BofA clients bought shares again last week, driving the biggest ETF inflows since 2017 in the sinking stock market
Bank of America clients have been buying U.S. stocks recently, even as the stock market fell, contributing to “large” inflows into exchange-traded funds last week, according to BofA Global Research.
Last week, as the S&P 500 fell 2.1%, BofA clients were net buyers of U.S. stocks for a sixth straight week, equity and quant strategists at Bank of America said in a BofA Global Research note Tuesday. “But after five weeks of single-stock inflows, buying was entirely ETF-driven,” they said, resulting in the “biggest week of ETF inflows since 2017.”
The strategists described the ETF share inflow as “large” and “broad-based,” with BofA clients buying exchange-traded funds that invest across styles, including growth, value and “mix.” They also bought ETFs across size segments other than funds that 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 out of 11 sectors attracted capital, while consumer ETFs saw “the largest outflows,” the note said.
U.S. stocks are in a bear market, with the S&P 500 down nearly 20% this year based on Tuesday afternoon trading levels. The index’s decline last week left it behind back-to-back weekly losseswith the benchmark falling in three of the past six weeks, according to FactSet data.
Still, equity ETFs have seen net buying from BofA clients so far this year in nearly every sector except health care and industrials, the research note said.
Clients also bought ETFs across equity styles in 2022, while small-cap stocks were the only 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, the flows are not there yet,” strategists said.
In recent years, BofA clients have shown a preference for buying stock ETFs over individual stocks, according to the report. A chart in the note points to a multi-year trend of inflows for ETFs and outflows for individual stocks.
Last week, institutional clients — a category that includes investors such as mutual funds, pensions, insurance companies, banks and brokerages — led overall net buying of U.S. stocks, the BofA strategists said. In addition to this category, “hedge funds were buyers after selling in the previous two weeks, while private clients were sellers after buying in the previous week,” they said.
“Private clients are typically big sellers in December amid tax loss selling by individual investors,” the strategists wrote, versus “large net buyers” in January. Private customers have been the largest net buyers of shares so far in 2022, according to the note.
Meanwhile, the S&P 500 is on track to end its worst year since 2008, when the index fell 38.5% amid the global financial crisis, according to FactSet data.
The US stock market rose on Tuesday afternoon with the S&P 500
up 0.4%, the Dow Jones Industrial Average
climbing 0.6% and the technology-heavy Nasdaq Composite
up 0.3%, FactSet data shows at last check. All three major benchmarks can snap four straight days of losses.