The month-end and quarter-end rebalancing of portfolios by big institutions and funds next week is already getting attention in the markets, and it has the potential to add to volatility in stocks in both directions.
With the S&P 500 down nearly 6% for the month, fund managers are expected to raise their holdings to bring stocks back to their prescribed levels, compared with bonds. But this is also the quarter end, and the S&P 500 is still 6.9% higher for the quarter, so portfolio managers are likely to make the opposite move and shift some funds into bonds from stocks, a negative for equities.
The impact of these cross currents in the market could be muted by the market's volatile behavior, but J.P. Morgan strategists expect it will have a positive impact on the stock market. Others say it may not.
