BofA Merrill Lynch equity strategists report data on what their clients are doing in the U.S. stock market on a weekly basis.
Last week, BAML’s hedge fund clients unloaded the most stock since 2008, while institutions and retail clients were net buyers.
In a note to clients, BAML strategist Savita Subramanian writes:
Most selling by hedge funds since 2008
Last week, during which the S&P 500 was up 0.9%, BofAML clients were net sellers of $US963mn of US stocks following the prior week’s large net buying. Net sales were entirely due to hedge funds, whose net sales were the largest since December 2008, and the second-largest in our data history. Despite this, hedge funds still remain small cumulative net buyers year-to-date. Institutional clients were net buyers for the second consecutive week — but remain the biggest net sellers YTD — while private clients continued their net buying streak (with purchases of equities in 21 of the last 22 weeks). Private clients are the largest net buyers of equities year-to-date, with $US15bn of inflows into ETFs and $US2bn of inflows into single stocks. By size segment, large, mid and small caps all saw outflows last week, and only mid caps have seen inflows YTD.
Biggest outflows ever from Consumer Discretionary stocks
Net sales last week were led by Consumer Discretionary, where outflows were the largest in our data history (since 2008). Tech, Financials and Staples also saw large net sales. The largest inflows were into ETFs, while Energy stocks also saw big inflows (largest since July 2012). Industrials currently has the longest net buying trend at four consecutive weeks, while no sector has seen two consecutive weeks of net sales. Based on four-week average flows, which are less volatile, clients continue to prefer defensives over cyclicals: Consumer Staples and Utilities have the longest net buying trends (since mid August), while Energy, Tech and Discretionary have the longest net selling trends (since late September).
In the week ended October 23, global investors poured $US11.5 billion into U.S. equities. The BAML client data highlighted above cover the period from October 21 to October 25.
In a note to clients, Goldman Sachs chief U.S. equity strategist David Kostin said the three questions dominating his discussions with clients about the stock market over the past week were “(1) the forward path of the US equity market; (2) prospective return of the S&P 500 compared with other global stock markets; and (3) investment strategies through year-end after a stellar 22% rally during the first 10 months of 2013.”
On the first question, Kostin says the debate among Goldman clients can be characterised in three words: “Fama vs. Shiller” (the names of two economists who won this year’s Nobel Prize in economics). Read more here »