BofA clients sold equities for second week, outflows led by Tech and Financials

Bank of America Securities Reports Client Activity on US Equities

Bank of America Securities reported that its clients sold US equities last week, experiencing outflows totaling $3.7 billion. This marked the second consecutive week of net outflows among BofA clients.

According to a Tuesday note, clients predominantly sold individual stocks but showed a preference for buying exchange-traded funds (ETFs). Notably, large and mid-cap stocks experienced outflows, whereas small caps saw inflows.

Both hedge funds and institutional investors, along with retail clients, were also net sellers last week, as per BofA's report. Hedge funds and institutional investors have been selling for four straight weeks, while retail clients have been net sellers for two weeks.

Corporate buybacks have remained strong, tracking above seasonal averages as a percentage of the S&P 500 market cap. The trailing 52-week buybacks reached an all-time high (since 2010) in relation to the S&P 500 market cap.

As the month progresses, BofA noted that institutional client sales linked to tax loss selling typically rise in October, ahead of the October 31 deadline for mutual funds to realize capital gains. They indicated, "Indeed, this group has sold stocks for the last four weeks." Retail investor selling generally increases in December before the 12/31 cutoff for individual investors.

On a sector basis, eight of the 11 GICS sectors saw outflows last week, with the Technology, Financials, and Industrials sectors experiencing the largest declines. Technology recorded outflows in three of the last four weeks, even with positive earnings reports from the semiconductor sector last week.

Conversely, there were inflows in the Communication Services, Real Estate, and Materials sectors, with Real Estate seeing its first inflow in nine weeks. The Consumer Staples sector has the longest streak of outflows, lasting four weeks, prompting BofA to maintain an underweight position on the sector due to its lower quality than in previous years and weak guidance trends.

Five of the 11 sectors saw ETF inflows, especially in Utilities, Consumer Staples, and Consumer Discretionary, even amid single stock outflows in those sectors. Additionally, Energy ETFs suffered the largest outflows.