Institutional Investors Are Buying U.S. Stocks

Bank of America reported that institutional investors have made "bottom buying" in U.S. stocks in the past week. Exchange-traded fund (ETF) inflows reached almost record levels despite ongoing weakness in individual stock trading.

BofA analyst Jill Carey Hall noted that clients were "net buyers of American stocks, especially with a record purchase of $4.3 billion directed towards ETFs." During this period, there was an outflow of $2.6 billion from individual stocks. The S&P 500 lost value by 1.6% during the same time frame.

According to analyses, "Clients sold stocks across all segments but became net buyers of large and small stocks thanks to ETF purchases." Institutional clients were the "only net buyers" after selling the previous week, while hedge funds and retail investors were net sellers.

In the past, retail investors were considered the most committed bottom buyers; however, especially since 2020, it has been observed that institutional investors have started to engage in bottom buying this year.

Corporate buybacks have also accelerated, but remained "below typical seasonal levels" for the third quarter earnings season. The bank noted that the share of buybacks in market value over the past 52 weeks is at its "lowest level since March 2024."

The bank added that sector flows have shown a defensive shift, noting that "the largest outflows occurred in Technology and Communication Services stocks, while the largest inflows were seen in Consumer Staples." Consumer Staples recorded inflows for five consecutive weeks. The healthcare sector also attracted significant inflows.

ETF flows occurred across "a wide range of sizes and styles," with investors beginning to favor growth stocks over value stocks after an eight-week hiatus. Financial ETFs saw the largest inflows since May, while Consumer Staples ranked second.