The Tide is Turning? Investors are Selling Cyclicals and Buying Defensives

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The Tide is Turning? Investors are Selling Cyclicals and Buying Defensives - BofA

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The Tide is Turning? Investors are Selling Cyclicals and Buying Defensives - BofA

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By Senad Karaahmetovic

Bank of America (NYSE:BAC) clients were small net sellers of U.S. stocks last week when the S&P 500 closed 1.2% in the red. All three major client groups - hedge funds, institutional and retail clients, were net sellers with total outflows registered at -$0.4 billion.

This marks the first week of selling after seven consecutive weeks of net buying. Selling was led by institutional clients while private clients were sellers for the second consecutive week.

“Clients bought stocks in six of the 11 sectors, led by Tech and Health Care. Four week avg. inflows into Tech are now the highest in our data history (since ’08), or the largest since March’21 as a % of sector market cap,” a Bank of America strategist wrote in a client note.

The data also showed that investors are becoming pickier and pickier as they bought single stocks but sold ETFs.

“Overall, we have seen a trend of accelerating single stock inflows vs. slowing ETF inflows since early this year,” the strategist added.

Interestingly, corporate buybacks accelerated to their highest weekly level since early January.

Broken down by sectors, Consumer Discretionary, Communication Services, and Energy witnessed the largest outflows. Cyclicals were also sold while investors shifted towards defensive sectors. Whether this is the beginning of a new trend still remains to be seen.

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