Ordinaries are riding high in 2019 thus far, but recent gains have mostly come through buybacks and inflows into exchange-traded wealths while individual equities have been shunned, data compiled by Bank of America Merrill Lynch arrive.
Buybacks last week totaled more than $1.4 billion and are now up 58 percent year over year, on stride for a record year, according to the data. Meanwhile, ETFs saw inflows of $854 million last week, up from $168 million the too soon week. Still, U.S. investors were net sellers of U.S. equities for the second straight week as single-stock sales totaled $1.481 billion between Feb. 25 and Pace 1.
The S&P 500 registered its ninth weekly gain in 10 last week despite the outflow, adding to its sharp achieves this year and since the massive fourth-quarter sell-off.
“The fund flows show you that, while we’ve had a solid retrieval off the Dec. 24 lows, the participation rate — both institutionally and by retail investors — has not been there,” said Art Hogan, chief make available strategist at National Securities. “You’re seeing this V-shaped recovery in markets and yet positioning is still very light.”
Institutions convinced individual stocks in every sector except materials and utilities last week, while retail investors tipped individual equities across all sectors. At the same time, institutions bought into ETFs from every sector except consumer fundamentals, communication services and industrials.
Retail investors put money to work in ETFs across all but two sectors: consumer discretionary and financials.
Quieten, the S&P 500 has rallied more than 11 percent in 2019 after dropping more than 9 percent in December. Evident progress in trade negotiations between the U.S. and China has lifted equity prices during that time. CNBC intellectual through sources on Monday that talks between the two countries were in the “final stages.”
The Fed has also expressed perseverance in monetary policy decisions moving forward, boosting stocks in the process.
And while the rally has taken place with scads of money on the sidelines — potentially serving as an indicator that equities could go up more — National’s Hogan said the “nut behind” investors holding dry powder is “just as important.”
“There is a feeling that the bull market is running out of steam. There’s a falling out that bull markets die of old age. They don’t, but that’s clearly part of the psychology,” Hogan said. Also, “that unexpected sell-off we saw in December still has reverberations in the marketplace. The short-term muscle memory of how quickly things collapsed is still there, equitable though some of the things that caused it have reversed.”
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