What is the impact of 401K on Index funds and Individual stocks? As a lot of money gets into the markets during the first weeks of the month ,shouldn't these securities move up a lot during this time period?
A lot of 401Ks now have mutual funds that do not even trade in the US stockmarket but, closed funds only to say employees of some companies or the state to which they reside. My own 401K was stuffed in generic mutual funds that could only be bought by state employees. Performance of those mutual funds lag the stockmarket for obvious reasons. Hedge funds buying certain stocks would affect the stockmarket more than anything else! They have hundreds of millions or even billions to invest! I would not even consider investing in a 401K mutual fund that does not trade in the US stockmarket. That is why I rolled my 401K into a broker IRA where I have more investment or trading choices.
Was a ~400 S&P point rise in about a month due to January effect or a Fed that went from "a long way from neutral / QT autopilot" to we're at neutral rate / let's do a pause and maybe drawback QT in less than 1 month?? My bet is that it's mostly the Fed.
Impact of 401K on Stock market Generally not as pronounced as most people would assume. The big indexers do what is termed an "asset allocation" trade when they know or have a sense of the inflows. It's not zero impact and generally, it starts in the full-size futures contracts and then a program trade(basket vs. futures) is done to exit the futures. BTW this one of the reasons the MOC order was created. Where you have liquid futures you can do enormous baskets with the overall basket friction being fairly modest. Where you don't have a robust futures market it's tough to accomplish. S & P 500, NDX and RUT are fairly easy.
True, but if you can understand how policy affects the market, you'll know how to position yourself to best take advantage of it.
Looks like zero hedge has an explanation for the rally. https://www.zerohedge.com/news/2019...er-buyers-strike-continues-11th-straight-week
Thanks for explaining this. Can you please expand on "it starts in the full-size futures contracts and then a program trade(basket vs. futures) is done to exit the futures"? What i understood is that indexers buy futures contracts and then sell them off to reduce the impact to the market?