By Senad Karaahmetovic
Bank of America (NYSE:BAC) clients continued to buy U.S. equities last week, which marks the fifth consecutive week of buying.
Hedge funds, institutional, and private clients were all buying stocks, with single stocks attracting bigger inflows than ETFs.
The bank’s clients were buying stocks in nine of the 11 sectors, led by Tech and Communication Services, while Real Estate and Industrials witnessed outflows. Materials, Energy, and Consumer Discretionary stocks recorded inflows for the last five consecutive weeks.
“Despite last week’s data revealing a second consecutive negative quarter for US GDP growth (-0.9%), clients were bigger net buyers of stocks in cyclical sectors than defensive sectors. Cumulative cyclical vs. defensive flows YTD suggest clients still do not appear to anticipate a recession. Our economists do not believe we are in a recession yet, but forecast one beginning in the 2H, and view market optimism about a dovish Fed pivot as premature,” strategist Jill Carey Hall wrote in a research note to clients.
Continuous buying of U.S. equities marked the second 10%+ rally in the S&P 500 this year. However, BofA strategist Savita Subramanian believes the ongoing rally is nothing but a bear market rally.
She notes that bear market rallies are common, “occurring 1.5 times on avg. per bear market since 1929.”
“Aug-Sept. have also historically been the seasonally weakest months (+0.1% on average in both Aug & Sept. vs. +1.1% monthly average). We maintain our 3600 year-end target on the S&P 500,” Subramanian added in a separate client note.
The strategist has continued to urge clients to focus on high-quality stocks.