Investor Movement Index Summary: July 2019

The Investor Movement Index, or the IMX, is a proprietary, behavior-based index created by TD Ameritrade designed to indicate the sentiment of retail investors.

Exposure to equity markets was relatively unchanged in TD Ameritrade client accounts during the July IMX period. The IMX decreased by 0.01, or 0.22%, to 4.60.

TD Ameritrade clients were net buyers overall during the July IMX period, but reduced exposure to equity markets. During the period, equities were net sold in favor of less risky assets, including fixed- income products. This marked the second period in a row that clients were net sellers of equities. During the period, volatility was generally light, with the S&P 500 only having three days with moves in excess of +/-1%.

July was a historic period for equity markets. The S&P 500 surpassed the 3,000 mark for the first time ever, while the Dow Jones Industrial Average passed 27,000 for the first time. All three major equity indices reached all-time highs during the period. For the period, the S&P 500 increased 2.7%, with the Dow Jones up 2.5%. The Nasdaq was the leader, increasing 3.5%. Anxiety over an economic downturn began to creep higher, but investors were reassured by Federal Reserve Chairman Jerome Powell after he hinted at a rate cut mid-period, pushing equities higher. The U.S. economy grew at a 2.1% rate in the second quarter, with consumer spending increasing 4.3% and offsetting a decline in business investment. Congress and the White House also reached a deal on spending on the debt ceiling to avoid a looming fiscal crisis.

Trading

TD Ameritrade clients found some names to buy during the July period. Abbvie Inc. ABBV, which announced plans to acquire Allergan PLC AGN in June, announced a beat on earnings during the period and was net bought. Zoom Video Communications Inc. ZM, the cloud-based video conferencing platform, traded higher during the period as it announced its Zoom Phone service was now available in Australia and the U.K. and was a net buy. NIO Inc. NIO was a net buy after it announced better-than-expected deliveries during the second quarter that topped estimates. Walt Disney Company DIS reached an all-time high during the period after the company reached record ticket sales at the box office for 2019 following the release of “Lion King,” and was net bought. Mastercard MA was a net buy as the stock reached an all-time high following an analyst upgrade.

Additional popular names bought include Canopy Growth Corp. CGC, Aurora Cannabis Inc. ACB, and Bristol-Myers Squibb BMY.

TD Ameritrade clients were net sellers of equities during the period. Amazon.com Inc. AMZN was net sold as it announced its quarterly profit streak ended after the company faced higher shipping costs and slowing growth from its cloud-computing business. Apple Inc. AAPL announced it was in advanced talks to buy Intel Corporation’s INTC Smartphone-Modem chip business, and was net sold for the second month in a row. INTC was also net sold as the chip giant posted a big earnings beat and raised guidance for the year. Facebook Inc. FB was net sold as it reached an eleven-month high following strong second quarter results even after a record-setting privacy fine. Big banks Bank of America Corp. BAC and Citigroup Inc. C were net sold after an analyst upgrade and the stocks traded to the highest prices since May.

Additional names sold include General Electric Co. GE, Cypress Semiconductor Corp. CY, and Square Inc. SQ.

Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.

Historical Overview

TD Ameritrade's Investor Movement Index (IMX) has generally correlated with the S&P 500 as clients react to equity price movements, but the index has gone through uncorrelated periods. Beginning in January 2010, when TD Ameritrade started tracking the IMX, the index rose with equity markets until April 2010, when it peaked at 5.40. In May 2010 investors experienced the "Flash Crash" and the IMX began a sharp downward trend. The IMX didn’t reach 5.00 again until the S&P 500 was well above April 2010 levels. The index eventually peaked at 5.56 in June 2011. This peak was immediately followed by a plunge in equity markets, and in the IMX, as the media was dominated by the U.S. debt ceiling debate, S&P downgrade of U.S. debt, and European debt concerns. The S&P 500 began to recover in the fall of 2011, but the IMX continued to decline until it reached a new low at the time in January 2012. As the S&P 500 began to sustain an upward trend in early 2012, the IMX started to rise. In 2013, as economic conditions improved and the S&P 500 climbed to record levels, the IMX rose to the high end of its historical range, finishing 2013 at 5.62, and continued to rise in 2014 amid geopolitical tensions related to Ukraine and the Middle East, until seeing slight declines in October and November. By the middle of 2015 the IMX had seen increases, as equity market volatility had reduced to near historical levels while the market continued its upward trend. As 2015 ended its third quarter, volatility had returned to markets, as global economic concerns and speculation around the timing and trajectory of Federal Reserve rate increases seemed to rattle overall equity markets. This uncertainty continued to play a role in the equity markets through the fourth quarter of 2015 and into early 2016. The volatility accompanying this uncertainty abated in the second quarter of 2016 and remained low until late in the third quarter. Just as it had in 2015, the IMX saw increases mid-year during the period of lower volatility. The IMX continued to climb into the fourth quarter reaching 5.83 in October 2016, its highest point in two years. A brief spike in volatility during November, timed around the U.S. presidential election, coincided with a slight pull back in the IMX, which then ended 2016 at the high end of its historical range. The IMX started 2017 with an upward trend and reaching an all-time high in March, before pausing in April as lower volatility lead to a decrease in the IMX. The momentum resumed in May, with the IMX breaching 7.0 for the first time ever in July of 2017. The IMX took another brief pause in September, before following markets higher and breaching 8.0 for the first time ever in November and ending 2017 at an all-time high. Volatility returned to the markets in early 2018, and the IMX decreased for four consecutive months to start the year. The IMX then rebounded in the spring of 2018, and continued higher during the summer on the back of better-than-expected earnings and increasing equity markets. The IMX headed higher during the fall of 2018 as economic growth increased before heading lower in late 2018 as the Nasdaq Composite entered a bear market to end the year. Geopolitical issues were in the headlines during early 2019 as the U.S. and China traded tariffs. The IMX rebounded along with equity markets in the spring of 2019 on optimism of a trade deal with China and the unemployment rate nearing a 49-year low.

Historical data should not be used alone when making investment decisions. Please consult other sources of information and consider your individual financial position and goals before making an independent investment decision.
All investments involve risk including the possible loss of principal. Please consider all risks and objectives before investing.
Past performance of a security, strategy or index is no guarantee of future results or investment success.
The IMX is not a tradable index.
The IMX should not be used as an indicator or predictor of future client trading volume or financial performance for TD Ameritrade.