Next two months typically the strongest for flows - Bank of America

December 6, 2022 8:03 AM EST
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Bank of America equity strategist Jill Carey Hall says the firm’s clients have continued to buy stocks despite several analysts warning that the relief rally may have ended.

The S&P 500 rose 1.1% last week with the bank’s clients net buyers of U.S. equities for the fourth consecutive week. Investors were buying small and large caps but selling mid-caps.

“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,” Carey Hall wrote in a client note.

Bank of America’s institutional clients were buyers for the fourth week despite acting as sellers in October (tax loss harvesting) in the past. Hedge funds and retail clients were sellers.

As far as sectors are concerned, clients were buying stocks in eight of eleven sectors, led by Tech and Industrials. The strategist also noted that clients were selling Health Care stocks for the first time in a month. Bank of America recently cut this sector to Market-weight, citing crowding risk.

“Meanwhile, clients have begun to sell Communication Services stocks, which have seen big outflows the past two weeks after also seeing inflows since late summer. We are underweight both Tech and Communication Services, where fundamentals have deteriorated and we see cyclicality risk for Tech,” Carey Hall added.

By Senad Karaahmetovic

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