More institutional and private client-led selling, HF buying
Last week, during which the S&P 500 climbed 1.2%, BofAML clients were net sellers of US
equities for the 12th consecutive week, in the amount of $0.9bn. Year-to-date, cumulative
net sales of US stocks by our clients are at post-crisis highs; broader (non-client) global
fund flow data from EPFR suggest that the US has seen the second-largest equity
outflows of any region (after Europe) this year. Similar to the prior week, BofAML
institutional and private clients sold stocks while hedge funds were net buyers.
Institutional clients have been the biggest net sellers year-to-date, followed by private
clients. And also similar to the prior week, clients sold stocks across large, mid and small
caps. Buybacks by corporate clients continued to decelerate, and are now tracking the
weakest of any 3Q since 2010. As we noted last week, elevated market valuations may be
one deterrent, as buybacks tend to be more rewarded when stocks are cheap.
ETF buying, single stock selling (except Telcos & Materials)
Clients sold single stocks across nine of the eleven sectors last week, led by Health Care
and Tech stocks. The selling of Tech stocks was the biggest reversal from recent trends,
and flows out of Health Care stocks were their largest in five months. Only Materials and
Telecom stocks saw net buying last week, while ETFs saw the biggest inflows. While no
sector currently has a multi-week net buying streak, Telecom stocks have seen net buying
in ten of the last eleven weeks. Consumer Discretionary continues to have the longest net
selling streak, with outflows for the last 13 weeks (the longest selling streak for this sector
in our data history). But given this is still the most crowded sector by mutual funds, there
could be more to go, and we are cautious on Discretionary for a host of reasons.
Other notable flows: Pension funds continue buying stocks
• YTD, clients have sold a post-crisis record of $32bn of single stocks, vs. small
cumulative inflows into ETFs (Chart 1). In a similar vein, both SimFund data on USdomiciled
funds/ETFs and global EPFR flow data suggest large long-only outflows
but smaller ETF inflows YTD. Flows from active to passive—coupled with poor
performance and a fee-sensitive investor base—remain headwinds to active funds.
• Health Care, Discretionary and Real Estate saw net selling by institutional clients,
private clients and hedge funds alike last week. No sector saw net buying by all three.
• While broader institutional clients remain net sellers, pension fund clients (a sub-set
of institutional), were net buyers of US stocks for the fifth consecutive week. Buying
was led by ETFs and stocks in the Tech and Health Care sectors; only the bond proxy
sectors (Real Estate, Telecom, Utilities and Staples) saw sales by this group last week.
See Pension fund flows for details.