Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Cancel Anytime
Enjoy Unlimited Digital Access
Canada’s most-awarded
newsroom for a reason
Stay informed for a
lot less, cancel anytime
“Exemplary reporting on
COVID-19” – Herman L
$1.99
per week
for 24 weeks
Get full access to globeandmail.com
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

U.S. pension funds that delayed rebalancing their portfolios are likely to pump about US$400-billion into stocks over the next two quarters, analysts at JPMorgan Chase & Co. said, providing a potential boost to equity markets battered by the coronavirus pandemic.

Weeks of asset price volatility may have pushed some fund managers to postpone rebalancing portfolios in which equity allocations have been knocked out of whack by a sharp decline in stocks, the bank said in a note to investors. The S&P 500 fell 20 per cent since the start of the year, marking its worst quarter since 2008.

“We still expect that US pension funds will eventually rebalance within 1-2 quarters,” strategist Nikolaos Panigirtzoglou wrote.

Story continues below advertisement

The bank said its estimate of US$400-billion in equity buying by the funds over the next two quarters could prove conservative. U.S. pension funds bought US$200-billion in stocks by the first quarter of 2009, in the aftermath of the global financial crisis – equivalent to US$600-billion today, the bank said.

Wild market swings have presented a challenge to asset managers looking to square their portfolios against a benchmark or return to their long-maintained allocation of stocks versus bonds. While the S&P is down about 24 per cent from its February highs, unprecedented support from the Federal Reserve and a US$2.2-trillion relief package from U.S. lawmakers helped stocks rally 15.5 per cent since March 23.

At least one fund – the Los Angeles City Employees’ Retirement System, which oversees some US$15-billion – is allowing its rebalancing to be deferred, according to a report in Pensions & Investments. The fund did not immediately respond turn a request for comment.

Brian Reynolds, chief market strategist with Reynolds Strategy, said in a note this week a rebalancing that leads pensions to sell bonds and buy stocks “makes no sense for pensions given the capital calls they are facing from credit and related products.”

Some index providers, such as S&P Dow Jones Indices, have delayed their quarterly rebalancing because of the market volatility, potentially complicating the picture for funds that look to track index performance.

Last week’s rally in stocks may have helped boost some funds’ equity allocations, making the need to increase exposure less acute, said Mike Schumacher, head of macro strategy at Wells Fargo Securities.

The bank last week had estimated that U.S. corporate pensions will need to shift about US$40-billion from fixed income into equities to maintain allocation targets. Its estimate now stands at US$20-billion after last week’s rally, Mr. Schumacher said.

Story continues below advertisement

At the same time, mutual funds, pensions and other asset managers rebalancing their portfolios may have stoked some of last week’s gains.

Steven DeSanctis, an equity strategist at Jefferies, said moves from fixed income into equities “most likely” happened last week, adding that “the rebalancings don’t have to take place on the 31st.”

Jack Janasiewicz, portfolio strategist at Natixis Investment Managers Solutions, said some of the market’s recent gains have come from quarter-end and month-end rebalancing.

“Once we get through the next couple of days, it’s going to be a little bit more interesting because the question then becomes, ‘Do we return really back to fundamentals and technicals?’”

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies