BofA Clients Generate Strongest Equity Inflows in Nearly 2 Years During Fed Cut Week

Investors at Bank of America Securities significantly increased their purchases of U.S. equities last week, coinciding with the Federal Reserve’s first interest rate cut in several years. Overall, stocks rose by 1.4%, with total inflows reaching $6.9 billion—the highest figure since October 2022.

According to Bank of America, clients focused on purchasing individual stocks and exchange-traded funds (ETFs), marking a record influx into single stocks. Buyers were drawn to companies across all market capitalizations: large, mid, and small.

Institutional investors led the buying activity, recording their first inflows in five weeks, with these being the largest since November 2022. Hedge funds also continued their buying trend for the third consecutive week, while private clients were net sellers for the second week in a row.

Purchases were made in eight out of 11 market sectors, with Technology, Consumer Discretionary, and Utilities taking the lead. Bank of America strategists highlighted that the Consumer Discretionary sector “could benefit from less rate pressure,” noting it saw the second-largest inflow on record last week, primarily driven by institutional buyers.

The Utilities sector experienced its highest inflow since 2008, prompting Bank of America strategists to upgrade this sector to Overweight due to its income and stability amid Fed rate cuts and ongoing market fluctuations.

Conversely, the Financials, Real Estate, and Energy sectors experienced outflows, with Real Estate facing its fifth consecutive week of selling pressure. Interestingly, while individual Financial stocks saw outflows, Financial ETFs recorded significant inflows, whereas Real Estate ETFs faced the largest outflows.

In addition, corporate buybacks remained strong, although they did see a slight slowdown last week. Year-to-date, buybacks are on track to set a record as a percentage of the S&P 500 market capitalization.

U.S. equities wrapped up last week on a high note, as the Fed’s half-percentage rate cut reportedly increased investor appetite for riskier assets. The S&P 500 rose by 1.36%, marking its fifth gain in the last six weeks, with 2024 showing an increase of nearly 20%.