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Christmas has come and gone, but the so-called "Santa Claus rally" that US stocks enjoyed in past years is nowhere to be found.
The S&P 500 is down in December and is over 2% away from its all-time high set earlier in the month — a modest, but meaningful, dip. Other major indexes are struggling even more, as the growth-oriented Nasdaq Composite is 2.5% from its peak and the Dow Jones Industrial Average and small-cap-focused Russell 2000 are 4.6% and 8% away from recent highs, respectively.
Those pullbacks come after a furious postelection rally fueled by optimism about forthcoming policies under President-elect Donald Trump. Stocks caught fire in the wake of that news but have since stagnated and given back some of those gains, as is often the case after big moves.
But investors don't seem to be discouraged by those declines. Instead, they've reflexively been buying stocks in droves during this slump, seemingly confident that they'll be rewarded soon.
US stock inflows were positive for seven straight weeks through December 20, Bank of America strategists led by Jill Carey Hall wrote in a late December note.
Bank of America
Net equity inflows in that span reached $10 billion, which is the second-biggest figure since 2008, according to BofA. The only other time since the financial crisis inflows were bigger was in January 2017, which also happens to be in the wake of the last time Trump won the election.
Investors have prioritized single stocks over exchange-traded funds (ETFs) and large caps over smaller firms lately, BofA found. Money also flowed into six of the 11 market sectors, though four saw outsize attention: technology, communication services, industrials, and consumer staples.
Bank of America
It's no shock that those first two growth-heavy groups are popular, as they've easily been the best-performing sectors in 2024.
What's more surprising is that industrials and staples saw their biggest inflows last week since February 2022 and April 2024, respectively. Both sectors have had middle-of-the-pack showings this year, and industrials have had the largest average weekly outflows of any sector in the last 12 months. Staples has been slightly better in that span, but it also has negative weekly flows.
Conversely, the healthcare and consumer discretionary sectors had the biggest outflows last week.
Mixed signals abound within Bank of America's latest sector flow data.
It's not as if investors are positioning for an economic boom or bust, since the industrials-staples and healthcare-discretionary pairings are both combinations of cyclical and defensive sectors, while tech and communication services tend to grow in any backdrop.
Even still, it's worth tracking where investors are placing their bets — and it's also helpful to note which sectors are most recommended by leading investment firms heading into 2025.
