Last week, during which the S&P 500 (INDEXSP:.INX) was up 0.8% amid a payrolls number that was largely in-line with expectations, BofAML clients were net sellers of US stocks for the second consecutive week according to quant and equity strategist at the firm, Savita Subramanian. At $206mn, net sales were more muted than the prior week, when fears of the Fed tapering roiled the market. Hedge funds—who had previously been the only group exhibiting faith in the market rally with seven consecutive weeks of net buying—had the largest net sales last week. Institutional clients were also net sellers, while private clients were the sole net buyers in their second week of inflows. Notably, this was the first time in eight weeks of net sales by hedge funds.

Hedge-funds-net-sellers

By size segment, small caps and mid caps saw outflows while large caps saw inflows. Year-to-date, cumulative outflows from US stocks total $10.8bn—nearly matching the $10.9bn of outflows for the full-year 2012, primarily due to net sales by institutional clients.

Mixed sector flows, but trend of cyclical inflows still intact

Health Care and Financials, along with ETFs, had the largest outflows last week, while the Consumer sectors saw the largest inflows. In fact, net buys of Staples and Discretionary were the second and fourth largest, respectively, in our data history (since 2008). This was chiefly due to net buys from private clients. Industrials currently has the longest net buying trend at three consecutive weeks, while Health Care has the longest net selling trend at four consecutive weeks. And consistent with what we observed last week, cyclical sectors are still seeing net buys on a four week average basis, while defensive sectors are still seeing net sales.

Hedge funds other institutional investors sell

Hedge funds and institutional clients were both net sellers—this was the second week of net sales by institutions, but the first in eight weeks by hedge funds. Private clients were the sole net buyers, after also being net buyers last week. By size segment, small and mid caps saw outflows, while large caps saw inflows.

Other notable flows from last week:

  • Private clients were net buyers of single stocks but net sellers of ETFs last week—this is rare for this group, and last occurred in June 2012.
  • Consumer Discretionary and Telecom saw net buying by all three client groups last week. Health Care, Energy and ETFs saw net sales by all three.
  • Flows were mixed by size segment last week, as no size segment saw net buying or net selling by all three client groups.
  • BofAML pension fund clients returned to being net sellers of US stocks last week, following a week of net buying.

Only Financials, Telecom and Discretionary saw inflows; outflows were led by Staples.