Bank of America Merrill-Lynch in their weekly hedge fund monitor dated Jan 14 2013, predicted that the S&P 500 (INDEXSP:.INX) would see a major correction during the first half of 2013. The prediction was based on the Commitment of Traders Eurodollar futures positioning and its correlation to the S&P 500, but it has not materialized as yet.

Hedge Funds

Bank Of America Merrill-Lynch Hedge Funds Monitor

S&P 500 (INDEXSP:.INX) posted a 2 percent gain in last two weeks and is now up 15 percent for the year and so far has shown no signs of slowing down. BofA clients however were net sellers of US stocks for the sixth straight week, notes a report released by BAML, the total sale amounting to $2 billion, largest since Dec 2012.

Clients net sellers of US Stocks

It seems that the equity market rally is not building confidence in most of the big money managers. Private clients led the way with the largest outflows whereas institutional clients were the top net sellers of US stocks year to date and have stuck with selling for the past six weeks. Hedge funds are still bullish, and they remained BofA’s only client that were net buyers in the past three weeks. Pension funds have been net buyers for the past two weeks, after five weeks of selling.  Notably in the last week, none of BofA’s clients were net buyers, a selling trend was evident overall.

Across Sectors And Sizes

The large cap stocks saw most of the outflows while meager inflows were seen in small caps. The two consumer sectors, discretionary and staples, took the largest net sales. BAML notes that sales in consumer staples sector were the third largest since 2008. The other sector that took net selling was healthcare, which has kept up for three straight weeks. Energy has also suffered through net sales. Consumer staples and energy remain the two sectors that have seen net selling in the past week by all of BofA’s clients.

The sectors that saw net buying activity were ETFs, telecom, technology and  materials, with the highest net buying coming to the technology sector for three consecutive weeks. BAML also pointed out in the analysis that during the Q1 earnings season the sectors that experienced very few positive surprises saw the largest outflows. Sectors like consumer staples, industrials and healthcare saw negative flows after Q1 earnings. Materials, despite missing expectations, saw inflows along with the technology sector which had mostly exceeded expectations during earnings season.

BAML clients Sector-wise Buying Selingl in Q1

H/T Matthew Boesler Business Insider.

Further reading:  Lansdowne Partners Amasses $3B Short Portfolio of European Equities