Goldman predicts $32bn stock sell-off by pension funds

As stocks surge, Goldman Sachs forecasts a massive equity sell-off by pension funds to rebalance portfolios

Goldman predicts $32bn stock sell-off by pension funds

Goldman Sachs Group Inc. has observed a trend indicating that pension funds are poised to divest around $32bn in stocks.  

This strategic adjustment aims at recalibrating their investment portfolios, according to Bloomberg. This forecast comes as the stock market is on track to conclude another quarter of significant gains. 

The anticipated sell-off is projected to be the most significant adjustment since June 2023, placing it in the 89th percentile among rebalancing actions observed over the past three years. This detail comes from analysts at Goldman’s FICC and equities team, as mentioned in a note released on Tuesday.   

The context for this anticipated activity is a stock market that, after a roughly 26 percent ascent since late October, is preparing to close another quarter on a strong note.  

This situation has generated concerns among traders regarding the potential for increased market sensitivity to short-term profit-taking, especially considering the possibility of stretched positioning in stocks.   

Goldman’s analysis suggests that the expected sell-off by pension funds could exert additional pressure on the markets, particularly as trading volumes typically diminish around the Easter holiday.  

This dynamic is noteworthy against the backdrop of the S&P 500's 8.8 percent increase since the onset of 2024, alongside a decline of about 2 percent in global bonds.  

The disparity in performance between these asset classes indicates that pension funds, along with institutional investors who usually adhere to strict allocation thresholds, might find themselves needing to offload a higher volume of shares than typically anticipated.   

These investment entities utilize the conclusion of each month and quarter as junctures to review and adjust their market exposure, aiming to align with predetermined allocation limits.  

The combination of recent market performance trends and the strategic need for portfolio rebalancing underscores the rationale behind Goldman Sachs’ projection of a significant upcoming sell-off in equities by pension funds.