Investors are shifting toward dividend and quality-focused ETFs as selling in individual US stocks intensifies, according to Bank of America’s latest equity client flow report.
Bank of America clients pulled a net $3.526 billion from individual stocks in the week covered by its Tuesday report, after record outflows of about $15 billion the previous week. Stock ETFs, however, attracted $2.345 billion in net inflows for a second consecutive week, even as the S&P 500 fell 0.5%.
The divergence suggests investors are reducing company-specific risk without abandoning equity exposure altogether.
Dividend and Quality ETF Flows Strengthen
Bank of America said the four-week average of dividend ETF inflows reached a near-year high, while quality and multi-factor ETF inflows climbed to their highest level since tracking began in August 2025. Momentum ETFs, meanwhile, experienced outflows.
The trend points to growing interest in strategies emphasizing income, profitability and other fundamental characteristics over stocks driven by recent price momentum.
Meta Selloff Triggers Record Sector Outflows
Communication services stocks recorded $4.786 billion in net outflows, the largest weekly withdrawal since the sector classification was introduced in September 2018. The selling followed Meta Platforms Inc’s (NASDAQ:META) post-earnings slump.
Technology stocks also saw $931 million in net outflows, while industrials recorded $1.232 billion in withdrawals, extending their selling streak to 13 consecutive weeks.
Yet technology ETFs attracted $317 million, suggesting some investors continued to seek sector exposure through diversified funds rather than individual companies.
3 ETFs That Align With The Rotation
- Schwab U.S. Dividend Equity ETF (NYSE:SCHD) focuses on dividend-paying US companies selected using fundamental measures, including dividend sustainability. Its 0.06% expense ratio makes it a relevant example of the income-oriented strategy gaining traction.
- Vanguard Dividend Appreciation ETF (NYSE:VIG) tracks companies with a record of increasing dividends over time. With a 0.04% expense ratio, it offers exposure to dividend growth rather than simply targeting the highest current yields.
- JPMorgan U.S. Quality Factor ETF (NYSE:JQUA) selects US stocks based on characteristics including profitability, solvency and earnings quality. Its 0.12% expense ratio makes it a direct fit for the quality-factor theme highlighted in Bank of America’s report.
These funds illustrate the strategies attracting interest; Bank of America did not identify them as specific client purchases.
What The Rotation Means For Investors
Bank of America clients recorded combined net outflows of $1.181 billion from stocks and ETFs last week. Year to date, individual stocks have suffered $9.81 billion in net outflows, while ETFs have attracted $6.31 billion.
The shift toward dividend and quality ETFs suggests investors are becoming more selective about equity exposure as earnings risks and AI-related uncertainty persist.
Whether the trend continues will depend on whether these funds sustain their inflows while momentum strategies remain under pressure.
For investors, the key question is not simply which ETFs attract money, but whether the underlying companies can deliver durable earnings and cash flows if market volatility intensifies.
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