Here's a funny thing about stock markets: sometimes they go up a lot, and the people who are supposed to be the smart money decide that's a good time to sell. That's what's happening right now.
Last week, the S&P 500—tracked by the SPDR S&P 500 ETF Trust (SPY)—had its best week since May 2025, gaining 4.5% and closing at a fresh all-time high of 7,126.06. And what did professional investors do with this gift? They sold. A lot.
According to a report from Bank of America, its clients were net sellers of U.S. equities for the week ending April 17. Single-stock outflows reached $5.1 billion. That marks the fifth straight week of outflows. The big sellers were institutional clients, who unloaded $5.2 billion in single stocks. Private clients sold for the sixth week in a row, their longest streak since February 2024.
The only group that bought? Hedge funds. They were net buyers for the second week, with $2.1 billion in net purchases—their biggest weekly inflow in four months.
A Sharp Reversal from Last Month
This is a complete flip from what was happening just a month ago. Back in the week ending March 20, with the S&P 500 down 5.8% on fears about the Iran war, BofA clients dumped $8.3 billion in single stocks. But at the same time, they poured a record $4.6 billion into technology shares—the largest weekly tech inflow in the 17-year history of the dataset.
That conviction has now unwound. Instead, against the backdrop of broad selling last week, money rushed into energy. The Energy Select Sector SPDR ETF (XLE) and other energy ETFs attracted $468 million of inflows in a single week. That's the largest weekly inflow into the group since March 2021, which was the tail end of the post-pandemic reopening trade when vaccine rollouts had everyone betting on a return of global demand.
What makes this especially interesting is that institutional investors are buying these energy ETFs into the teeth of an oil crash. Last Friday alone, Brent crude fell 12.6% to $86.84 a barrel. West Texas Intermediate plummeted 15.75% to $79.78. The drop came after Iran reopened the Strait of Hormuz that afternoon, declaring it "completely open" to commercial traffic.
The Hedge Fund Signal: Fast Money Chasing Momentum
So, hedge funds kept buying. They bought both single stocks and ETFs, with tech, energy, and consumer discretionary as their top sector targets.
Hedge funds tend to be faster, more tactical, and more willing to chase momentum than pensions, endowments, and mutual funds. Their buying alongside institutional selling is a classic late-cycle divergence: the fast money chases the breakout while the slow money quietly rotates out.
Why the Distrust in This Rally?
The rally that institutional money sold into was one of the most aggressive in recent memory. The Nasdaq 100—tracked by the Invesco QQQ Trust (QQQ)—rose 6.8% on the week and posted its 13th straight day of gains on Friday, its longest winning streak since 1992. The Russell 2000 hit a new all-time high, the first small-cap record since January.
Microsoft Corp. (MSFT) jumped nearly 14%, its biggest weekly gain since 2007. Tesla Inc. (TSLA) rose 15%.
And yet, the flow data shows BofA clients selling roughly $1.5 billion more than they bought when counting both stocks and equity ETFs. The 4-week rolling average of U.S. equity flows is now at negative $1.6 billion.
The hesitation has a reason. The S&P 500's forward 12-month price-to-earnings ratio is now 20.9, above both the 5-year (19.9) and 10-year (18.9) averages. The rally has run faster than earnings estimates have risen to support it.
Corporate buybacks are also running colder than usual. Buyback flows as a percentage of S&P 500 market cap have been tracking below the post-Global Financial Crisis average most weeks this year, and they've been particularly below seasonal levels in the first three weeks of earnings season, when they typically accelerate. Buybacks have slowed most notably in tech, even as they've picked up in financials and energy.
In other words, the two biggest natural buyers of U.S. stocks—institutional clients and corporations themselves—are both stepping back as the index prints new highs. It's a reminder that sometimes, when everyone else is cheering, the smart money is quietly heading for the exits.
