BofA Clients Drive Modest Inflows; Tech Sector Experiences Largest Outflow Since August

Investment activity at Bank of America Securities indicated that clients made modest equity purchases last week, amounting to $0.6 billion after a previous week of outflows.

Investors directed their attention toward both individual stocks and exchange-traded funds (ETFs), with ETFs seeing higher inflows, as highlighted in a Tuesday note from Bank of America. Both large-cap and small-cap stocks recorded positive inflows, while mid-cap stocks experienced outflows.

Private clients and corporations emerged as the key net buyers, marking the first inflows from this group since early September. In contrast, institutional and hedge fund clients continued to divest from equities for the second week in succession.

Although corporate buybacks have slowed, they remain above seasonal averages relative to S&P 500 market capitalization. Buybacks over the trailing 52 weeks, as a percentage of the index’s market cap, are at a record high.

As the tax-loss selling season approaches, stock sales by institutional clients typically increase, particularly ahead of the October 31 deadline for most mutual funds to realize capital gains. Strategists noted that this group has sold stocks in six of the previous seven weeks. Retail investor selling tends to rise in December as individuals prepare for the year-end deadline on December 31.

Last week, clients of Bank of America purchased stocks across six of the eleven sectors, with notable inflows in Consumer Discretionary, Communication Services, and Health Care. In contrast, the Technology and Industrials sectors saw the largest outflows, with net sales in Technology reaching their highest level since August.

The Real Estate sector is currently experiencing a seven-week selling trend, although Bank of America continues to view this sector positively in terms of income and quality.

Among ETF flows, seven out of the eleven sectors noted inflows, with Utilities leading. Consumer Discretionary, Real Estate, and Health Care ETFs also attracted positive investment interest.

Clients displayed a preference for both Growth and Value ETFs while selling off Blend ETFs. They favored large-cap and broad-market ETFs but were net sellers of small- and mid-cap ETFs.