The recent trading week saw a notable shift with institutional clients engaging in significant selling, marking the first outflow from single stocks in eight weeks, according to Bank of America’s analysis of client data.
Despite the S&P 500 gaining 1.1%, the broker’s clients were net sellers of US equities, totaling outflows of $0.7 billion, the first such instance in three weeks. Contrasting this, there was an inclination towards purchasing equity ETFs, a trend observed for the first time in four weeks.
This wave of selling was primarily led by institutional clients, who recorded their second-largest outflow since 2008, and the largest since 2015, with a focus on selling Tech and Discretionary stocks.
On the other hand, private clients and hedge funds were net buyers. Interestingly, despite the significant outflows last week, the outflows from institutional clients for the month of January aligned with the average of the past five years.
In sector-specific movements, clients sold stocks in seven of the eleven GICS sectors, particularly in Technology and Staples, with the latter experiencing its third-largest outflow on record. Financials continued their outflow trend for the eighth consecutive week, with fund managers still significantly underweight in Banks.
On the flip side, Communication Services has been seeing consistent buying for the past 13 weeks, the longest streak of any sector, while Industrials have started to attract inflows after an 11-week gap, suggesting a shifting investor sentiment in these sectors.
Corporate buybacks, though decelerating, maintained levels above typical for the eleventh consecutive week. The year-to-date buybacks as a percentage of the S&P 500 market cap are currently exceeding the highs of 2023 for the same period.