Tech Stocks Attract Record Inflows as Broader Market Weakens
Investors sharply increased their exposure to technology stocks last week, even as overall equity flows turned negative, according to data from Bank of America. The tech sector recorded its largest inflows in BofA’s dataset, which dates back to 2008.
Market Sell-Off Drives Sector Rotation
The shift toward tech came during a turbulent week for U.S. equities. Investors were net sellers overall as the S&P 500 dropped 5.8%.
This decline was fueled by near-record outflows from individual stocks totaling $8.3 billion, along with $1.1 billion in outflows from exchange-traded funds (ETFs), marking the largest ETF withdrawal in six months.
Tech Stands Out as Investors Add Exposure
Despite widespread selling across most sectors, technology stocks emerged as a clear exception. According to BofA strategist Jill Carey Hall, the sector saw its strongest inflows on record.
Investors increased their positions in tech while reducing exposure elsewhere. The healthcare sector was the only other area to experience net inflows during the period.
Historical Trends Point to Potential Outperformance
Previous periods of strong inflows into technology stocks have often been followed by market outperformance. Historically, the sector has outpaced the broader S&P 500 over the following one- and three-month periods after similar buying trends.
Selling Pressure Hits Most Sectors
Outside of tech and healthcare, selling activity was widespread. Investors reduced exposure in nine out of eleven sectors, with financial stocks leading the outflows and recording weekly declines throughout the year so far.
Other sectors, including energy, consumer discretionary, consumer staples, utilities, and materials, also experienced record or near-record outflows. Communication services saw its first wave of outflows since late December.
Institutional Investors Lead the Sell-Off
Institutional investors were the primary drivers behind the recent selling, following three consecutive weeks of buying. Private investors also continued to reduce positions for a second straight week.
In contrast, hedge funds were the only group to increase exposure, ending a four-week period of net selling.
ETF Flows Show Mixed Trends
While selling was concentrated in individual stocks across all market capitalizations, ETF flows painted a more mixed picture. Investors added funds to both growth and value ETFs, while continuing to reduce exposure to blended strategies.
Six of the eleven sectors recorded ETF inflows, with financials, technology, and energy leading the gains. Notably, energy ETFs have continued to attract consistent inflows despite ongoing selling in individual energy stocks.
On the other hand, materials ETFs experienced the largest outflows during the period.
