(Bloomberg) — The US stock market had a great 2023 with the S&P 500 Index gaining 24% and the Nasdaq 100 Index having its best year since 1999, but mom-and-pop investors may have missed out on the excitement.
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Retail investors fled US equities last year, according Bank of America Corp. client flow data. Meanwhile, hedge funds appear to have been the smart money, plowing cash into stocks as the market continued to soar.
In all, BofA clients were net buyers in 2023, funneling $66 billion into US shares, strategists led by Jill Carey Hall said Wednesday in note to clients. Purchases were most pronounced among corporations and hedge funds, which posted their first net inflows to the asset class in four years. On the other hand, institutional and private clients were net sellers, with the latter group pulling the most money from US stocks since 2019.
Despite losses across recent sessions, the S&P 500 and Nasdaq 100 are coming off of nine consecutive weeks of gains. US equities soared last year on economic resilience, expectations the Federal Reserve will soon pivot to easier monetary policy and anticipation of a tech boom triggered by artificial intelligence.
BofA clients bought technology and communications services stocks, while selling industrials, energy, staples and utilities. Industrials posted the largest cumulative outflow in the history of BofA’s data, which goes back to 2008.
Meanwhile, Corporate America was busy snapping up its own shares. Corporate client buybacks accelerated last year relative to 2022, comprising roughly 0.3% of the S&P 500’s total market capitalization in 2023 compared with 0.2% the prior year. Still, repurchases haven’t returned to pre-Covid levels, when they represented about 0.4% of the US stock benchmark’s market cap.
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