$2T Exits US Stocks; Norway, Japan May Keep Selling

Last night, European and American stock markets closed with a collective rise, but it still couldn't conceal the potential for a wave of selling that could hit the market at any time.

Wall Street investment banks in the United States have warned that many funds may experience significant selling before the end of the year. Currently, more than $280 billion has already fled from the U.S. stock market, and the selling wave may continue for some time.

In just the next two weeks, the selling could reach $100 billion, equivalent to approximately 700 billion yuan.

01, A significant outflow of 2 trillion

In the past year, the wave of selling in the U.S. stock market has been ongoing.

Recently, data on international capital flows released by the Treasury Department showed that U.S. stocks have had a net outflow for 11 consecutive months. From November of last year to October of this year, the cumulative outflow of overseas funds holding U.S. stocks reached $286 billion, equivalent to more than 2 trillion yuan in Chinese currency.

Due to pessimism about the prospects for 2023, it is estimated that foreign institutional investors and American households will continue to sell U.S. stocks next year, totaling more than $200 billion. However, this amount will be lower than the amount of selling seen this year.

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02, Another wave is coming

But before the end of 2022, various funds may still be forced to sell $100 billion worth of stocks.

The reason is that during this period, U.S. stocks have seen a certain increase, rising more than bonds and commodities. Most funds adopt a rebalancing strategy, needing to sell stocks and buy other assets that have fallen, to rebalance the asset allocation ratio. Therefore, it is predicted that in the last two weeks, $100 billion worth of U.S. stocks will be sold.Of course, the final wave of selling may be dominated by domestic investors, including the U.S. pension plans, which may sell off $70 billion worth of stocks.

Additionally, several large overseas sovereign funds may also need to sell stocks, including Norway's oil fund and Japan's pension fund, selling off $12 billion and $17 billion worth of stocks, respectively.

Most of these funds allocate their investments in a 60:40 ratio between stocks and bonds. After selling off stocks, they may buy bonds, but they might opt for Chinese yuan-denominated bonds, steering clear of U.S. dollar-denominated bonds.

03, U.S. stock market rises

However, this seems to have no impact on the rise of the U.S. stock market last night.

The Dow Jones Industrial Average opened with a significant increase last night and continued to rise.

After 12 AM Beijing time, it had already reached its highest point of 33,437, a rise of 600 points from the previous trading day's close.

Although there were slight fluctuations afterward, it generally maintained a high level, and ultimately closed up 526 points, a 1.6% increase.

Currently, the Dow Jones Industrial Average has accumulated a rise of 456 points this week, almost all contributed by yesterday.

The increases of the other two major indices are very close, both around 1.5%.04, Positive News?

Believe that the rise in the U.S. stock market is greatly related to several recently released financial reports.

Nike released its financial report for the third quarter, which far exceeded market expectations. As a result, the stock recorded the largest increase in the past year and a half last night, rising by 12%, and also drove the rise of other retail stocks.

FedEx's financial report was also better than market expectations, but the stock's increase was far lower than Nike's, only rising by 3%.

In addition, the consumer confidence index reached 108.3, an increase of 8 points from last month, also far exceeding market expectations, showing that market confidence is gradually recovering, and investors may return to the stock market.

But it is still difficult to say how much the return of retail investors can push up the market. Maybe the stock market rebound will lead to more resolute selling by institutions.