U.S. one-hundred dollar banknotes are arranged for a photograph in Hong Kong, China. (Photographer: Paul Yeung/Bloomberg)

‘Buy the Dip’ Alive and Well as BofA Sees Biggest Inflows in 2019

(Bloomberg) -- The carnage in U.S. stocks meant a buying opportunity for Bank of America Corp.’s clients.

While the benchmark S&P 500 last week slumped the most since December, the bank had its largest equity inflows of the year, totaling $4.7 billion. Its institutional and retail clients snapped up single-stock names while hedge funds offloaded holdings. In a sign of optimism for a resolution in the U.S.-China trade conflict, overseas-exposed and cyclical shares saw the largest net purchases.

‘Buy the Dip’ Alive and Well as BofA Sees Biggest Inflows in 2019

It’s a sign that “buy the dip” is alive and well in stock markets, even as global shares erased $3.6 trillion amid renewed trade tensions. While the latest tit-for-tat tariff hikes dashed earlier hopes for an impending deal, investors including Goldman Sachs Asset Management and Robeco, still expect common interest to bring the two countries to an accord.

“Strong inflows (even when excluding buybacks) indicate clients were likely expecting a benign resolution on trade,” strategists led by Jill Carey Hall wrote in a note.

The S&P 500 dropped 0.6 percent as of 9:50 a.m. in New York on Wednesday, following a relief rally in the previous session.

According to Bank of America’s report, buying was largely driven by single-stock names, with the lender’s clients turning net sellers of equity exchange-traded funds for the first time in nine weeks. Markets also enjoyed some support from the usual suspects: corporations bought back the most shares in about a year last week, reflecting a tendency for repurchases to peak in mid to late May, the strategists said.

In terms of sectors, this year’s market darling, technology, posted the largest inflows this week. There are other signs the industry group has emerged as an all-weather favorite. Long U.S. tech was considered the most crowded trade in Bank of America’s latest fund manager survey, while hedge funds’ first-quarter filings so far also indicate they boosted such holdings.

The bank’s clients also poured cash into health-care stocks for a third straight week, helping to reverse some of the drastic outflows spurred by fears of policy changes earlier.

©2019 Bloomberg L.P.