What's Up With Today's Big Rally? (Spoiler Alert: Quarter-End Rebalancing)

What's Up With Today's Big Rally? (Spoiler Alert: Quarter-End Rebalancing) Stocks went on a tear in Q2 with the S&P up 20% as recently at June 16th. AI-adjacent stocks were up over 50%. Bonds lost ground over the same time. That means the 60/40 stock/bond portfolio targets were thrown way out of whack, at times approaching a 70/30 balance. Gigantic money managers (insurance/pension funds and foreign investment funds) take the last few weeks of a quarter to get that balance back to 60/40. This is accomplished via selling stocks, buying bonds, or both. In today's case it was both, but primarily the "buying bonds" part. If the math is so cut and dried, why can't the market accurately price it in ahead of time (after all, it was being talked about)? Ultimately, rebalancing flows are only a small fraction of trading volume. For instance, the stock selling in early June was viewed as early rebalancing tradeflows. This stuff doesn't adhere to a set schedule, so it's only truly obvious in hindsight. Unfortunately, it doesn't speak to a material shift in bond buying demand going forward--just an accounting adjustment in response to the past. Econ Data / Events New Home Sales (May) 0.58M vs 0.64M f'cast, 0.622M prev Market Movement Recap 09:20 AM MBS up nearly 3/8ths and 10yr down 6.6bps at 4.432 11:33 AM MBS up nearly half a point and 10yr down 9.1bps at 4.407 02:43 PM MBS up half a point and 10yr down almost 10bps at 4.401