Since January, investors have been looking for a downward correction to the stock market rally that began back in November, but nearly six months later, the sell-off hasn’t materialised yet.
According to BofA Merrill Lynch equity strategist Savita Subramanian, who tracks flow data on positions of clients invested in the stock market, all of BAML’s clients have been selling the stock market rally for several weeks now – except for the hedge funds.
In a note today, Subramanian writes:
Last week, as the S&P 500 climbed 2.0% to reach a new high of 1614, BofAML clients were net sellers of US stocks for the sixth consecutive week. Flows continue to suggest a lack of faith in a continued market rally.
Net sales last week were $2.0bn, their largest since December. Private clients led outflows in their second week of net sales, with outflows by this group their largest year-to-date. Institutional clients also sold stocks for the sixth consecutive week, and remain the biggest cumulative net sellers year-to-date.
Hedge funds were the sole net buyers, and have now bought US stocks for three consecutive weeks. By size segment, outflows were chiefly in the large cap space, while only small caps saw inflows.
The charts below show the flows on a four-week average basis:
Which stocks are the hedge funds buying while everyone else sells?
Tech stocks and ETFs, last week. Over the past four weeks, though, they’ve also been loading up on industrials and consumer staples.