Institutional clients are buying the dip in stocks says BofA

Investing.com -- Institutional investors stepped in to “buy the dip” in U.S. equities last week, according to Bank of America, as exchange-traded fund (ETF) inflows surged to near-record levels despite continued weakness in single-stock trading.

BofA analyst Jill Carey Hall said clients were “net buyers of U.S. equities, led by near-record buying of ETFs ($4.3 billion; largest since December 2022)” even as they pulled $2.6 billion from individual stocks. The S&P 500 fell 1.6% over the same period.

“Clients sold stocks across all size segments, but were net buyers of large and small caps overall due to ETF buying,” the analyst noted. Institutional clients were “the sole net buyers after selling the prior week,” while hedge funds and retail investors turned net sellers.

Historically, “retail clients have been the most persistent dip-buyers,” particularly since 2020, BofA stated, but “institutional clients have begun buying dips this year.”

Corporate buybacks also accelerated, though they “remained below typical seasonal levels” for the third-quarter earnings season. The firm added that trailing 52-week buybacks as a share of market capitalization “are now their lowest since March 2024.”

The bank added that sector flows reflected a defensive shift, with “Tech and Communication Services stocks seeing the biggest outflows,” while “Staples saw the largest inflows and has seen inflows for five straight weeks.” Health Care also drew solid inflows.

ETF flows were “broad across size and style,” with investors favoring Growth over Value “for the first time in eight weeks.” Financials ETFs saw the largest inflows since May, followed by Staples.

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