Clients buy US stocks for the first week since mid-January
Last week, during which the S&P 500 was flat from the prior week, BofAML clients were net buyers of US stocks for the first time in 19 weeks, breaking a record-long selling streak that began in mid-January. Sales had generally been decelerating since late April. Net buying of $0.8bn was led by institutional clients, who have been the biggest sellers of US stocks this year. Hedge funds and private clients remained net sellers last week. Broader global flow data (EPFR data) similarly suggested inflows into US stocks in the most recent week (Thurs-Weds, vs. Mon-Fri for flows in this report). But four-week average BofAML client flows remain negative, as they have been since February, and flows in the coming weeks will suggest whether this represents true capitulation or simply a brief pause in outflows. Other sentiment measures, such as our Sell Side Indicator, suggest still-bearish equity sentiment.
Passive inflows, but single-stock buying, too (led by HC)
Net buying last week was led by flows into passive vehicles (ETFs), though clients were net buyers of single stocks as well. Single-stock buying was largest within Health Care, a sector which has seen net sales most weeks this year amid uncertainty over the US election and a positioning unwind. Clients also bought Utilities, Industrials, Tech, Staples, and Discretionary stocks last week. Financials and Energy stocks saw the biggest net sales. Currently, no sector has a long-term selling streak or buying streak, as the longest buying trend is for Staples (at three weeks) while the longest selling trend is for Telecom, Materials, Financials and Energy (two weeks each).
Other notable flows: Buybacks continue to slow
• Buybacks by our corporate clients slowed to their lowest weekly level year-to-date, with the four-week average trend in buybacks the lowest since January 2015. Cumulatively this year, buybacks are tracking in-line with levels we saw in the first five months of 2015, and below 2014’s record levels.
• Sector flows varied by client type – only Utilities saw net buying by institutional clients, hedge funds and private clients alike last week, while only Financials and Energy saw net selling by all three groups.
• Pension fund clients were net sellers of US stocks last week, following a week of net buying. Opposite of broader institutional clients (and similar to hedge funds), this group’s net sales were chiefly in Health Care and Consumer Discretionary stocks last week. This group remains a net buyer of stocks year-to-date, which was true in 2015 and 2014 as well. See Pension fund flows for details.