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A Bank of America strategist noted more defensive investor positioning as the market digests Fed Chair Powell’s comments from the Jackson Hole conference.
The bank’s clients were small net sellers of US equities (-$0.3 billion) for the second consecutive week, with the selling led by hedge funds and institutional clients. Small caps were sold while clients were buying large/mid-caps, the strategist noted.
“Amid investors’ concerns about a hard landing, given a Fed that is committed to combatting inflation, this was the second consecutive week in which cyclical sectors (in aggregate) saw outflows while defensive sectors saw inflows, which previously hadn’t happened since January,” the strategist added in a note.
BofA’s data shows clients were selling stocks across 7 out of 11 sectors, with the biggest outflows recorded in Industrials and Energy. For the former, this was the biggest weekly outflow since November 2020.
On the other hand, the tech sector saw big inflows last week (the third largest since 2008), while clients were also buying Health Care, Utilities, and Materials stocks.
Last week, the S&P 500 closed 4% lower on the back of Powell’s comments on Friday that the Fed plans to “use our tools forcefully” to combat inflation.
