Investors poured money into U.S. small-cap stocks in the week following the Jackson Hole conference, marking one of the strongest inflow weeks on record, according to Bank of America Securities.
The bank reported that its clients were significant net buyers of U.S. equities overall, with $2.3 billion directed into individual stocks and another $2.1 billion into equity ETFs.
The rally was fueled largely by small- and mid-cap (SMID) shares. Net purchases of small caps — including both stock and ETF flows — totaled $1.49 billion, the second-largest weekly inflow in BofA’s data going back to 2008, narrowly trailing the all-time high of $1.51 billion that year.
“We expect small caps to outperform near-term,” strategist Jill Carey Hall wrote in a Tuesday research note.
Buying was spread widely across client groups. Institutional investors extended their buying streak to five consecutive weeks, private clients continued a run of purchases in 35 of the last 38 weeks, and hedge funds turned net buyers for the first time in three weeks.
Corporate buybacks, on the other hand, slowed for a ninth straight week, remaining weaker than usual for the season.
Flows leaned toward cyclical sectors for the second week in a row, with clients picking up shares in eight of eleven sectors. Leading the inflows were Technology, Industrials, and Communication Services. Outflows were concentrated in Financials, Consumer Staples, and Utilities, with the latter two extending a three-week streak of redemptions.
ETF activity also stood out, showing the strongest equity inflows since March. Value-focused ETFs continued to top growth funds for the fifth consecutive week, with Hall pointing to the Fed, macro trends, and investor flows as “positive catalysts for Value.”
While clients sold sector ETFs tied to Tech, Healthcare, and Staples, they increased holdings in Industrials and Materials ETFs.
Importantly, Hall noted that the wave of SMID inflows was “entirely driven by single stocks,” as investors cut exposure to small- and mid-cap ETFs while adding to large-cap and broad-market funds.
Overall, the four-week rolling average of equity inflows climbed to $3.2 billion, approaching the higher end of historical ranges.
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