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Consumer Discretionary Flows are Bottoming, Buybacks are Stalling


© Reuters. Consumer discretionary flows have bottomed, and buybacks are down – BofA

Bank of America strategist Jill Carey Hall reflected on last week’s equity client flows in a week where the closed 2.8% lower.

The second consecutive week saw clients buy US stocks ($1.8 billion). The majority of clients were purchasing single stocks as well as ETFs. Retail clients began buying the stock for the first-time in three weeks. Hedge funds, on the other hand were still selling in the eighth week.

The key finding is the stalling of buybacks.

“Buybacks by corporate clients were flat vs. a week ago; typically buybacks accelerate by Week 2 of earnings. The slowdown in buyback activity since Jan. that we’ve been flagging in this publication supports our view for dividends over buybacks in ‘22 (note). YTD, corp. client buybacks as a % of S&P 500 market cap (0.065%) are below both 2021 (0.068%) and 2019 (0.108%) levels at this time,” Carey Hall wrote in a client note.

Bank of America’s (NYSE:) sector-based buying spree was led by Tech and Health Care.

An important conclusion is that the Consumer Discretionary flows have bottomed.

“Clients bought Consumer Discretionary stocks for the second consecutive week following historically-extreme outflows in the four weeks prior (and the biggest outflows of any sector YTD). As we highlighted last week and the week before, such extreme outflows have typically suggested that sector performance could be close to bottoming.”

By Senad Karaahmetovic