Investors have pivoted to defensive stocks as the market has become bearish due to a tighter monetary policy, stronger U.S. dollar and fears of a recession.
During the sell off in the market last week, clients of Bank of America, including institutional investors, were net buyers of U.S. equities during last week's sell-off, led by hedge funds, according to the bank's securities data.
Investors Sell Cyclical Stocks
Investors have shifted to defensive stocks from cyclicals and have started buying health care stocks, the bank's data revealed.
The largest net buys were in health care stocks, which was the fifth largest inflow in Bank of America's weekly history since 2008, followed by communication services, tech and utilities. The purchase of health care stocks marks inflows for the last six weeks after outflows occurred for a portion of the year-to-date.
During the past six weeks, there have been more stocks purchased in the defensive sectors while stocks in the cyclical sector showed more selling or outflows in five of the last six weeks.
Stocks in seven sectors, led by consumer discretionary, energy and financials were sold, according to the bank's data.
Investors favored buying single stocks last week when the S&P 500 declined by another 4.6% and opted to sell ETFs for the second consecutive week.
For the second and third week, investors chose to invest in small and mid cap stocks and divested large caps for the first time in three weeks, according to Bank of America.
Tax loss harvesting season, when investors offset any realized gains to benefit from after-tax returns, has also started. Institutional selling peaks in Octobers and retail selling peaks in December, the bank said.
Retail Investors Favored Tech Stocks
Investors bought shares of Amazon (AMZN), Shopify (SHOP), NVIDIA (NVDA), Lucid Group (LCID) and AT&T (T) during August, according to brokerage TD Ameritrade.
Volatility in the market was elevated in August, rising 5% before declining in the latter half of the month. The Investor Movement Index rose to 4.82 in August, up from 4.68 in July, a behavior-based index created by TD Ameritrade that aggregates Main Street investor positions and activity to measure their investments.
“In August, clients had a lot to digest, from macroeconomic catalysts to noteworthy earnings and finally to the remarks shared by Chairman Powell at the Jackson Hole symposium,” said Shawn Cruz, head trading strategist, TD Ameritrade. “In the face of mixed signals, optimism waxed and waned. But despite how the period ended, on a whole, TD Ameritrade clients increased exposure in August, leading to the first bump the IMX score has seen since November last year.”
Investors sold out of their positions of Apple (AAPL), Twitter (TWTR), Netflix (NFLX), Exxon Mobil (XOM) and Qualcomm (QCOM).
Millennial Choices are Different
Millennial investors bought more stocks than they sold during August, TD Ameritrade said.
Both Millennial and TD Ameritrade's overall clients favored buying Google (GOOG), the tech giant, while Amazon was another popular stock.
Millennials purchased semiconductor giant Nvidia despite pessimistic forward guidance and electric vehicle makers were also popular among the generation as they favored Tesla (TSLA), Rivian (RIVN) and Lucid Motors.
While JP Morgan Chase (JPM) continued to trade near its lows for 2022, Millennials bought shares of the investment bank while Gen Xers and Baby Boomers did not.
Similar to the other two generations, Millennials sold popular tech names like Apple, Twitter, Netflix and Roblox (RBLX).
Investors also divested airline stocks, including Delta Airlines (DAL), American Airlines (AAL) and Spirit Airlines (SAVE).
