Clients sell stocks—but surprisingly, mostly defensives
*1st week of net sales this year amid market sell-off
Last week, during which the S&P 500 was down 2.6% (its biggest weekly decline since May 2012), BofAML clients were net sellers of $302mn of US equities following four weeks of net buying. Net sales were entirely due to institutional clients, who sold stocks following five weeks of net buying. Hedge funds were net buyers for the second consecutive week, while private clients continued their long-term net buying streak, with inflows into US stocks by this group in all but three of the last 35 weeks since late May. By size segment, outflows were entirely in the large cap space last week.
* Defensive-led outflows; big Tech inflows continue
Interestingly, despite concerns over China and EMs, net sales last week were actually concentrated in the defensive sectors of Health Care and Staples, along with ETFs. Tech saw the largest net buying following the previous week’s record inflows into the sector, and has the longest net buying trend of the ten sectors with five consecutive weeks of inflows. We note that most sectors which saw inflows last week were globally-oriented cyclical sectors. We have been expecting clients to rotate out of defensives and into these sectors as global growth picks up this year, particularly
given very attractive valuations that appear to be discounting the worst, and so far this year we have seen evidence of what could be the start of this rotation (see Chart of the Week below).
* Other notable flows: Broad-based small cap buying, Utilities sales
- All three client groups were net sellers of Utilities. No sector saw net buying by all three groups, though both hedge funds and private clients bought Discretionary, Staples, Energy, Financials, Health Care, Industrials, and Tech.
- Small caps saw net buying by all three client groups last week; no size segment saw net sales by all three groups.
- BofAML pension fund clients were net buyers of US stocks across all three size segments last week following a week of net selling, and are currently small net buyers YTD. Net buying last week was chiefly in Industrials and Materials, while Energy and Tech saw the largest net sales. See pg 9 for details.