A few shifts have occurred over the last month that tilt the risks more towards equity supply than equity demand for the next few weeks.

1) An aging population means more investors need to take Required Minimum Distributions from retirement products (starting at age 70 ½ investors need to take withdrawals from tax advantaged retirement plans). QDS estimates that nearly $100bn of equity needs to be sold this year from those holdings to meet the required distributions. There is a risk then that investors that have not yet taken their distributions do so over the next few weeks, accelerating fund outflows.

2) Systematic strategy leverage has risen on the back of the low volatility market rally over the last few months. Increased exposures mean it is harder for these strategies (vol target funds, CTAs) to be continued buyers now. And if there is a shock to the market, these strategies will have a considerable amount of stock to sell.

3) Some of the long gamma that suppressed volatility in November has rolled off.