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The S&P 500 gained 2.5% last week, during which Bank of America’s clients were also buying U.S. equities after selling the prior week. Net-net, BofA’s clients were net buyers ($0.1 billion) and focused on single stocks vs ETFs.
“While stocks typically see more positive flows than ETFs in Jan., the spread this month between single stock and ETF flows was the widest ever for Jan. in our data since ’08 (chart below). Our view: active > passive & “outdex” > “index” in ‘23,” BofA strategists wrote in a client note.
All three client groups – retail, institutional, and hedge funds – were sellers last week. Hedge funds for the first time in three weeks, institutional clients for the fourth consecutive week, and private clients for the first time in two weeks.
As far as sectors are concerned, clients were buying stocks in 6 of the 11 sectors, led by Communication Services, Healthcare, and Tech.
“Tech/Comm. Services have also led inflows YTD, despite risks we see: still bloated labor relative to real sales growth even post layoffs, weakening fundamentals and the fact that Tech=cyclical,” the strategists added.
Finally, they also noted strong buybacks last week coupled with weak buyback announcements.
