Longest selling streak has yet to cease
Clients sell US stocks for the 15th week straight
Last week, during which the S&P 500 fell 0.4%, BofAML clients were net sellers of US
stocks for the 15th week, in the amount of $1.3bn. This has been the longest uninterrupted
selling streak in our data history (since ’08)—previously the longest streak (in late ’10) was
12 weeks. The pace of outflows has slowed slightly in the last two weeks. Rampant
negative equity sentiment—echoed by EPFR flow data, BofAML’s Global Fund Manager
Survey, and our Sell Side Indicator (which recently generated a contrarian “Buy” signal)—
suggest extreme levels of bearishness and reflect doubt that the market can rally further.
Net sales continue to be led by institutional clients, while hedge funds and private clients
also remain sellers. Clients sold stocks in all three size segments last week. Corporate
buybacks picked up last week, though are tracking below last year’s 2Q-to-date levels.
Big sales of Industrials/Materials; HC selling streak continues
Clients sold stocks in seven sectors plus ETFs last week. The biggest sales were of
Industrials and Materials (third-largest and second-largest in our data history, respectively),
after Industrials had seen positive flows and solid earnings results the week prior. Only
Tech, Discretionary and Telecom stocks saw net buying, with flows into Discretionary the
largest in eight months and Tech inflows their largest since Sept. Health Care continues to
have the longest selling streak (ten weeks); this sector has been hurt by a positioning
unwind and political uncertainty in an election year. No sector has seen more than two
weeks of buying. Year-to-date, only Telecom stocks have seen cumulative inflows, and
Utilities have seen the smallest net sales—with both of these sectors helped by the fall in
interest rates and a push-out in the expected timing of the first Fed rate hike.
Other notable flows: Near-record sales of small caps
• Net sales of small caps last week were the largest since Nov. and the fifth-largest in
our data history, entirely led by institutions. Our clients have been persistent buyers of
small caps for last several years, despite a worrisome rise in leverage to all-time highs
(chart below)—though small caps have begun to see outflows for last two months.
• The commodity-oriented sectors of Energy, Industrials and Materials—last week’s
worst-performers—plus Utilities and Staples saw net sales by institutional clients,
hedge funds and private clients alike last week. No sector saw net buying by all three.
• Pension fund clients were net sellers of US stocks for the second week, led by sales of
ETFs and stocks in the Staples and Materials sectors. But unlike broader institutional
clients, this group is still a net buyer year-to-date. See Pension fund flows for details.