Hedge Funds Are Buying Into This Market While mum And Pop Are Selling At The Fastest Pace In 19 Months

BofA equity strategist Savita Subramanian is out with an update on what her clients are doing in the stock market.

Subramanian says last week, only hedge fund clients were net buyers of stocks, while institutional clients – pension funds and the like – were net sellers.

Meanwhile, the week marked the fastest selling by private clients – or retail investors – since May 2011.

However, as the chart below shows, BofA’s retail clients have been dumping stocks for a while now, but the pace is rapidly accelerating:

BAML client flows

[credit provider=”BofA Merrill Lynch”]

Subramanian sums up the data:

Last week (12/3-12/7), during which the S&P 500 was up 0.1%, BofAML clients were net sellers of US stocks for the second week, after being net buyers since mid- October. Net sales were $1.36bn, and almost entirely driven by private clients, as institutional clients were small net sellers while hedge funds were actually net buyers. In fact, private clients’ net sales were the seventh-largest in our data history (since 2008) and the largest in nineteen months. While they were net buyers of ETFs, as has been the case most weeks in recent history, they were big net sellers of single stocks in all 10 GICS sectors. Private clients have now sold stocks for the last eight weeks, with cumulative net sales by this group YTD now greater than those of institutional clients (Chart 1). By size segment, outflows were chiefly due to large caps last week, though mid and small caps also saw net sales.

Below is a table breaking down the numbers for the past several weeks. It shows the magnitude of the retail selling that has taken place since the election.

The average over the past four weeks has been $920 million in selling volume on the retail side, whereas over the past 12 weeks, the average is only $296 million in selling.

BAML client flows

[credit provider=”BofA Merrill Lynch”]

Hedge funds, on the other hand, have been buying an average of $169 million in stocks over the past four weeks, compared with a $56 million 12-week average.