BofA_BofA Securities Equity Client Flow Trends_20240108

Trading ideas and investment strategies discussed herein may give rise to significant risk and are not suitable for all investors. Investors should have experience in relevant markets and the financial resources to absorb any losses arising from applying these ideas or strategies. BofA Securities does and seeks to do business with issuers covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Refer to important disclosures on page 17 to 19. BofA Securities Equity Client Flow Trends Early 2024 flows: large ETF outflows and muted single stock inflows Clients sold equities in the sell-off • ETF outflows and small single stock inflows: Last week (where S&P 500 was -1.5%), clients were net sellers of US equities for the first time in three weeks (-$2.1B, biggest outflow since July). Outflows were driven by ETFs as clients were small net buyers of single stocks. • No “Jan effect” in retail flows yet: All three client groups (institutions, hedge funds and private clients) were sellers, led by hedge fund clients (seventh consecutive week of outflows). Institutional clients were sellers for the second week and private clients for the third week - typically, retail clients are big net buyers in Jan. • Corporate buybacks decelerated: Corporate client buybacks decelerated the past week but are tracking above seasonal levels for an eighth week in a row. Buybacks as a percentage of S&P 500 market cap (0.26%) are above '23 highs (0.24%) at this time. Tech led outflows but Comm. Svcs. saw large inflows • Clients sold 6 of the 11 GICS sectors: led by Tech (first outflow since Nov.’23 and largest outflow since July’23). • However, Comm. Svcs. led inflows (third largest inflow in our data history since ‘08) and has seen inflows since October. • Defensives saw inflows while cyclicals saw outflows: Defensives saw inflows for a second consecutive week. However, we are more positive on cyclicals (see our year-ahead outlook), and our sector views have a cyclical tilt. ETFs: largest outflow since Jan ’23 • Outflows across all styles (Growth/Value/Blend) ETFs and large caps/broad market. SMID cap ETFs saw inflows (small caps have seen inflows since mid-Sept.). • Most sector ETFs saw outflows, led by Financial ETFs; Cons. Disc. ETFs led inflows. Exhibit 3: The past two years, retail clients have been purchasing more single stocks vs. ETFs in January despite historical trend (passive>active) Cumulative retail client inflows/outflows of single stocks and ETFs in January Source: BofA Securities BofA GLOBAL RESEARCH (5,000) (2,500) - 2,500 5,00008091011121314151617181920212223Single stocksETFsSingle stocks avg.ETFs avg.08 January 2024 Equity and Quant Strategy United States Jill Carey Hall