If they have, say, a 60/40 mix of stocks to bonds, and stocks go up 12 percent, and bonds are flat to down (as has happened this quarter) pension funds must SELL stocks and BUY bonds to rebalance to 60/40. This is tricky figuring out exactly how much this is influencing the markets, but it is definitely part of the story.
Don't get too glum. So many people are underinvested, it seems like every time we get a pullback we end up having a whole new wave of buyers drive the market back up," one trader wrote to me this afternoon. "I still think path of least resistance is higher."
And it's hard to believe that equities are going to hell when you look at the IPO market today: Annie's Foods priced 5 million shares at $19, opened at $31, and is sitting near $34. Vocera Communications, which priced at $16 and opened at $24, is holding at $22.
"I do believe there is a cyclical shift from bonds to equities going on. Lots of money chasing a 5mm share deal accounts for the pop," one IPO trader wrote to me.
Finally, don't hit me for saying this, but Apple was at another historic high today ($621.45), before falling back a bit...how bad can things be? Of course, if AAPL craters, it will take the market with it.
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