BofA Clients are Buying Defensive Stocks, Shifting Away from Cyclicals - Analyst

September 27, 2022 7:19 AM EDT
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Despite the last week’s rapid move lower in the U.S. equities, Bank of America’s clients were net buyers of stocks ($0.5 billion). Unlike the week-ago period when private clients were the sole net buyers, hedge funds were buying last week while private clients turned to sellers.

On the other hand, Institutional clients were sellers for the second straight week. BofA’s clients were also buying SMID caps while selling large caps.

“Last week we highlighted extreme small cap outflows vs. large cap inflows over the trailing eight weeks which has historically been followed by small-cap leadership over the subsequent two months,” equity strategist Jill Carey Hall wrote in a research note.

As far as sectors are concerned, last week’s flows showed that clients were mainly selling Consumer Discretionary, Energy, and Financial stocks. On the other hand, a more defensive tactical positioning is reflected in the fifth largest inflows to Health Care since 2008.

“Health Care has now seen inflows for the last six weeks after outflows for much of the YTD. Defensive sectors in aggregate have seen inflows the last six weeks vs. cyclical sector outflows in five of the last six weeks (a reversal vs. most of this year),” Carey Hall added.

Institutional clients were selling ETFs and buying single stocks.

“Sales of stocks could pick up in the coming weeks ahead of the Oct. 31 deadline for most mutual funds to realize capital gains,” the strategist concluded.

By Senad Karaahmetovic

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