In the previous week, during which the S&P 500 rose 0.8%, Bank of America’s clients were buyers of U.S. equities, amounting to $3.7 billion.
This marked the fourth consecutive week of net buying, according to the bank’s analysis. However, there was a shift in buying behavior as clients purchased ETFs and divested from individual stocks.
This is in contrast to the trend observed in the preceding three weeks, where stock inflows exceeded ETF inflows.
The buying activity was evident among both retail and institutional clients, with retail clients leading the way. Retail clients displayed net buying for the first time in three weeks, whereas institutional clients were net buyers for the third week in a row.
Hedge funds, however, turned into net sellers for the first time in three weeks. Despite this, they remain the only category of clients with cumulative net buying year-to-date.
“Health Care saw the largest outflows: Biggest sales of the sector since May ’22 and third-largest sales of the sector in our data since ‘08, after near-record inflows the prior week,” BofA strategists said in a client note.
“Whipsawing Health Care flows (with no persistent buying or selling trend since May) may suggest continued uncertainty/lack of conviction; we are underweight Health Care within the S&P 500 and it continues to rank poorly in our small cap work.”
The trend of momentum in favor of small-cap stocks persisted, with clients displaying a preference for both large-cap and small-cap stocks. However, they chose to sell mid-cap stocks for the fourth consecutive week.
Small-cap stocks, which experienced significant outflows in the first half of the year, have seen a consistent influx of capital for nine consecutive weeks. Given this, BofA analysts see room for a potential catch-up rally in the small-cap segment.