Bank of America Throws In The Towel: "Clients Don’t Believe The Rally, Continue To Sell Stocks"

Tyler Durden's picture

One week ago, as the bear market rally was about to hit its peak post-ECB crescendo, we reported that according to Bank of America data, "The "Smart Money" Is Quietly Getting Out Of Dodge: Sells For A Sixth Straight Week As Buybacks Soar." 

The writing was on the wall with the selling prevalent across every investor class: "similar to the prior week, hedge funds, institutional clients, and private clients (aka the "smart money")were all net sellers, though sales last week were led by private clients (vs. hedge funds the week prior). Our hedge fund clients remain the biggest net sellers of US stocks year-to-date."

As for the 'buyer' no surprise there either: "buybacks by corporate clients accelerated last week to their highest level since August, and are tracking above levels we saw this time last year, though below levels we observed in 2014."

In other words, the smart money sold to corporations buying back their stock, courtesy of bondholders who continue to eagerly fund this transfer of money, something even Bloomberg figured out yesterday with its report showing the "Only One Buyer Keeping The Bull Market Alive" (buybacks, for those who missed it).

Which brings us to the latest week, where in the latest BofA report on client flow trends, we find that Bank of America has largely thrown in the towel and reports that "Clients don’t believe the rally, continue to sell US stocks" and notes that the "smart money" has now sold stocks in the face of this bear market rally for a near record seven consecutive weeks.

The details:

Last week, during which the S&P 500 climbed 1.1%, BofAML clients were net sellers of US stocks for the seventh consecutive week. Net sales of $3.7bn were the largest since September and led by institutional clients (where net sales by this group were the second-largest in our data history). Hedge funds and private clients were also net sellers, as was the case in each of the prior two weeks, but a different group has led the selling each week. Clients sold stocks across all three size segments, and net sales of mid-caps were notably the largest since June ’09. 

The details:

  • Hedge funds have been net sellers on a 4-week average basis since early Feb.
  • Institutional clients have been net sellers on a 4-week average basis since early Feb.
  • Private clients have been net sellers of US stocks on a 4-week average basis since early January.

 

 

And if the smart money continues selling, means...that's right, the corporations are buying their own stock:

Buybacks by corporate clients accelerated for the third consecutive week to their highest level in six months, which is also above levels at this time last year. This suggests that overall S&P 500 completed buybacks—which are reported with a lag—have likely picked up significantly as well.

It gets better: "Buybacks of Industrials stocks by our corporate clients last week were the largest in our data history, and Materials buybacks were also near record levels. These two sectors, along with Staples, have led the pick-up in overall buybacks in recent weeks."

The stunning long-term chart which confirms that without buybacks, the S&P would be orders of magnitude lower:

Which brings us to BofA's chart of the week: buybacks are picking up (in case someone was not aware).