Key Takeaways:
Bank of America clients net bought US equities for a sixth straight week, with hedge fund clients posting their largest weekly purchases since 2008.
The buying was concentrated among hedge fund clients, whose weekly purchases ranked in the 99th percentile of weeks when normalized by S&P 500 market capitalization, strategists led by Jill Carey Hall at Bank of America said. The week followed a near-record buying week the week prior, extending a stretch of aggressive accumulation by the most active managers.
Equity ETFs drew $4.1 billion in net inflows, a seventh consecutive week of buying, while single stocks saw $2.4 billion in outflows for a second straight week. Institutional and retail clients were net sellers for a second consecutive week, and clients sold single stocks across all size segments except small caps. When ETFs were included, clients were also buyers of large-cap stocks.
The flows came as the S&P 500 rose 3.6% last week, its best weekly performance since April. The preference for ETFs over individual names points to a more passive allocation strategy that could support broad indices while capping gains in single stocks.
By sector, clients sold stocks in seven of 11 sectors. Industrials saw the largest outflows for a second consecutive week, and Communication Services registered its biggest outflows since December. Tech stood out on the buy side, posting its second-biggest inflow week on record when normalized by the sector's market cap within the S&P 500. Consumer sectors also drew interest, with Discretionary and Staples logging inflows for a sixth and third straight week, respectively.
Within ETFs, clients favored Value and Blend funds over Growth for the first time in five weeks, and bought across all size segments, including large-, mid-, small-cap and broad-market funds. Sector-wise, ETF selling was seen in six of 11 sectors, led by outflows from Tech ETFs even as Tech single stocks saw near-record inflows. Industrials ETFs led sector inflows.
Corporate client buybacks picked up pace last week but remained below the historical average for the fourth week of earnings season when measured against market capitalization. Year-to-date, annualized buybacks are running slightly below full-year 2025 levels and below 2024 records, though still above the 2016-2023 range.
The divergence between hedge fund buying and institutional and retail selling suggests positioning remains concentrated among the most active managers, leaving broad participation thinner. The rotation into ETFs and Value and Blend funds, alongside near-record Tech inflows, points to a market where index-level strength masks uneven demand beneath the surface. With the S&P 500 near record levels and buybacks running below prior-year records, the durability of the rally may hinge on whether retail and institutional demand returns in coming weeks.
This article is for informational purposes only and does not constitute investment advice.
