Tech stocks were the only safe haven during last week's US stock market selloff

Last week (through March 20), the S&P 500 index fell 5.8% for the week, but the actual trading behavior of Bank of America Securities clients tells a clearer story than the index itself. During that week, net outflows from individual stocks reached $8.3 billion, the fourth-largest weekly outflow since 2008; stock ETFs saw net outflows of $1.1 billion, the highest in nearly six months. The combination of these two data points constitutes a rare overall reduction in holdings.

According to ChaseWind Trading Desk, Bank of America Securities stock and quantitative strategist Jill Carey Hall documented this “broad-spectrum sell-off” in the latest weekly fund flow report — 9 out of 11 sectors experienced net outflows, with financials, energy, discretionary, staples, utilities, and materials recording record or near-record outflows. Communications services was the only sector to see a net inflow since late December last year. The only exception was technology stocks: a net inflow of $4.6 billion, setting a record for the highest weekly inflow since 2008.

From the client structure perspective, three types of clients showed rare divergence in direction. Institutional clients were the largest net sellers last week, after three consecutive weeks of net buying; private clients continued their second week of net selling; hedge funds, after four weeks of net selling, turned to net buying for the first time. However, when looking over the past 12 months, this divergence reveals another side — hedge funds and institutional clients have been cumulatively net selling, while private clients have been the main net buyers. The short-term actions last week are almost completely opposite to this medium-term pattern.

Regarding corporate buybacks, although the scale accelerated week-over-week, the level of buybacks as a percentage of market cap has remained below seasonal norms over the past 10 weeks. The rolling 52-week buyback as a percentage of the S&P 500 market cap has fallen from a peak of 0.42% at the end of February this year to 0.22% now. Notably, Bank of America corporate clients’ buybacks are down 17% year-over-year, while the overall S&P 500 buyback activity still grew 6% in Q3 2025 — two highly correlated data sets. The ongoing gap may indicate that buyback activity at the index level could face contraction in the coming quarters.

Institutional clients are turning around, hedge funds are stepping in

In last week’s net outflows from Bank of America clients, institutional clients were the main contributors — combined net outflows from individual stocks and ETFs exceeded $11 billion, with about $9.9 billion from stocks alone. After three weeks of continuous buying, last week’s sharp reversal was quite sudden.

Hedge funds were the only net buyers last week, with net purchases of $2.7 billion in stocks and net sales of about $900 million in ETFs, resulting in a total net inflow of approximately $1.8 billion, ending four consecutive weeks of net selling. Private clients continued their second week of net selling individual stocks (about $1.08 billion), but maintained net buying in ETFs, with overall net outflows remaining relatively limited.

The situation for small-cap and micro-cap stocks is even more persistent. These segments have experienced net outflows for eight consecutive weeks, the longest continuous selling period among all market caps.

Tech stocks see record inflows, historical data suggests outperformance ahead

Last week, technology stocks saw a weekly net inflow of $4.6 billion, the highest since 2008 in Bank of America’s data, ranking eighth in historical records when measured as a percentage of the sector’s market cap. This occurred after clients had sold tech stocks for five consecutive weeks.

Historical analysis of four similar cases — where five weeks of consecutive selling were followed by an equivalent-scale buying reversal — shows that, on average, tech stocks outperformed the S&P 500 by 1.7 percentage points over the next month and 6.0 percentage points over three months. In contrast, the overall average excess return for tech over 1 and 3 months is only +0.5 and +1.6 percentage points, respectively. Although the sample size is small, the directional consistency is notable.

In comparison, the financial sector has experienced continuous weekly net outflows since the start of the year, with cumulative net outflows of about $17.5 billion so far in 2026, the largest among all sectors this year. Healthcare was the only sector among the 11 sectors last week to see a net inflow alongside technology.

Energy ETFs and stocks diverge, with large ETFs being abandoned

The divergence between ETF and stock fund flows is most evident in the energy sector: energy ETFs have nearly continuously seen weekly net inflows since the start of the year, with last week adding another $43 million; but energy stocks saw net outflows of about $1.8 billion, ranking among the largest declines across sectors. This “buy the industry basket, sell individual stocks” approach indicates investors want to maintain exposure to energy but are unwilling to take on specific company risks.

In terms of style, clients are buying growth and value ETFs but have sold off hybrid (Blend) ETFs sharply for the second consecutive week. By market cap, large-cap ETFs experienced the most significant outflows, while small-cap and broad-market ETFs saw net inflows. Six sectors recorded ETF net inflows, with financials, technology, and energy leading; materials ETFs experienced the largest net outflows.

Concerns from buyback data

Buybacks are a key endogenous support for the current US stock market, but related data are sending signals. From an industry distribution perspective, over the past 12 weeks, the largest buyback amounts were in technology ($9.9 billion) and financials ($6.6 billion), followed by discretionary and healthcare.

However, total buyback activity from Bank of America corporate clients has decreased 17% year-over-year, contrasting with the 6% growth in the S&P 500 in Q3 2025. Given the high historical correlation between these two data sets, if Bank of America’s data is leading, the overall buyback pace of the S&P 500 may weaken soon — a variable that market heavily reliant on corporate buy-ins cannot ignore.

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