BofA Clients Stay Net Buyers Even as S&P 500 Slides

Bank of America's clients were net buyers of U.S. equities for the third consecutive week, even as the S&P 500 fell 1.6% over the period. The overall buying was modest: inflows into equity exchange-traded funds (ETFs) of $3.4 billion were nearly offset by $3.1 billion in outflows from individual stocks.

Retail investors drove the buying, registering their largest weekly net purchases since May 2025 across both single stocks and ETFs. Institutional clients also bought stocks for a third straight week, but their activity was entirely concentrated in ETFs. Hedge funds, in contrast, were net sellers for a second consecutive week, with sales of individual names outweighing their ETF purchases.

Small and micro-cap stocks attracted particular momentum. Clients bought both single names and ETFs in this segment, pushing the four-week average flow to a record level. Large and mid-cap equities, however, saw net sales, despite continued buying of ETFs in those size categories.

By sector, clients sold stocks in seven of 11 S&P 500 sectors last week. Technology recorded its first outflows in three weeks, while communication services suffered a third straight week of selling. Consumer discretionary attracted the largest inflows, marking a third week of buying after a year in which the sector mostly saw outflows. Financials also saw inflows during a week of stronger-than-expected bank earnings, and energy stocks were bought amid persistent geopolitical tensions. On the ETF side, flows favored styles (growth, value and blend) over sectors, with outflows from 9 of 11 sector ETFs and only tech and industrials attracting cash. Corporate buybacks picked up but remained below the historical average for the first week of earnings season when adjusted for market capitalization.

Inside the Flows: Retail Steps Up, Hedge Funds Fade, Small Caps Surge

The Retail-Hedge Fund Divide

Retail investors’ aggressive buying, even as the S&P 500 dipped, suggests confidence in the market or a dip-buying reflex. That contrasts with hedge funds, which have now been net sellers for two weeks. The divergence may indicate that professional managers are taking a more cautious view of valuations or positioning for a pullback, while retail money keeps flowing in. The fact that institutional clients stuck to ETF-only buying reinforces the picture of broad but unspecific exposure, rather than conviction in individual names.

Small Caps at Record Demand

The record four-week average flow into small and micro-caps stands out. Often seen as more sensitive to domestic economic conditions and interest-rate expectations, the rotation into this segment could signal growing optimism about U.S. growth or a bet that smaller companies will benefit as larger firms face headwinds. The simultaneous selling of large and mid-cap stocks underscores a deliberate rotation, not just a broad market trade.

Sector Bets: Rotation Away From Tech

Outflows from technology and communication services—two sectors that have led gains—point to profit-taking or a shift toward cyclicals. Consumer discretionary saw its third week of inflows after months of selling, while financials benefited from strong bank earnings. Energy buying tied to geopolitics makes sense as a short-term play. The ETF flow data confirms that sector-level conviction is thin, with money gravitating toward style-based funds instead.

What the Divergence Means for Portfolio Positioning

  • Watch the small-cap trade. The record four-week average flow into the segment suggests momentum could persist, but a reversal is likely if economic data disappoint or rate-cut expectations shift—keep an eye on the Russell 2000 and small-cap ETF volumes.
  • Hedge fund caution is a yellow flag. Their two-week selling streak in individual stocks, if extended, could foreshadow broader risk-off positioning. Track volumes in large-cap single-name outflows for early signs.
  • Consumer discretionary inflow streak may be an early indicator. Three weeks of buying in a sector that was mostly sold all year could mean sentiment toward household spending is improving; upcoming retail earnings will test that thesis.