"The Selling Just Won't Stop" - Smart Money Sells Stocks For Near Record 11th Consecutive Week

Last week when BofA reported that "everything is being sold" as its smart money clients (institutional, private and hedge funds) dumped stocks for a whopping 10th consecutive week, it said that "BofAML clients were net sellers of US stocks for the tenth consecutive week, in the amount of $3.98bn. Net sales last week were the largest since September, and the fifth-largest in our data history (since 2008). Since early March, all three client groups (institutional clients, private clients and hedge funds) have been sellers of US stocks."

At this point it was about time for the selling to stock, if purely statistically, otherwise said "smart money" would be sending the clearest signal yet that the market rally from the February lows is nothing but a huge gift to sell into.

And then we got the latest BofA data. This is what happened:

Last week, during which the S&P 500 was down 1.2%, BofAML clients were net sellers of US equities for the 11th consecutive week. Net sales of $1.7bn were smaller than in the prior week, but all three client groups (hedge funds, institutional clients, private clients) remained net sellers, led by institutional clients. Net sales were in both large and mid-caps, while clients bought small caps last week.

 

Who is doing the selling? Everyone:

  • 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.

What are they selling:

Clients sold stocks in eight of the ten sectors last week, following the prior week’s broadbased selling across all ten sectors. Financials and Consumer Discretionary stocks saw the largest net sales, while only Telecom and Industrials stocks, along with ETFs, saw net buying. This was the first time since February that clients bought Industrials or Telecom stocks, with flows into these sectors entirely driven by private clients last week. Health Care currently has the longest net selling streak, with sales for the last six consecutive weeks. All three client groups have sold Health Care stocks year-to-date—the only sector besides Staples where this is true (Chart 1). As we’ve noted in our work, Health Care stocks have been hurt by a positioning unwind and political uncertainty in an election year.

  • While institutional clients have generally been broad-based sellers of US stocks this year, they have been big net buyers of Tech stocks (see chart below), which was also true last week.
  • Bifurcated Materials flows: buybacks of Materials stocks hit a new record last week, while sales of Materials by institutional clients were the largest in our data history.
  • Pension fund clients were net sellers of US stocks last week, after a week of net buying. Sales were largest in the globally-oriented cyclical sectors of Energy, Tech and Industrials, while ETFs and Utilities stocks saw the biggest buying

So who is buying? As it turns out rumors of the buyback quiet period have been greatly exagerated.

Buybacks by corporate clients accelerated, but remained below recent trends in what is typically a seasonally light month for buybacks. Year-to-date, cumulative buybacks are still tracking above levels we saw over the same period in 2015, but below early 2014 levels.

Bottom line: everyone selling except for the companies themselves, who are desperate to repurchase up every available share they can find.

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