Where Are You Going To Go?

I wanted to touch upon Mr. Fink’s comments about the pension fund re-balancing.  With the S&P 500 up 25% year-to-date, funds rebalancing their equity exposure to get back in line with their respective allocations makes sense. But my question is, where are they going to go with the cash?  Bonds?

If I’m a PM at a pension fund and I’ve got to reduce my equity exposure, am I going to sell those stocks and allocate that money to bonds, given the impending tapering? If I am, do I go into short-term bonds to protect myself but earn nothing in interest?  If the funds can’t sit in cash, and commodities aren’t viable for the funds (nor do they look bullish at the moment),  are other regions of the world (Europe, emerging markets, Japan, China) that much more attractive compared to the U.S.?

I’m not a fan of investing in something because “there’s nowhere else to go.” But in this 0%, Fed-engineered environment, I do have to admit that it’s a tough question to answer. As a result, I’m not so sure that the rebalancing Mr. Fink is alluding to will be such a negative on stocks, although he’s obviously more-knowledgeable in the area than I am.  But, it is food for thought on why stocks can continue to grind higher.  Capital flows are a powerful influence on markets in the short/medium term.