Consumer Discretionary Flows are Bottoming, Buybacks are Stalling

Bank of America strategist Jill Carey Hall reflected on last week’s equity client flows in a week where the closed 2.8% lower.

Clients were buying US equities ($1.8 billion) for the second consecutive week. Clients were buying both single stocks and ETFs with institutional clients leading the way while retailer clients started buying for the first time in three weeks. On the other hand, hedge funds were selling for the 8th week.

One of the key findings is that buybacks are stalling.

“Buybacks by corporate clients were flat vs. a week ago; typically buybacks accelerate by Week 2 of earnings. The slowdown in buyback activity since Jan. that we’ve been flagging in this publication supports our view for dividends over buybacks in ‘22 (note). YTD, corp. client buybacks as a % of S&P 500 market cap (0.065%) are below both 2021 (0.068%) and 2019 (0.108%) levels at this time,” Carey Hall wrote in a client note.

When it comes to sectors, Bank of America (NYSE:) clients were buying stocks in 8 out of 11 sectors, led by Tech and Health Care.

Another important finding is that Consumer Discretionary flows are bottoming.

“Clients bought Consumer Discretionary stocks for the second consecutive week following historically-extreme outflows in the four weeks prior (and the biggest outflows of any sector YTD). As we highlighted last week and the week before, such extreme outflows have typically suggested that sector performance could be close to bottoming.”

By Senad Karaahmetovic