Nobody is as aware of the market’s conditions as institutional buyers and the banks that do the dealing for them since they employ hundreds (if not thousands) of qualified analysts and portfolio managers with their fingers on the pulse of global markets essentially all day, every single day. Regardless of experience or awareness of market conditions, an individual investor could never outcompete the scale and information flow these places have access to.

This is why noticing a shift in institutional flows can be massively important for retail portfolios, as it can signal the time to step on the gas or potentially pull back on the market and avoid unnecessary losses. Today, the volatility in the S&P 500 has driven some institutions out of cyclical and consumer discretionary names, as perhaps the underlying economic conditions are worse than everyone thinks.

The names that fell victim to this institutional selling spree include a broader exchange-traded fund (ETF) like the Consumer Discretionary Select Sector SPDR Fund (NYSEARCA: XLY) or more individual names like Progressive Co. (NYSE: PGR) despite its product being a relatively essential spending item today, and even Booking Holdings Inc. (NASDAQ: BKNG) as the hardships of the economy start to hit one of the most cyclical industries, which is travel.

Consumers Pulled Back, Room for Downside

There are several reasons why institutions have decided to sell out of the consumer discretionary ETF. Still, as these places tend to be tied with economic data, one recent release might have sparked enough fear (and risk) in the sector to trigger a systematic selloff.

For the month of February 2025, the retail sales data release showed the market that the American consumer pulled back on spending at the most aggressive pace in nearly two years. That might have been enough for these institutions to tackle the downside in cyclical stocks before it was too late to act.

As of February 2025, aligning perfectly with the report’s release, up to $3.5 billion in institutional selling took place, pulling out a massive wave of capital from this ETF and its constituents. Leading the pack were those at Northern Trust, which had one of the biggest holdings of the ETF, currently valued at around $65.5 million.

If the leader in exposure to this space is pulling back, investors could reasonably assume that the smaller names could follow suit soon enough, creating an even bigger downward spiral.

Insurance Won’t Be So Safe This Year

Nobody looks at insurance and insurance stocks and thinks that they will be coming down in any way. Since insurance is an essential aspect of everyday life, whether for automobiles or homes, it is typically considered a safe investment and business model overall.

However, considering that these institutions are selling out of cyclical names today, it would make sense to expect inflation to start trending down, which it has over the past few quarters for the United States economy. With this in mind, investors need to understand that inflation measures drive insurance premiums (the profit driver for insurance companies).

That might explain why institutional holders dumped up to 2.2% of net holdings at Janus Henderson in February 2025. Again, this is the leader in Progressive’s institutional holdings, still keeping a stake worth up to $1.6 billion, signaling that the leader is also looking to get out ahead of time before the earnings contract.

Wall Street analysts also forecast a dip in earnings per share (EPS) for the third quarter of 2025, to $2.74 from today’s $4.08 level. If consumers buy fewer cars and homes, where is Progressive going to get its EPS growth?

Traveling Is Out the Window

When consumer spending pulls back, it makes sense to expect the first item on budget cuts to be travel and tourism. That is why Booking.com was a target of this recent institutional selling—the most aggressive on this list, in fact.

Over the past quarter, up to $210 billion of institutional capital has been sold out of Booking stock, reiterating that these big players are going all in with their view shifts when it comes to consumer discretionary names. The stock’s short interest rose by 6.5% over the past month alone, signaling further bearish sentiment in the company’s future earnings.

And as far as earnings are concerned, Wall Street analysts now forecast a near 50% decline in EPS for the first quarter of 2025, projecting only $22.53 in EPS, down from today’s reported $41.55. This is concerning because the first quarter should cover the holiday travel season, yet the view is for a net decline in profits and bookings.

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