While hedge funds are increasing their purchases, large-scale sales by institutional investors are accelerating—highlighting a clear division among market investors.

In the U.S. stock market, the divergence in behavior among investor groups has become more pronounced than ever. According to data analysis platform reports, last week institutional investors executed a net sale of approximately $8.3 billion. This is the second-largest weekly sell-off on record, indicating significant shifts in market allocation.

Shift in Institutional Strategies and Massive Outflows from Individual Stocks

While institutional investors are making large-scale sales, the outflow of funds from individual stocks is accelerating. Last week alone, outflows from individual stocks reached $8.3 billion. This phenomenon has persisted for 13 out of the past 15 weeks, with cumulative outflows exceeding $52 billion.

Interestingly, during the same period, exchange-traded funds (ETFs) saw inflows of $2.2 billion. This contrast clearly illustrates a strategic shift among institutional investors from active stock picking to more passive, diversified ETF investments.

Market Split as Retail and Hedge Funds Buy More

Contrasting with the selling pressure from institutional investors, other market participants are showing opposite behavior. Retail investors maintained a strong buying stance last week, purchasing stocks worth $1 billion. This continuous buying has lasted for five weeks, suggesting solid demand.

Additionally, hedge funds are noteworthy—they increased their holdings by $1.2 billion, marking their eighth consecutive week of net buying over the past nine weeks. This active buying behavior from hedge funds sends a different signal to the market compared to institutional selling, highlighting a divergence in judgment among investor groups.

Rapid Differentiation Among Market Participants

In summary, three distinct investor groups are currently making different decisions, resulting in significant divergence in capital flows. Large investors like institutional funds are turning to sell, while hedge funds and retail investors continue to buy. This structure reflects the complexity of market sentiment and differing perspectives among investors.

The ongoing net buying by hedge funds suggests they are pursuing alpha strategies that differ from typical institutional sell-offs, indicating a relatively bullish stance on the overall market outlook by hedge funds.