-income by 10.45% (S&P total-return 10.50%, 10yr total-return 0.05%).
  • GS says a mitigating factor may be the street gamma positioning, which is trending further into positive territory

To be sure, this is not the first time a bank has expected a major month or quarter-end selling rebalnce only to see stocks rip into the event. Furthermore, now that pensions can pick and chose when they execute the rebalance, the probability that they will all wait until the very last minute is minimal especially with market liquidity back near dismal levels.