Wednesday, January 27, 2021
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As markets hit a record high, investors sell billions in stock.
There is… a lot going on in the stock market.
GameStop (GME) continued its unlikely surge on Tuesday, with shares gaining 91% during the session as Redditors continue to pressure short sellers and — now, apparently — big hedge funds.
Heavily shorted names across the market also rallied on Tuesday, including Bed, Bath & Beyond (BBBY), Tanger Outlets (SKT), and Macy’s (M) among others. The financial media and Wall Street analysts alike are scrambling to make sense of a market trading at record highs amid a global pandemic led by retail traders coordinating on Reddit.
Meanwhile, in the background of all of this, one of the most persistent themes of the post-crisis market continues apace: Investors are moving money out of stocks.
According to data from Bank of America Global Research published Tuesday, the firm’s clients sold a net $5.2 billion worth of stock last week. This was the 5th-largest weekly net equities outflow — which measures the difference between stock purchases and stock sales — since 2008.
“Sales were chiefly from institutional clients,” BofA analysts led by Jill Carey Hall said in a note, “but all three client groups (private clients, hedge funds, institutional clients) were sellers.”
And this coming as corporates finally got back in the market repurchasing shares, an activity that had been forestalled during the depths of the COVID economic crisis and associated cash crunch, for many businesses.
“Buybacks by corporate clients over the past three weeks have picked up to their highest levels since March,” BofA wrote. “With Banks allowed to buy back stock again in 1Q, financial buybacks increased back to March levels. Financials comprised just 7% of buybacks from 2Q-4Q last year after making up 40% of buybacks in 2019.”
Now, while money is moving out of stocks on net, the shift towards passive investments and away from actively managed funds does bolster the exchange traded fund (ETF) space, and offer some support for buying equities.
In 2020, for instance, Bank of America’s clients sold a net total of $773 million worth of stock. But if ETF purchases are excluded for the year, the firm’s clients sold a net $8.5 billion worth of stock last year.
And the longer-term picture for investor exposure to the market is even more bleak.
Since 2008, just two years — 2018 and 2019 — saw a net increase in equity purchases. When excluding the impact of ETFs and corporations repurchasing shares, money has actually come out of the stock market every year since the crisis.
And so, while the average investor at the core of today’s retail mania might not have a ton in common with BofA’s institutional or private client customers, we do know that this rush of energy into the market follows a decade-plus of most investors lightening up their stock market exposure.
We hear a lot these days about the FOMO trade, or investors having a “fear of missing out.” And yet the data is clear: Many investors have already missed out on a lot of the post-crisis rally.
That trend continues.
By Myles Udland, a reporter and anchor for Yahoo Finance Live. Follow him at @MylesUdland
What to watch today
7:00 a.m. ET: MBA Mortgage Applications, week ended January 22 (-1.9% during prior week)
8:30 a.m. ET: Durable Goods Orders, December preliminary (1.0% expected, 1.0% in November)
8:30 a.m. ET: Durable Goods Orders excluding transportation, December preliminary (0.5% expected, 0.4% in November)
8:30 a.m. ET: Non-defense Capital Goods Orders excluding aircraft, December preliminary (0.5% expected, 0.5% in November)
8:30 a.m. ET: Non-defense Capital Goods Shipments excluding aircraft, December preliminary (0.6% expected, 0.5% in November)
2:00 p.m. ET: Federal Open Market Committee Monetary Policy Decision
Before market open: Blackstone (BX) is expected to report adjusted earnings of 91 cents per share on revenue of $2.03 billion
6:00 a.m. ET: Anthem (ANTM) is expected to report adjusted earnings of $2.52 per share on revenue of $30.86 billion
6:25 a.m. ET: AT&T (T) is expected to report adjusted earnings of 73 cents per share on revenue of $44.58 billion
6:55 a.m. ET: VF Corp (VFC) is expected to report adjusted earnings of 90 cents per share on revenue of $3.01 billion
7:00 a.m. ET: Nasdaq (NDAQ) is expected to report adjusted earnings of $1.45 per share on revenue of $752.41 million
7:30 a.m. ET: Abbott Laboratories (ABT) is expected to report adjusted earnings of $1.36 per share on revenue of $9.94 billion
7:30 a.m. ET: Boeing (BA) is expected to report an adjusted loss of $2.06 per share on revenue of $15.16 billion
8:15 a.m. ET: The Progressive Corp (PGR) is expected to report adjusted earnings of $1.69 per share on revenue of $10.8 billion
4:05 p.m. ET: Facebook (FB) is expected to report adjusted earnings of $3.54 per share on revenue of $26.41 billion
4:05 p.m. ET: Tesla (TSLA) is expected to report adjusted earnings of $1.01 per share on revenue of $10.33 billion
4:05 p.m. ET: Whirlpool (WHR) is expected to report adjusted earnings of $6.18 per share on revenue of $5.62 billion
4:05 p.m. ET: Las Vegas Sands (LVS) is expected to report an adjusted loss of 32 cents per share on revenue of $1.29 billion
4:10 p.m. ET: ServiceNow (NOW) is expected to report adjusted earnings of $1.06 per share on revenue of $1.22 billion
4:10 p.m. ET: Ameriprise Financial (AMP) is expected to report adjusted earnings of $4.47 per share on revenue of $3.13 billion
4:30 p.m. ET: Apple (AAPL) is expected to report adjusted earnings of $1.42 per share on revenue of $103.12 billion
European stocks dip ahead of Fed decision as France eyes lockdown [Yahoo Finance UK]
Microsoft blows away Q2 expectations on cloud and personal computing strength [Yahoo Finance]
Starbucks Q1 earnings top Wall Street estimates, but same-store sales hit by COVID resurgence [Yahoo Finance]
Tesla earnings preview: Investors eye 2021 targets after record-setting year [Yahoo Finance]
Walmart to launch local fulfillment with grocery-picking robots [Yahoo Finance]
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