Pension fund buying spree creates tailwind for US equities

In recent years, the TINA principle (There Is No Alternative) has motivated investors to put their money in US stocks. However, this strategy faltered amid the Federal Reserve's prolonged rate-hiking cycle that began in 2022, when Treasury bond yields rose, Yahoo Finance reports.  Nevertheless, according to Goldman Sachs, TINA-driven trading is now regaining traction, particularly in retirement accounts, such as 401(k) plans.

Bank experts say more and more US pension funds are buying stocks, and they believe 401(k) assets could hit $8.9 trillion by 2024. 

Allocations to equities have steadily climbed, rising from 66% of retirement account holdings in 2013 to 71% in 2022. Younger investors, those in their 20s and 30s, are even more assertive, dedicating an average of 90% of their portfolios to American stocks. This robust institutional and retail demand is reinforcing the US equities market. 

Goldman’s trading desk reports that retail investors alone have purchased $20 billion in assets over the past three months, creating a supportive environment for stocks.