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BofA clients bought equities again last week, driving biggest ETF inflows since 2017 in sinking stock market

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Bank of America clients have been buying U.S. equities lately, even as the stock market fell, contributing “big” inflows into exchange-traded funds last week, according to BofA Global Research. 

Last week, when the S&P 500 dropped 2.1%, BofA clients were net buyers of U.S. equities for the sixth straight week, said equity and quant strategists at Bank of America, in a BofA Global Research note Tuesday. “But after five weeks of single stock inflows, buying was entirely ETF-driven,” they said, and resulted in the “biggest week of ETF inflows since 2017.”

The strategists described the ETF equity inflows, as “big” and “broad-based,” with BofA clients buying exchange-traded funds that invest across styles including growth, value and “blend.” They also bought ETFs across size segments except for funds focused on small-cap stocks.

All three of BofA’s client groups bought equity ETFs last week, including hedge funds, institutional clients and private clients, according to the note. Among sectors, ETF inflows were led by industrials and real estate. Seven of 11 sectors attracted capital, while consumer-staples ETFs saw “the biggest outflows,” the note says.

U.S. equities are in a bear market, with the S&P 500 down almost 20% this year based on Tuesday afternoon trading levels. The index’s drop last week left it with back-to-back weekly losses, with the benchmark falling in three of the past six weeks, according to FactSet data. 

Still, so far this year equity ETFs have seen net buying from BofA clients in nearly all sectors except for healthcare and industrials, the research note says.

The clients also have bought ETFs across equity styles in 2022, while small-cap stocks were the sole area of three size segments with net ETF outflows so far this year, according to the BofA note. “Despite more investor interest in small-caps, flows aren’t there yet,” the strategists said.   

In recent years, BofA clients have shown a preference for buying equity ETFs over single stocks, according to the report. A chart in the note points to a multiyear trend of inflows for ETFs and outflows for single stocks. 


BOFA GLOBAL RESEARCH NOTE DATED DEC. 20, 2022

Last week, institutional clients — a category that includes investors such as mutual funds, pensions, insurance companies, banks and broker-dealers — led overall net buying of U.S. equities, the BofA strategists said. Beyond that category, “hedge funds were buyers after selling the prior two weeks, while private clients were sellers after buying the prior week,” they said.

“Private clients are typically big sellers in Dec. amid tax-loss selling by individual investors,” the strategists wrote, versus “big net buyers” in January.  Private clients have been the biggest net buyers of equities so far in 2022, according to the note.

Meanwhile, the S&P 500 is on track to wrap up its worst year since 2008, when the index plunged 38.5% amid the global financial crisis, according to FactSet data.

The U.S. stock market was trading up Tuesday afternoon, with the S&P 500
SPX,
+0.12%
rising 0.4%, the Dow Jones Industrial Average
DJIA,
+0.30%
climbing 0.6% and the technology-heavy Nasdaq Composite
COMP,
-0.03%
advancing 0.3%, FactSet data show, at last check. All three major benchmarks may snap four straight days of losses. 

Credit: marketwatch.com

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