Institutions slow selling as funds curb buying after frenzied end of 2025

Institutional investors continued to sell stocks in January, while index and exchange-traded funds maintained their buying activity. However, both groups slowed their trading following significant shifts in capital flows the previous month.

Institutions sold a net $47.47 billion in January, while index and exchange-traded funds (ETFs) bought a net $21.03 billion, according to the latest S&P Global Market Intelligence data.

Net selling by institutions declined 29%, while net buying by index funds and ETFs decreased 56% from December 2025's peak flows, the data shows. Still, institutions sold a net $8.45 billion more than their average monthly net sales over the past 12 months, while index funds and ETFs bought about $1.84 billion more than their average monthly net purchases during the same period.

The institutional buying and selling by passive funds took place as the S&P 500 increased 1.4% in January, but the slowdown in buying and selling was "mostly an outlier," and not a signal of a more lasting shift in flows, according to David Sim, an associate for Market Intelligence.

"December had a stack of predictable calendar-driven catalysts, including the S&P quarterly rebalance and year-end portfolio adjustments, that simultaneously boosted ETF-driven buying and increased institutional selling," Sim said in an interview. "Once those mechanics cleared, flows began to normalize, even though underlying investor conviction didn't change dramatically."

Institutional investors sold a net $468.27 billion in stocks from the end of January 2025 to the end of January 2026, while index funds and ETFs purchased a net $230.28 billion during the same period.

This trend of institutions selling and funds buying is likely to persist, according to Julian van Rensburg, a senior analyst for Market Intelligence.

"Market valuations and macro uncertainty would likely need to moderate before we see this dynamic shifting," Van Rensburg said in an interview.

Hedge funds bought a net $3.13 billion in stocks in January. However, over the past 12 months, they have, on average, sold a net $1.78 billion worth of stocks each month.

Retail investors, meanwhile, purchased a net $18.83 billion in January after selling a net $12.85 billion in December 2025.

"January's inflows appear to reflect the [retail] group broadly moving back into the market following December's profit-taking, likely driven by [fear of missing out], as the AI space saw the bulk of buying," Van Rensburg said.