Bank of America clients pour the most cash into ETFs since 2017

BANK of America (BofA) clients bought US$2.8 billion of US stocks last week, marking a sixth straight week of equity inflows at the bank, as they made heavy purchases of exchange-traded funds (ETFs) and sold tech shares, BofA strategists led by Jill Carey Hall wrote in a note Tuesday (Dec 21).

Investors poured the most money into ETFs since 2017 after five straight weeks of single-stock inflows. The biggest outflows for the week ended Dec 16 were from technology stocks, which BofA clients sold for the first time in six weeks, followed by health care, while consumer staples and consumer discretionary saw the biggest inflows. Customers sold stocks in seven of the 11 major S&P 500 Index sectors.

Yet again, institutional clients were the lead buyers. After selling the previous two weeks, hedge funds were buyers as well. Meanwhile, retail clients sold equities after buying the prior week.

“Private clients are typically big sellers in December amid tax loss selling by individual investors,” the strategists wrote. The group tends to be large net buyers in January, while institutional clients tend to rebound in the months following October, as a result of tax-loss selling by mutual funds, they added.

All three client groups bought ETFs across styles and size segments last week, except small caps, according to the strategists. Seven of the 11 ETF sectors received inflows, led by industrials and real estate. Consumer staples ETFs saw the biggest outflows.  

For the year, energy ETFs have seen the biggest inflows, with ETFs in all sectors apart from health care and industrials seeing net buying.

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“Despite more investor interest in small caps, flows aren’t there yet,” the strategists wrote. “It was the only one of the three size segments to see ETF outflows.”

Institutional clients were buyers after two consecutive years of selling in 2022, while retail clients were the biggest net buyers of stocks, posting the first inflows since 2017. Hedge funds were the sole net sellers for the year, marking the biggest outflows in the bank’s data since 2008.

Year-to-date technology and communication services inflows are twice as large as cumulative inflows for the rest of the market. Industrials saw the biggest outflows in 2022.

Corporate buybacks has slowed and as a percentage of the S&P 500 market cap remains in line with last year’s 0.23 per cent level at this time, but still below the 2019 level of 0.35 per cent, the strategists wrote. BLOOMBERG