Clients are Buying the Dip and Selling the Rally

By Senad Karaahmetovic

Bank of America (NYSE:) strategist Jill Carey Hall noted that the bank’s clients are selling the rally after buying the dip in U.S. equities.

Flows from the last week when the S&P recorded the biggest weekly gain since November 2020 showed that clients were net sellers of equities, which marks the first time since the start of April.

Selling was led by institutional clients, who were joined by hedge funds. On the other hand, retail clients continue to buy US equities.

As far as sectors are concerned, clients were selling stocks in 7 of the 11 sectors, led by Health Care and Tech.

“Health Care outflows as a percentage of sector market cap were more than 2 standard deviations below average; prior weeks of similarly extreme outflows (18 instances since 2008) saw the sector continue to underperform, on average, over the subsequent month (~60% of the time), but outperform over the next three months >60% of the time (by a median of 70bp),” the strategist told clients in a note.

On the other hand, clients were buying Consumer Discretionary, Staples, Financials, and Materials stocks last week.

“Discretionary stocks have continued to see positive inflows most weeks since early April following capitulation-like outflows from the sector.”