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Portfolio rebalancing tests turn-of-the-month effect as Nasdaq 100 volatility rises

Portfolio rebalancing and a packed US macro calendar could test the turn-of-the-month effect, raising volatility risks for the Nasdaq 100.

written by

Luis Francisco Ruiz

Market Analyst

Portfolio rebalancing could offset the turn-of-the-month effect

Two of the market's most important flow drivers are set to collide next week. The first is the turn-of-the-month (TOM) effect, a seasonal pattern widely documented in academic literature and associated with systematic inflows linked to passive investment management and regular contributions to investment funds.

The second is the end of the first half of the year, which will force many portfolio managers to rebalance their holdings in order to stay aligned with their investment mandates. JPMorgan estimates that this process could lead to equity sales of around USD 165bn, one of the largest rotations into fixed income in recent years. If these flows outweigh the usual capital inflows linked to the TOM effect, the seasonal pattern could lose effectiveness or even be neutralised.

Nasdaq 100 / iShares 20+ Year Treasury Bond ETF (TLT), weekly chart with stochastic

Sources: TradingView, Luis Ruiz

A compressed week with several key catalysts

The clash between these two flows will coincide with a particularly busy macroeconomic calendar.

The Independence Day holiday will bring Wall Street's trading week to an early close on Thursday, concentrating some of the month's most important releases into just four sessions: JOLTs job openings, the ADP employment report, the ISM manufacturing survey and, most importantly, the official non-farm payrolls report, which will be published exceptionally on Thursday.

Trading ranges rise sharply

The combination of major flow moves and high-impact macroeconomic data significantly increases the probability of sharp market swings, and the first signs are already beginning to appear.

Average true ranges (ATR) across the main US indices are rising again. In the case of the Nasdaq 100, the daily ATR (14) is above 2%, a level not seen since March and April 2025.

The indices are working off bullish excesses after the strong advance seen between April and May, which produced gains of more than 30 percentage points. The key level for the bullish structure, and the point that would trigger alerts if lost, is the 9 June low at 28,196 points. For the S&P 500, that equivalent low is at 7,237 points.

Nasdaq 100, daily chart with stochastic and ATR %

Sources: TradingView, Luis Ruiz

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