Institutional Investors are Buying U.S. Stocks

Bank of America reported that institutional investors have made "dip purchases" in U.S. stocks over the past week. Exchange-traded fund (ETF) inflows have reached nearly record levels despite ongoing weakness in single stock trading.

BofA analyst Jill Carey Hall noted that clients were "net buyers of American stocks, with record purchases of $4.3 billion, especially in ETFs." During this period, there was an outflow of $2.6 billion from individual stocks. S&P 500 lost 1.6% in value over the same period.

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

Historically, retail investors have been considered the most determined dip buyers, but particularly since 2020, it is observed that institutional investors have also started to seek dip purchases this year.

Corporate buybacks 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 last 52 weeks is "at the lowest level since March 2024."

The bank added that sector flows exhibited a defensive turnaround, with "the largest outflows occurring in Technology and Communication Services stocks, while Consumer Staples saw the largest inflows." Consumer staples recorded inflows for five consecutive weeks. The healthcare sector also attracted significant inflows.

ETF flows occurred "across a broad spectrum of size and style," with investors starting to favor growth stocks over value stocks after an eight-week hiatus. Financial ETFs experienced the largest inflows since May, while consumer staples ranked second.