If the chart below is anything to go by, Bank of America-Merrill Lynch’s (BAML’s) US equity clients spent most of last quarter with their fingers on the sell button.
It shows net US equity flows from BAML clients over the September quarter, breaking them down by sector, market cap and type of investor. It’s based off trades executed by the cash equities business of the firm, with derivatives such as options, futures and swaps are not included in the data.
BAML says that the data is not meant to be predictive of the market “but aims to provide a holistic view of BofAML client trading flows by client type, sector and market cap”.
Here’s the chart:
With the exception of corporate buybacks, exchange traded funds (ETFs) and telecoms, the selling elsewhere during the quarter was prolific.
“While cyclicals beat defensives in Q3, clients’ flows were defensively skewed,” Jill Carey Hall and Savita Subramanian, Equity & Quant Strategists at BAML, wrote.
“Besides ETFs, only Telecom stocks saw inflows, while other bond-proxy sectors saw muted outflows. Discretionary and Financials saw some of the biggest net sales. Health Care was the main exception, and had the biggest net sales overall,” they add.
Even corporate buybacks, seen as a major factor that has underpinned the monotonous move higher in US stocks in recent years, slowed, says BAML.
“Buybacks for the full quarter were the smallest of any Q3 since 2010 amid elevated market valuations as the S&P 500 made new all-time highs,” Hall and Subramanian wrote.
The selling seen in the September quarter continues the theme seen over the past eight years, with outflows from hedge funds, institutional and private clients continuing despite the ongoing rally in stocks.
While just the fund flows from BAML clients, it’s clear, in holistic terms at least, that they’re lightening up their stock holdings, particularly among institutional investors.