Analysis: U.S. pension funds are expected to conduct a $20 billion sell-off of U.S. stocks by the end of the month.

On May 30, a report from Goldman Sachs’ trading arm revealed that U.S. pension funds are expected to conduct a $20 billion equity sell-off by the end of the month as part of their month-end rebalancing operations. According to Goldman Sachs, the total value of the $20 billion is in the 86th percentile of net buying or selling similar to rebalancing since 2000. The reason for this is that many pension plans adjust their equity-debt allocations (which can be seen as a large-scale version of the traditional 60/40 portfolio). While equities have outperformed this month, bonds have underperformed, which means that in the model portfolio, some major adjustments are needed to bring these two asset classes back into balance. Bret Kenwell, U.S. investment analyst at eToro, said: “We’re not used to seeing so much volatility in the bond market, especially for pension funds or institutional investors, who are almost all billions of dollars. When these rebalancing operations unfold rapidly, it may indeed become a ‘compass’ for the short- to medium-term market. Whether it’s the suspension of the 90-day trade talks, the postponement of the negotiation deadline with the European Union, or the emergence of legal proceedings to prevent Trump from implementing tariffs, I expect the general consensus on Wall Street that the worst of the tariffs issue is behind us and that the situation is moving towards détente.” (Golden Ten)