Quarter-end flows risks creating more noise for the market until we get to April

What’s all the chatter about month-end and quarter-end rebalancing?

As much as technicals and fundamental drivers are key parts of the market, flows are also something that needs to be considered – especially when there are large amounts reportedly involved during crucial periods such as this one.

Equities and risk sentiment have been a little jittery lately and while there seems to be some room for comfort so far today, the coast may not be clear until we get to April.

JP Morgan and BofA outlined potentially large chunks of equities to move into fixed income for rebalancing purposes, with Wells Fargo now adding that they expect US pensions to move an additional $19 billion into fixed income.

While these flows may have already been a factor in trading this week, it may be tough to extrapolate much from the actual market mood until the month and quarter actually ends – when all of this chatter is put behind us.

That said, not everyone is seeing this rebalancing flows as being one that is net negative for stocks. As noted earlier, JP Morgan’s chief global strategist says that recent portfolio rebalancing has taken some of the sting out of the typical quarter-end flows:

“A lack of these flows, and broad anticipation of ‘month/quarter-end’ effect, could result in the market moving higher near term, all else equal.”

Either way, this is just something to consider alongside other factors as we navigate through the remaining days of March.

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