BofA Clients Sold Equities Last Week; Institutional Outflows May Accelerate

Bank of America Securities reported a significant shift in client behavior last week, with clients selling off $3.9 billion in US equities after an almost record-setting buying spree the previous week.

While individuals were offloading specific stocks, there was a noticeable increase in purchases of exchange-traded funds (ETFs). Mid and small-cap stocks experienced outflows, in contrast to large-cap equities, which saw inflows.

All major client groups—institutions, hedge funds, and private clients—functioned as net sellers during this period. Institutional clients led the way in selling, marking their first net sale in two weeks, while hedge funds sold for the first time in four weeks. Private clients were net sellers for the third consecutive week, experiencing their largest weekly outflow since November 2023.

Looking forward, institutional clients are likely to increase their stock sales as the October 31 deadline draws near for many mutual funds to realize capital gains. Although this group has been a net buyer so far in the month, they reverted to selling last week.

According to the strategic insights provided, there are signs of tax loss selling among institutional investors in October, compared to retail investors in December, ahead of the year-end cutoff.

Stocks were sold across seven of the 11 sectors, with the most considerable outflows occurring in Financials, Staples, Technology, and Health Care. The Financials sector saw its largest weekly outflow since July, while Communication Services enjoyed the highest inflows, maintaining its year-to-date lead.

The Real Estate sector has now recorded six consecutive weeks of outflows, although it remains a preferred choice for income and quality. Conversely, the Energy sector has faced outflows in 12 of the last 14 weeks, with the firm recently downgrading this sector to Market Weight, citing poor oil supply/demand conditions and disappointing earnings revisions.

Corporate client buybacks remained strong, although they slowed last week, continuing to exceed seasonal trends when measured against the market capitalization of the S&P 500.

ETF inflows were observed across various styles (Blend, Value, and Growth) and size segments (large, small, and broad market), although mid-cap ETFs saw outflows. Only three sectors—Real Estate, Utilities, and Communication Services—recorded ETF inflows, while Consumer Discretionary ETFs experienced the largest outflows.