By Senad Karaahmetovic
“No recent love for Energy,” is how Bank of America equity strategists described the recent outflows from this sector. Alongside Industrials, Energy has the longest selling streak this year (late May to late August).
Last week, when the S&P 500 closed nearly 6% higher, BofA’s clients were again selling Industrials, while also reducing the exposure to Materials, Real Estate, and Utilities. On the other hand, the firm's clients were buying Tech and Consumer Discretionary stocks on the improving risk sentiment. Last week’s inflows into Discretionary were the sixth largest in the firm’s data history since 2008.
“Clients were bigger buyers of stocks in cyclical sectors than defensive sectors, a reversal from the trend we’ve seen for the last two months,” the strategists said in a client note.
“Our tactical quant framework still favors Energy (#1 sector for 17 consecutive months) and the sector remains historically cheap and underowned.”
Institutional and hedge fund clients led the buying activity last week with the former recording the third-largest inflow since 2008. The firm’s private clients were net sellers of equities last week.