Bank of America’s equity client flow trends shows that investors are increasingly buying the dip in stocks as the S&P 500 tests 14-month lows.
Last week, BofA’s clients bought $2.4 billion worth of US equities for the 4th consecutive week. This time, the buying activity was led by private clients and hedge funds.
“Private clients have been the biggest net buyers of US equities YTD (where they have been more aggressive buyers of the dip this year after missing out on what has generally been a successful strategy for much of the post-GFC (Global Financial Crisis) period). Institutional clients have also been net buyers YTD (vs. net sales by hedge funds),” strategist Jill Carey Hall said in a note.
Clients were buying large and mid caps but selling small caps. When it comes to buybacks, they picked up last week amid cheaper valuations.
“Buybacks by corporate clients accelerated to the highest weekly level since late Jan. following tepid trends for the majority of this earnings season so far. YTD, corp. client buybacks as a % of S&P 500 mkt. cap (0.07%) are in line with 2021 YTD levels at this time but below 2019 (0.13%) levels.”
As far as sectors are concerned, clients were buying stocks in 6 out of 11 sectors, led by Energy and Real Estate. Inflows in the former were the highest in 7 months. On the other hand, Financials and Communication Services saw the largest outflows.
“Rolling 4-week avg. flows for Financials turned the most negative ever last month, with more muted but continued outflows in recent weeks. Our Banks team notes that banks are trading on recessionary concerns; easing inflationary pressures of de-escalation of Russia-Ukraine tensions could increase investor confidence,” Carey Hall concluded.
By Senad Karaahmetovic