Investors are flocking to tech and telecom stocks, but they're wrong to see them as defensive plays, Bank of America says

According to Bank of America, investors have been buying shares of technology and communications companies, suggesting that they are not defensive.

The first time in eight weeks that clients sold US equities was last week, according to analysts. The sales were led by people.

Tech and communication services were the only sectors where selling occurred. Inflows have been reported for the last six and nine weeks.

In the last two months, investors have been shifting out of thecyclical sectors and into defensive ones, and in the last two months, they have been out of the defensive sector.

"But we see risk that 'Tech' isn't as defensive as some investors think, with interest rates continuing to trend higher and the economy showing signs of weakness," wrote BofA equity and quant strategist.

According to the bank, investors have been looking at tech as the new defensive sector because their earnings grew despite the recession.

The S&P 500 has had better earnings for the past year than the tech-rich Nasdaq 100 index. According to a note published last week by BofA, mega-cap tech companies are facing the biggest challenges amid de-globalization.

The third-quarter earnings season for Big Tech has largely been a disappointment, with both Facebook and Meta missing earnings expectations.

Tech companies were highlighted last week by BofA as being downbeat. In the third quarter, there was a pullback in spending by some advertisers in search ads. Microsoft said that demand for PCs will continue to be weak.

The Federal Reserve is expected to raise interest rates for the sixth time this year on Wednesday in order to fight inflation. Tech and other growth companies can suffer from higher interest rates.

The S&P 500 went up by 4%. Over the past month, the information technology sector has risen but is still down on the year to date. The communications services group has lost a lot of money.