BofA Securities Report on U.S. Equities

BofA Securities reported that clients continued to purchase U.S. equities for the seventh consecutive week, coinciding with a 2% decline in the S&P 500 index. Inflows reached $10 billion, marking the second-largest amount since 2008 and the largest since January 2017.

Investment Trends

Similar to previous weeks, the buying was diversified across individual stocks and exchange-traded funds (ETFs). Notably, there was a stronger focus on single stocks, particularly large-cap stocks, while small caps saw subdued inflows.

Both institutional and retail investors increased their equity holdings for another week—this being the third week for institutions and the second for retail clients. Conversely, hedge funds were net sellers for a second consecutive week.

Institutional Inflows

The rolling four-week average of inflows from institutional clients reached its highest level in nine months, indicating renewed buying activity following typical October tax-loss selling by mutual funds.

BofA strategists, led by Jill Carey Hall, noted: "Private clients typically are big sellers in December amid tax loss selling vs. big net buyers in January. While this group has been a buyer of ETFs this month, it has sold single stocks, although slightly less than in an average December."

Corporate Buybacks

Corporate buybacks from BofA’s clients have diminished during the week but remain above seasonal norms as a percentage of the S&P 500’s market cap. Year-to-date corporate buybacks are on track to set record levels relative to market cap.

Sector Performance

Clients directed purchases toward six of the eleven sectors. The leading sectors for inflows were Technology, Communication Services, and Industrials. Technology and Communication Services have seen steady inflows over the past seven and eight weeks, respectively, while Industrials noted their largest inflow since February 2022. Additionally, Consumer Staples attracted significant interest, recording the highest inflows since April.

In contrast, the Health Care and Consumer Discretionary sectors experienced the most outflows, with Health Care facing withdrawals in four of the past five weeks.

ETF Activity

Investments in ETFs were spread across eight sectors, with Industrials and Technology ETFs seeing the most activity. However, Financial and Real Estate ETFs led the outflows.