Flows suggest investors believe the market has bottomed - we disagree, says BofA

November 29, 2022 7:34 AM EST
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While Bank of America’s equity client flow trends points toward building momentum in the U.S. stock market, the firm’s equity strategist Jill Carey Hall warned against chasing the rally.

Last week’s data shows BofA’s clients continued to buy the rally, which marked the third consecutive week of inflows, according to Carey Hall. Clients were buying both single stocks and ETFs with institutional clients leading the buying activity. On the other hand, retail investors were net sellers for the 5th straight week.

“November typically sees net selling by this group that typically accelerates further in Dec. amid retail tax loss selling,” Carey Hall wrote in a client note.

As far as sectors are concerned, BofA’s clients were mostly buying Tech and Health Care stocks while selling Financials, Communication Services, Real Estate, and Energy. In aggregate, flows favored defensives over cyclicals.

“Recent flow momentum (and lack of capitulation-like outflows) suggest that investors likely believe the market has bottomed; we see further downside risk ahead of a 1H23 bottom,” the strategist concluded in a client note.

By Senad Karaahmetovic

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