Despite the headwinds now facing the global economy, the S&P 500 rallied 1.5% last week, near to an all-time high.
However, despite this rally, according to Bank of America’s flows data, which is based on the buying and selling activities of clients of the bank, investors were small net sellers of US stocks for the second week in a row last week despite the S&P 500 strength.
According to Bank of America’s data, both institutional and private clients were net sellers of stocks last week, for the sixth and second weeks respectively. Both groups have sold stocks for the majority of weeks this year. Meanwhile, hedge funds were net buyers for the sixth week in a row. Over a longer time horizon, all three groups remained net sellers of equities year-to-date. Last week Bank of America clients sold net $407 million of equities.
Investors continue to sell stocks despite rally
The key takeaway from Bank of America’s data is that US private investors and institutional equity investors continue to desert the stock market in ever increasing numbers. Private clients flows have been negative since December 2007, and institutional selling has accelerated over the past 12 months — as shown in the chart below. When one things about the chart is quite incredible as it shows that all types of BAML clients which would likely be among the “smart money” have outflows since 07 and therefore missed the entire 09-present rally.
While corporate, institutional and hedge fund clients have been selling equities almost continually since the financial crisis, corporates have been picking up the slack via share buyback programs. Indeed, year-to-date corporate transactions going through Bank of America’s trading desks show net buying of $21.2 billion, compared to net selling of $11 billion by retail, $24.5 billion by institutional funds and $5.1 billion in selling by hedge funds. Last year, corporate transactions amounted to net buying of $40.8 billion compared to retail buying of $1.8 billion or sales of nearly $30 billion excluding ETFs.
In 2014, corporate transactions amounted to net buying of $44.9 billion, compared to retail net sales excluding ETF’s of $36 billion and institutional selling of $18.2 billion.
The two most important takeaways from this data are; (1) corporates appear to be the largest net buyers in this market; (2) retail investors are continuing to sell single stock names while reinvesting the funds into ETFs.
According to Bank of America’s data, last week investors poured $2.2 billion into ETF’s while pulling money out of single stock names. The sectors that seem to be the least favored by investors are Health Care, Industrials, and Tech. Bond proxy sectors, such as the Telecoms and Utility sectors saw the best performances on a sector basis. Telecoms saw net buying of $14 million while Utilities saw net selling of $100 million making it the second best performing sector after telecoms.