There was a clear shift towards value stocks last week. Here’s what investors were purchasing.

Main Insights

• Last month, institutional investors exited the tech sector ahead of last week’s downturn, sparing themselves much of the recent market volatility. Meanwhile, retail investors took advantage of lower prices, but did so with discernment rather than across-the-board buying.

• Certain analysts believe there are attractive opportunities among stocks that have been unfairly punished during the recent sell-off.

As market conditions shift, investors quickly adjust their strategies. Last week saw a flurry of portfolio changes as participants responded to new trends.

Major technology companies, along with metals and digital assets, experienced significant declines. Both institutional and retail investors began to focus on specific market segments, raising questions about whether these moves represent lasting changes or are simply temporary adjustments.

Recent data reveals that institutional investors, often considered the "smart money," reduced their exposure to tech stocks before the recent slump. Retail investors, while more affected by the downturn, have become increasingly selective when buying the dip. Notably, U.S. equities began this week on an upward trend.

According to Vanda Research, sectors such as energy, industrials, and materials—where institutions shifted their capital after leaving tech—stood out as strong performers last week. Retail investors also showed a strong preference for energy stocks, with Wednesday marking the highest net retail purchases in State Street’s Energy Select Sector SPDR ETF (XLE) since March 2022. Companies like Chevron (CVX) and Exxon (XOM) also attracted significant retail interest.

Why This Is Important

In recent years, U.S. equities—especially technology—have dominated investor attention. However, current trends indicate a growing interest in other asset classes.

Retail investors have been more targeted in their tech investments, favoring companies like Alphabet (GOOGL), AMD (AMD), and Palantir (PLTR) rather than buying the entire sector. Vanda’s data shows that retail buying activity this year is only about a tenth of what it was last summer, reflecting a more cautious approach.

Vanda noted last week that retail investors are not indiscriminately buying on market dips.

Deutsche Bank analysts observed a clear shift away from large-cap stocks, particularly tech, toward other sectors and smaller companies.

At Bank of America, there has been a notable move toward cash, bonds, and international equities, while gold and cryptocurrencies have fallen out of favor. According to BofA Global Research, over $87 billion flowed into cash last week, with nearly $35 billion going into stocks and $23 billion into bonds.

Global Investment Flows and Market Trends

European equities attracted $4.2 billion, the largest weekly inflow since April, while Korean stocks saw a record $5 billion in new investments, according to Bank of America. Gold experienced its first week of outflows since November, and cryptocurrencies saw their largest outflows since then.

Oppenheimer’s chief investment strategist, John Stoltzfus, noted that investors are taking on more risk, which has boosted small- and mid-cap stocks relative to large-caps.

Stoltzfus also pointed out that institutions are actively repositioning with complex short-term strategies, contributing to recent market volatility and testing the market’s resilience amid ongoing uncertainty.

This environment may present opportunities for investors to acquire undervalued assets that have been dragged down by broader market concerns—a chance to "catch babies thrown out with the bathwater."

There has also been a noticeable shift toward value stocks over growth stocks, with Schwab’s chief investment strategist Liz Ann Sonders highlighting last week’s strong move into value-oriented investments.