Clients sell for 5th week; big mid cap sales; weak 3Q for buybacks
Last week, during which the S&P 500 climbed 0.4% to another new high, BofAML clients were net sellers of US stocks for the fifth consecutive week. Net sales of $0.8bn were smaller than the prior week’s ~$2bn, but all three client groups (hedge funds, institutional clients, and private clients) were net sellers again. Institutional clients led the selling, as has been true a majority of weeks this year. And similar to the prior week, clients sold stocks in all three size segments, with the biggest sales of mid caps (fourth-largest in our data history after near-record mid-cap outflows the week before). As we noted last week, mid caps are the most expensive size segment and have generally seen accelerating sales by our clients since earlier this year—four-week average net sales are their largest since mid ‘08 (Chart 25), and cumulative net sales of mid caps YTD are the largest in our data history (Chart of the Week, below). Buybacks by our corporate clients picked up last week, though QTD are tracking at their lowest levels of any comparable period since 2012.
Biggest sales of cyclicals, Health Care; Telecom buying continues
Clients sold stocks in six of the ten sectors last week, along with ETFs (a reversal from net buying of ETFs most weeks this year). Net sales were largest in Health Care and Consumer Discretionary, despite differing trends for these two sectors in 2Q results (most Health Care stocks have positively surprised, while Discretionary has seen a high proportion of sales misses). Tech, along with the defensive sectors of Telecom, Staples and Utilities, saw net buying by our clients last week, with flows into Tech stocks their largest in one year. Cyclical sectors continue to see larger net sales than defensive sectors, which has been true since late June. Telecom continues to have the longest net buying streak (for four consecutive weeks, or since mid-June when looking at four-week average flows).
Other notable flows: institutional clients’ sales nearing records
• Cumulative net sales by institutional clients YTD ($28 bn) have eclipsed sales by this group in 2015 ($26bn), though so far remain below 2013’s record ($33bn).
Redemptions from mutual funds amid poor performance is one likely contributor.
• Hedge funds, institutional clients and private clients all sold stocks in the Financials, Discretionary and Materials sectors last week. No sector saw net buying by all three.
• Pension fund clients were net buyers of US stocks for the third consecutive week. Similar to other institutional clients, Tech stocks saw the biggest buying from this group last week. Their biggest net sales were of Staples stocks. All three size segments saw inflows by this group last week. See Pension fund flows for details.