Live Markets-BofA clients favor ETFs as hedge funds step in to buy

ETF demand, meanwhile, was broad-based. Clients bought equity ETFs across growth, value and blend strategies, as well as across large-, mid- and small-cap segments. Technology ETFs led sector inflows, while healthcare ETFs saw the largest outflows.

Across market-cap segments, clients bought large- and mid-cap equities but sold small- and micro-cap names after five straight weeks of buying. Even so, Hall noted that positioning data continues to show multi-cap managers significantly underweight small caps despite the recent surge in flows.

Corporate buybacks picked up modestly last week but remained below the historical average for the third week of earnings season when adjusted for market capitalization. On an annualized basis, buyback activity is running below full-year 2025 levels and well below the record pace seen in 2024, though it remains above levels recorded in any year from 2016 through 2023.

Sector flows were mixed. Clients were net sellers in six of the 11 S&P sectors, led by industrials, after the sector attracted record inflows the previous week. Financials and technology also saw notable outflows, although hedge funds remained aggressive buyers of tech shares.

Consumer-oriented sectors drew the strongest inflows. Notably, the four-week rolling flow measure for consumer staples turned positive for the first time since May.

BofA Securities equity and quant strategist Jill Carey Hall said BofA clients were modest net buyers of U.S. equities last week, marking a fifth consecutive week of inflows, as the S&P 500 .SPX gained just over 1%, with most buying flowing into ETFs rather than individual stocks.

In a note out on Wednesday, Hall said equity ETFs attracted $1.9 billion in inflows, while single stocks saw $1.1 billion in outflows, a sharp reversal from the previous week, when stock purchases hit a record high.