Redemptions from technology stocks totalled $1.5 billion in the past week, the biggest since February 2015, Bank of America Merrill Lynch said on Thursday, citing data from EPFR Global. The outflows from funds dedicated to tech shares came as a rout on Wall Street earlier this week wiped $1 trillion off the value of leading tech firms.
Total equity redemptions were just $900 million, as the biggest moves happened under the surface. Investors pulled out of sectors highly sensitive to the cycle and favoured safer high-dividend and stable-earning "defensive" sectors.
"Broader flow story is rotation... not massive redemptions," the strategists wrote. "Defensive yes, but panicked no."
Investors have ploughed $8 billion into defensive sectors (excluding real estate investment trusts) and pulled $14 billion out of cyclicals over the past eight weeks, they noted.
The strategists said they remain sellers of equities because institutional positioning is not bearish enough yet to signal a market bottom.
The bank's "Bull & Bear" indicator of market sentiment remained at last week's level of 2.8. It would have to fall to 2 to constitute a "buy" signal, BAML said.
"We see no positioning or policy capitulation yet; institutional positioning not bearish enough to signal Big Low," the strategists wrote.
"BIG POLICY PANIC" The triggers for a panic over monetary tightening are forming, BAML wrote, predicting the US Federal Reserve could be stopped in its tracks in the next three months by further falls in the S&P 500 and high-yield bonds.
Fed tightening cycles usually end with a "financial event", they warned, pointing to previous crises such as the 2000 tech bubble and the subprime crisis of 2007.
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