© Reuters. BofA is a ‘patient bear’ despite streams of suggestions This is not a bear market rally
By Senad Karaahmetovic
According to strategist Jill Carey Hall, last week, Bank of America clients were net buyers of US stocks for the seventh consecutive week with cash inflows recorded at $3.2 billion.
Institutional clients led buying activity for the third straight week while hedge funds returned to buying after selling last week. Interestingly, retail customers sold out last week, marking the short first week in almost 2 months.
“Customers bought stocks in six of 11 sectors, led by Technology (seventh largest weekly Tech inflows in our data history since ’08) and Consumer Discretionary (largest weekly cash flow in the history of our data). In a sector where early cycles perform better than in Fed easing cycles, performance for consumer services stocks typically starts earlier,” said Carey Hall, said Carey Hall. one note.
Customers have continued to dump defensive sectors, such as Healthcare and Consumer Goods, with the sixth largest Staples cash flow since 2008. Elsewhere, clients have bought Energy shares. while Industry recorded the fourth consecutive week of selling.
For Carey Hall, these flows indicate that investors believe the ongoing rally is the start of a cycle sooner than just a bear market rally.
The Bank of America’s (FMS) Global Fund Managers survey in August also found sentiment remains bearish, “but no longer apocalyptic as hopes rise that inflation and rate shocks prices will close in the coming quarters.”
“BofA Bull & Bear indicator remains at ‘maximum downside’ 0 = no immediate reversal of the rally to the downside; but we are still patient bears, will drop SPX >4328 as rates of return move down our base case,” wrote Chief Investment Strategist Michael Hartnett in a client note.
Equity allocations are picking up from “catastrophic” July lows as investors expect lower inflationary in the next 12 months. This is also reflected in the amount of cash, which fell to 5.7% from 6.1% in July.
“FMS’ positioning remains ‘prolonged stagnant inflation’ (commodities, cash, defenses), ‘short-term Goldilocks’ (EU/EM shares, consumers); but the big rotation in August went to US stocks/technology/consumers, apart from staples/utilities/UK,” Hartnett added.
More importantly, the survey found that “notable FMS investors” expect growth stocks to outperform value over the next 12 months.