Waning optimism: first post-election outflows
Clients sell US equities for 1st time in 15 weeks
Last week, during which the S&P 500 climbed to another new high, BofAML clients were net sellers of US equities for the first time since the week prior to the US election in early November. Net sales of $2.1bn were the largest since June, with net sales of single stocks eclipsing small net purchases of ETFs. Sales were broad-based across size segments and client types, and this was the first week of selling by private clients since January. Buybacks by corporate clients slowed to a six-week low, and year-to-date are tracking the lowest of any comparable period since 2013. As our Chart of the Week below shows, buybacks on a trailing 12-month basis have been slowing since early 2016. Corporates may be pulling back on buybacks given elevated market valuations and a near-record-low proportion of investors wanting companies to return excess cash to shareholders (based on the latest Global Fund Manager Survey).
Buying of ETFs & Materials stocks, sales of everything else
Clients continued to buy ETFs last week, though purchases of ETFs were their smallest since the week prior to the election. And after the previous week’s buying of cyclical stocks and selling of defensive stocks, clients sold stocks across all sectors except Materials last week. Consumer Discretionary, Industrials and Staples stocks saw the largest net sales; sales of Discretionary stocks were the sixth-largest in our data history following record sales of this sector two weeks ago. Utilities currently has the longest selling streak, with outflows for the last four weeks, while only Materials has seen two weeks of inflows. Based on less-volatile four-week average flows, Health Care has seen net sales since last March, while Financials and Tech have the longest buying streaks (since early Jan 2017).
Other notable flows: Broad-based sales of REITs
• Mixed sector flows across client groups: Real Estate was the only sector which saw net sales by hedge funds, institutional clients and private clients alike last week. No sector saw net buying by all three.
• Pension fund clients were net sellers of US stocks following two weeks of net buying. They sold ETFs along with single stocks in seven of the eleven sectors last week, led by Financials and Utilities. This group sold large caps but bought small and mid caps last week. See Pension fund flows for details.