BofA warns of large-cap fatigue, ETFs see biggest outflows since January

Investing.com -- Investors continued to pull money from U.S. equities last week, with Bank of America reporting the largest equity ETF outflows since January 2024 amid signs of “large cap fatigue.”

BofA said clients were “net sellers of U.S. equities for the 4th straight week,” including “sales of both single stocks (-$0.8bn) and equity ETFs (-$2.2bn; first outflows since April/biggest outflows since Jan. 2024).”

All major client groups were net sellers, led by hedge funds, which posted “4th straight week of outflows, with rolling 4wk average outflows at record levels.”

Institutional clients were sellers for a third consecutive week, while private clients sold for the fifth time in seven weeks.

The bank noted that outflows were “chiefly in large caps after record large cap outflows the prior 2 weeks.” Clients also sold mid-caps but “bought small caps,” the only segment seeing inflows since Jackson Hole.

Sector trends were mixed, with BofA highlighting “continued Financials outflows” as clients sold stocks in five of 11 sectors, “led by Financials (7th week of outflows)” and Communication Services.

It added that “rolling 4-wk average Financials flows are the most negative since mid-November amid a weakening job market and investor concerns over credit.”

In contrast, “Tech saw the largest inflows, followed by Real Estate/Materials,” both of which have seen steady buying.

ETF flows also showed a shift in style preferences, as “clients bought Blend & Value ETFs vs. sold Growth ETFs for a 3rd week.”

BofA said its U.S. Strategy team recently “raised Health Care to overweight & lowered Utilities to underweight.”

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