Bank of America Warns of $163 Billion Forced-Selling Risk

U.S. equities face a potentially sharp imbalance between remaining systematic buying capacity and downside selling risk this September, according to an analysis Bank of America cited by Coin Bureau.

Bank of America estimates that systematic funds have only about $9 billion of additional buying capacity if stocks continue to rise, while a market decline could trigger as much as $163 billion in selling from commodity trading advisers and volatility-control strategies. The gap represents an 18-to-1 imbalance between potential downside selling and remaining upside demand.

Systematic Funds Could Amplify a September Selloff

The estimates highlight how markets positioning can become a source of additional volatility when investment strategies respond mechanically to changes in prices and volatility.

According to Bank of America’s calculations, systematic strategies would have limited room to add equity exposure if markets extend their gains. By contrast, a significant decline could prompt trend-following and volatility-targeting strategies to reduce positions, potentially creating additional selling pressure.

The $163 billion figure represents a scenario rather than a forecast of actual transactions. The potential flows would depend on the magnitude and speed of any market decline, as well as how individual systematic strategies respond to changing market conditions.

The warning comes against a backdrop of growing caution among investors. Reuters reported that U.S. equity funds recorded their second consecutive weekly outflow in the week ended September 2, with investors withdrawing $11.12 billion as higher bond yields and geopolitical tensions weighed on risk appetite.

Buyback Blackouts Remove Another Source of Demand

Corporate share repurchases could provide less support during the period as companies enter buyback blackout windows ahead of earnings announcements. That matters because buybacks have been an important source of underlying equity demand, particularly when other markets participants become more cautious.

The combination of limited systematic buying capacity and reduced corporate demand creates a more asymmetric market structure. A decline would not automatically produce a $163 billion liquidation, but a sufficiently large move could activate selling programs that reinforce the initial downturn.

For cryptocurrency markets, the development is also relevant because Bitcoin and other digital assets remain closely linked to broader risk sentiment. A significant equity-market deleveraging event could affect liquidity and investor positioning across multiple asset classes.

The key test for markets will be whether September produces the type of sustained equity decline capable of activating the systematic selling thresholds identified by Bank of America.

Writer: Victoria Hale
Technology & Blockchain Writer

Victoria Hale writes about blockchain technology, digital infrastructure, and the intersection of emerging technologies with finance. Her articles explore how new protocols and systems are shaping the evolving digital economy.

She prioritises clarity and accuracy when explaining technical developments to a general audience.