"Smart money" makes massive purchases of U.S. stocks! Bank of America clients record the sixth highest weekly net purchases in history, technology stocks favored again

According to Golden Ten Data APP, the latest client fund flow data from Bank of America shows that last week its clients posted a net purchase of US stocks for the second consecutive week, with the scale of fund inflows reaching the highest level since mid-July and ranking as the sixth largest single-week net inflow since the bank began compiling weekly data in 2008. Notably, the current round of buying was mainly driven by institutional investors and hedge funds, while private clients have been net sellers of US stocks for the sixth consecutive week. Meanwhile, funds have shifted back toward growth sectors such as technology, indicating that large professional investors' risk appetite is on the rise.

Data shows that last week Bank of America clients had a net purchase of about $3.9 billion in individual stocks and a net purchase of about $3.1 billion in stock ETFs, with total fund inflow around $7 billion. During the same period, the S&P 500 Index rose only 0.1%, implying that the large inflow of funds did not occur in the context of a significant market rally.

By investor type, institutional clients and hedge funds were the primary drivers of these inflows. In contrast, private clients continued to exit the market, remaining net sellers of US stocks for the sixth consecutive week.

There was also a clear divergence in fund flows among stocks of different market capitalizations. Bank of America clients mainly bought large-cap and mid-cap stocks while continuing to sell small-cap stocks, indicating that although investors increased their US stock exposure, they still favored companies with larger scale, higher liquidity, and more stable fundamentals.

At the sector level, the trend of funds returning to growth assets was particularly evident. Last week, Bank of America clients had net purchases of individual stocks in eight of the eleven major US stock sectors, with the technology sector seeing inflows for the second consecutive week. The rolling average fund flow into tech stocks over the past four weeks has remained positive since mid-July, indicating a continued improvement in capital allocation to the technology sector. Meanwhile, the communication services sector recorded its first net inflow in five weeks. In stark contrast was the industrials sector: Bank of America clients have now been net sellers of industrial stocks for five consecutive weeks, with last week's capital outflows ranking highest among all industries.

Bank of America noted that industrial stocks had already become a sector with high valuations and crowded trades. The previous week, the sector’s four-week rolling average outflow hit a record high, signaling that investors are retreating from previously heavy industrial stock positions. Consumer-related sectors also saw notable outflows, reversing the net purchase trend of the prior week.

The ETF market also sent signals of funds rotating back to a growth style. Last week, clients bought value, growth, and blended ETFs, with growth ETFs recording their first net inflow in five weeks. By market cap style, large-cap, mid-cap, and broad-market ETFs all saw fund inflows, while small-cap ETFs continued to be sold off.

However, there was a notable divergence in the technology sector between single stocks and ETFs. Although clients made significant net purchases of tech stocks, technology ETFs saw the largest capital outflow among industry ETFs. At the same time, of the eleven sector ETFs, seven recorded net client inflows, with healthcare ETFs seeing the greatest scale of inflow.

Overall, Bank of America’s latest client fund flow data shows a clear reallocation of capital within the US stock market. On one hand, institutional investors and hedge funds are returning en masse, pushing total inflows to historical highs; on the other, funds are not chasing risk across the board, but are instead concentrated in large-cap, mid-cap, and growth sectors such as technology, while continuing to avoid small-cap stocks and withdrawing from the previously crowded industrial sector.

Of particular note, private clients have been net sellers for six straight weeks while institutions and hedge funds are actively buying, showing a further divergence in attitudes among different types of investors toward the current US equity market.