Bank of America Client Trading Activity

Bank of America Securities reported that clients sold US equities worth $3.9 billion last week after a buying spree the week prior.

While individual stocks were sold, exchange-traded funds (ETFs) saw increased purchases. Outflows were noted in mid and small-cap stocks, whereas large-cap stocks experiences inflows.

All major client groups—institutions, hedge funds, and private clients—were net sellers. Institutional clients initiated equity selling after two weeks of buying, and hedge funds sold after four weeks of purchases. Private clients marked their third consecutive week as net sellers, with their largest weekly outflow since November 2023.

Looking to the future, institutional clients might increase stock sales due to the upcoming October 31 deadline for mutual funds to realize capital gains. Despite being net buyers throughout the month, they shifted to selling last week.

According to BofA’s note, indications of tax loss selling by institutional investors appear in October, contrasting with retail investors’ activities in December before the end-of-year cutoff.

Clients reduced equity holdings across seven of the eleven sectors, with notable outflows in Financials, Staples, Tech, and Health Care. The Financials sector noted its largest weekly outflow since July. In contrast, Communication Services recorded the most inflows, maintaining its lead for the year.

Real Estate faced six consecutive weeks of outflows but remains popular for income and quality. Conversely, the Energy sector saw outflows in 12 of the last 14 weeks, leading BofA to downgrade it to Market Weight due to poor oil supply/demand dynamics and weak earnings.

Corporate buybacks continued to be strong yet faced a slowdown last week, maintaining dominance over seasonal trends in relation to the S&P 500 market cap.

ETFs showed inflows across various styles (Blend, Value, Growth) and size segments (large, small, broad market), albeit mid-cap ETFs experienced outflows. Only Real Estate, Utilities, and Communication Services had ETF inflows, whereas Consumer Discretionary ETFs saw the largest outflows.