Institutions, retail investors boost stock sales in September amid market swoon

Institutional and retail investors ramped up their sales of US stocks in September as equities stumbled throughout the month.

Institutions, which had been slowing their stock selling for months, reduced their exposure to equities by a net of more than $27.85 billion, up from the nearly $14.05 billion in outflows in August and the average net sales of $23.47 billion over the past 12 months, according to the latest data from S&P Global Market Intelligence. Institutional investors have reduced their exposure to stocks by a net $281.65 billion over the past 12 months, the data shows.

The outflows from institutions corresponded to a pullback in the stock market in September. Institutions were "notable contributors" to the downward pressure that stocks faced that month, said Christopher Blake, executive director for S&P Global Issuer Solutions.

Meanwhile, retail investors reduced their exposure to equities by nearly $8.82 billion in September, more than double the $3.94 billion they sold off in August and the $3.78 billion in net monthly outflows they averaged over the past 12 months. Retail investors reduced their exposure to equities by nearly $45.38 billion over the past 12 months.

Net retail selling continued for six consecutive months, the longest period of retail outflows since Market Intelligence began tracking these flows.

"The group has historically had a much more bullish bias to equity investing, so we are either seeing the retail investor outlook dropping considerably or retail investors are facing more forced withdrawals," Blake said, pointing out that these investors are possibly taking money out of the market for reasons not related to investing.

Hedge funds

While institutional and retail investors were sellers throughout September, hedge funds were largely buyers, increasing their exposure to equities by a net $7.07 billion by the end of the month.

Hedge funds were major sellers of utility stocks throughout September after buying them throughout August.

Utilities, which have been the worst-performing sector in the stock market over the past 12 months, are seeing increased volatility due to rising interest rates since investors often move into these high dividend-paying stocks when rates are low and utility businesses tend to be debt-intensive and more sensitive to rate changes.

Retail investors

Retail investors were also net sellers of utilities, after being net buyers in September.

Institutions

Institutions, however, took a different tactic and were net buyers of utilities in September.

Institutions also continued to sell off communication services and consumer discretionary stocks throughout the month.

This article highlights capital flows data available from S&P Global Issuer Solutions. Data and insights for this article were compiled by Matthew Albert, Mark Buckles and Christopher Blake.

For more information on this product, please contact Christopher Blake, executive director, at christopher.blake@spglobal.com.