BofA’s Institutional Clients Are Suddenly Selling Everything

Over the past week we reported on multiple occasions that according to two major banks, Bank of America and JPMorgan, institutional investors and hedge funds have been quietly selling stocks, while the “last man in”, mom and pop retail investor, have been waving it in, riding high on the animal spirits and delighted brokers who finally get to collect some retail commissions, and using ETFs for their purchase, whose end of day rebalancing has had the added benefit of sending the market surging in the last 30 minutes of trading as JPM explained.

Fast forward to today when BofA released its latest weekly client flow trends report, and what it found was even more of the same. As Jill Carey Hall writes, Bank of America clients’ optimism continued to wane last week as clients sold US equities for the second consecutive week after having been net buyers the prior 14 weeks since the election, with four-week average flows turning negative for the first time since November as well.

Net sales were $988mn, with sales of single stocks eclipsing small purchases of ETFs. For the second week in a row, hedge funds, institutional clients were all net sellers; hedge funds have the longest selling streak at four consecutive weeks. Even private clients, aka rich retail investors, who have been the most aggressive buyers in the past few months, finally joined in selling bandwagon.

What did they sell? Pretty much everything. Clients sold large and mid caps but bought small caps, after sales of
all three size segments the week before.

BofA clients were net sellers of single stocks across all 11 sectors last week – the last time this occurred was two weeks prior to the Brexit vote in early June (where the market subsequently sold off 6% from peak to trough). C

lients continued to buy ETFs last week, though purchases of ETFs were their smallest since the week prior to the election. Utilities still have the longest selling streak, with outflows for five consecutive weeks, while no sector has a recent net buying streak. Based on less-volatile four-week average flows, Health Care has seen net sales since last March, while Financials have the longest buying streak (since early January of this year).

Meanwhile, corporations continue to pull back on buybacks and year-to-date are tracking the lowest of any comparable period since 2013. As BofA concludes, given elevated market valuations and a near-record-low proportion of investors wanting companies to return excess cash to shareholders (according to the latest BofAML Global Fund Manager Survey).