As S&P 500 Hits ATH, Bank of America Clients Exit US Stocks; Institutional Investors, Retail Traders, and Corporate Buybacks All Cool Down

Last week, the S&P 500 rose 4.5% for the week, closing at an ATH of 7126.06 points, marking its strongest weekly performance since May 2025. Yet, simultaneously, Bank of America clients continued selling.

According to a report released by Bank of America on Wednesday, as of the week ending April 17, BofA clients were net sellers of US stocks overall, with outflows from individual stocks reaching $5.1 billion, marking five consecutive weeks of net outflows.

Institutions and retail investors are exiting in tandem. The main selling force came from institutional clients, with sales of individual stocks totaling $5.2 billion. Retail investors sold net for the sixth consecutive week, setting the longest streak of net selling since February 2024.

This data stands in stark contrast to what Bank of America captured a month earlier. For the week ending March 20, while the S&P 500 fell 5.8% amid fears of war with Iran, clients sold $8.3 billion worth of individual stocks—yet at the same time, they poured a record $4.6 billion into tech stocks, the largest single-week inflow into technology equities in the 17-year history of this dataset. Now, that conviction has eroded.

Amid the broad-based selling last week, the Energy Select Sector SPDR ETF (XLE) and other energy-focused ETFs attracted $468 million in inflows for the week, the largest single-week inflow since March 2021—when the market was pricing in the tail end of the post-pandemic economic reopening, with vaccinations driving bets on a return in global demand.

Now, institutional investors are buying energy ETFs against the backdrop of collapsing oil prices. Brent crude fell 12.6% in a single day on Friday to $86.84 per barrel; WTI crude plummeted 15.75% to $79.78 per barrel. That afternoon, Iran announced the "full opening" of the Strait of Hormuz for commercial navigation.

Furthermore, corporate stock buybacks have also cooled significantly. Year-to-date, buyback volumes have generally remained below the post-financial crisis average as a share of S&P 500 market capitalization, particularly during the first three weeks of earnings season—a period typically marked by an acceleration in buybacks. The slowdown in buybacks has been most pronounced in the US technology sector, while financial and energy sectors have seen some recovery.

In other words, the two most important buyer categories in US stocks—institutional clients and listed companies themselves—are retreating in tandem even as the US stock index reaches ATH.

Only hedge fund clients chose to buy US stocks, posting net inflows for the second consecutive week with a net purchase size of $2.1 billion, the largest single-week net buying in nearly four months, with purchases concentrated in the technology, energy, and non-essential consumer sectors.

Hedge funds typically react faster, operate more flexibly, and are more willing to chase market momentum compared to pension funds, endowment funds, and mutual funds.

The recent rally, driven by institutional selling, is one of the sharpest in recent years. The Nasdaq 100 rose 6.8% for the week and recorded its 13th consecutive day of gains on Friday, setting the longest winning streak since 1992. The Russell 2000 hit an ATH, marking the first record for small-cap stocks since January this year. Microsoft surged nearly 14% for the week, its largest weekly gain since 2007; Tesla rose 15%.

However, capital flow data shows that when combining individual stocks and stock ETFs, BofA clients' net selling reached approximately $1.5 billion, driven almost entirely by institutional clients. The four-week rolling average of US equity capital flows has now fallen to a negative $1.6 billion.

Analysts point out that hedge funds buying aggressively while institutional clients sell is a classic signal of divergence at the end of a cycle: fast money chases breakouts, while slow money quietly rotates out.

There are reasons for market hesitation. The S&P 500's forward price-to-earnings ratio over the next 12 months has risen to 20.9 times, higher than the five-year average of 19.9 times and the ten-year average of 18.9 times. Stock prices are rising significantly faster than the pace of earnings expectation recovery.