Further signs of strain in the credit market risks provoking another broad equities rout as long-only investors, including pension funds, will be compelled to sell, according to strategists at Bank of America Corp.
“If private lending hiccups continue, pensions etc. may be forced sellers of index funds to avoid punitive private asset marks and meet ongoing obligations,” said Savita Subramanian, head of US equity and quantitative strategy at BofA Securities. Passive investment “dominates the S&P 500,” so a downturn would push funds that track indexes to sell equities, she wrote in a note Monday.
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