Buy-the-dip Mentality Continues to Dominate, Last Week's $5.9 Billion Stock Inflows Were Fourth Largest Since 2008 - BofA

September 28, 2021 7:07 AM EDT
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BofA strategist Jill Carey Hall took note of “big, broad equity inflows” that occurred last week.

The S&P 500 closed the week half a percent higher as investors used the pullback to add to their long positions. In total, investors poured $5.9 billion in US equities last week, marking the third consecutive stock-buying week.

“Inflows were the fourth-largest in our data history since ‘08 (and the largest since Dec. as a % of S&P 500 mkt. cap), with near-record buying by hedge funds following four weeks of selling and a third straight week of outsized inflows from institutional clients. Private clients were net buyers as well (first time in eight weeks),” Carey Hall said in a client note.

Clients were buying cyclical stocks ahead of defensives amid the surging rates. Consumer Discretionary, Energy and Real Estate, while Staples, Health Care and Comm. Svcs. all witnessed large inflows.

“Energy has seen the most notable pick-up in inflows over the past few months, with the highest rolling four-week avg. flows in a year. Energy ranks highly across our large/small cap work, and offers attractive inflation-protected yield. Hedge funds have been big net buyers of Financials the last several weeks, but our positioning work (report) suggests much more room to run: hedge funds’ relative weight in Financials is more than two standard deviations below history.”

The data also shows that clients preferred buying ETFs rather than stocks. Cumulative single-stock flows (excluding buybacks) are now the least-negative YTD. On the buybacks front, they decelerated ahead of the 3Q earnings season.

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