Here’s What Dip Buyers Bought Amid Last Week’s Stock Sell-Off

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Key Takeaways

• Bank of America clients last week were net buyers of U.S. equities for the seventh straight week, buying up proper stocks and ETFs as the S&P 500 slumped into correction territory.
• Despite the recent sell-off being sparked by slump fears, robust flows into cyclical stocks and out of defensive stocks suggests investors aren’t positioning for a set-back.
• However, small-cap ETFs, which tend to be more sensitive to the economic cycle than large-cap equivalents, saw their largest outflows since July 2022.

Dip customers came out in spades last week, according to client fund flow data from Bank of America.

BofA shoppers, including institutional investors and corporate clients, were net buyers of U.S. equities for a seventh consecutive week last week. They accept up individual stocks and ETFs as the benchmark S&P 500 slid into a correction for the first time since 2023.

Private shoppers were buyers for a 14th straight week, their longest start-of-year buying streak in data going back to 2008. Institutional patients returned to buying after two weeks as net sellers. Hedge funds, meanwhile, stuck to selling for a fifth straight week.

Definitive week’s sell-off came amid mounting recession fears. Investors and economists are antsy that tariffs could unhurriedly economic growth and raise prices, increasing the risk of the U.S. economy entering a period of “stagflation.” Consumers have also mature fearful of tariffs—inflation expectations have soared in recent months, causing consumer confidence to drop to its basest level since 2022. 

BofA Clients Bought More Cyclical Than Defensive Stocks

However, much of end week’s equity buying ran counter to the narrative driving the market. BofA clients bought more stocks in the consumer discretionary and other cyclical sectors than in defensive sectors. Consumer habituals, a classic defensive sector, was one of just two sectors that investors sold last week. On the flip side, cyclicals led the suborning. Energy recorded its biggest week of inflows since March 2023, and tech saw its biggest inflows since July 2023.

Small-cap ETFs, on the other hand, saw their largest outflows since July 2022, suggesting some caution among investors. Small caps likely to be more sensitive than large caps to slowdowns in consumer and business spending.