Investment Rating - The report indicates a mixed sentiment with institutional clients being net sellers while private clients have shown net buying behavior [5][7][20]. Core Insights - The report highlights that small cap inflows have continued, with clients showing a preference for small cap stocks over mid caps, while large caps also saw some buying activity [9][25]. - Private clients have turned net sellers for the first time this year, with a rolling four-week average of equity flows turning negative [9][20]. - Institutional clients have been net buyers for six consecutive weeks, marking the longest streak since late 2022, while hedge funds have also shown buying activity [9][20]. - The report notes that corporate client buybacks have accelerated, surpassing typical seasonal levels for the first time in ten weeks [9]. Summary by Client Type - **Institutional Clients**: The largest net sellers post-crisis, with cumulative flows showing significant outflows [5][7]. - **Private Clients**: Have been the only cumulative net buyers year-to-date, but recent trends indicate a shift to net selling [9][20]. - **Hedge Funds**: Showed a buying trend for the second consecutive week, contrasting with the selling behavior of private clients [9][20]. Summary by Sector - **Technology, Consumer Services, and Staples**: These sectors saw the most buying activity from clients [9]. - **Industrials, Financials, and Utilities**: Experienced the largest outflows, with utilities facing near-record outflows in recent weeks [9][20]. - **Equity ETFs**: Clients favored growth ETFs over value ETFs for the first time in six weeks, indicating a shift in investment strategy [9]. Summary by Size Segment - **Small and Micro Caps**: Continued to attract inflows, while mid caps saw outflows [9][25]. - **Large Caps**: Also experienced buying activity, indicating a diversified interest across market capitalizations [9][25]. Summary by Investment Style - **Growth vs. Value**: Growth ETFs have seen greater net flows compared to value ETFs, suggesting a preference for growth-oriented investments [9].

Investment Strategy - TS Lombard is positioning for the Jackson Hole meeting by adjusting views on US small-cap and large-cap stocks [1] - The report suggests adjustments to views on the Japanese Yen (JPY), Swiss Franc (CHF), and Australian Dollar (AUD) assets [1]

Market Sentiment & Performance - Bank of America's flow data indicates net selling of small-cap stocks by clients last week, while large and mid-cap stocks saw net buying [1] - 44% of fund managers surveyed believe large-cap stocks will outperform small-cap stocks this year, an increase from the previous reading [1] - The Russell 2000 is up only 1.5% year-to-date, indicating continued underperformance of small caps [1] Concerns & Cautions - B of A remains near-term cautious on the Russell 2000 index and does not expect any Fed rate cuts this year [2][4] - Tariff risk poses a greater threat to small caps due to their thinner margins [3] - Inflation remains sticky, leading to the expectation that the Fed will remain on hold, potentially negatively impacting the Russell 2000, which is sensitive to interest rates [4][5] - Small-cap earnings recovery has been slower than expected compared to large caps, with lofty expectations for the second half of the year [6][7] Opportunities & Recommendations - It is advisable to be selective within small caps, favoring mid-caps due to cleaner balance sheets and lower risk from tariffs and refinancing [8] - Despite risks, small caps offer wider performance spreads and alpha opportunities, with relatively cheap valuations compared to large caps [8] - Focus on higher quality areas within small and mid-caps, prioritizing stocks with positive revisions and stronger margins [9][10]