Investing.com — In its latest equity client flow trends note, Bank of America said it has seen big institutional outflows as tax loss harvesting season wraps up, with institutional client sales in October surpassing typical levels for the month by more than 80%.
BofA’s equity client flow data revealed that the trend of equity outflows has now reached its fourth consecutive week, driven by significant single stock sales, particularly in the Financials and Technology sectors.
Notably, “institutional clients’ sales of stocks typically pick up in October,” driven by mutual fund capital gains deadlines, though this October’s sales far exceeded the historical average, according to BofA.
Amid the heavy outflows, BofA said Health Care was a bright spot, recording its largest weekly inflow since January. This was alongside modest inflows in Communication Services and Energy.
Meanwhile, BofA said private clients and hedge funds also contributed positively to market flows by purchasing equities last week. However, individual investors are said to typically wait until December to maximize tax loss selling, which may introduce additional outflows as the year’s end approaches.
On the other hand, BofA noted an increase in corporate buybacks, which have been tracking above average seasonal levels. ETFs, which attracted inflows across most styles (Blend, Value, Growth) and sizes, saw broad-based buying, led by ETFs in Industrials, Consumer Discretionary, and Energy.
Interestingly, while single stock sales in Financials and Tech dominated institutional outflows, the bank said ETFs in these sectors witnessed inflows, indicating some investors are using ETFs as a more diversified way to maintain exposure to these sectors despite broader outflows from individual stocks.
BofA concludes that the “big sales by institutions” signal a complex market sentiment as the end of tax loss harvesting approaches, with sector-specific flows reflecting varied investor outlooks in the current market climate.