For the second month in a row, TD Ameritrade clients' exposure to equity markets remained mostly unchanged. During the August period, the IMX increased to 4.62, up 0.02 or 0.4%, from the previous period.
During the August period, TD Ameritrade clients were net buyers overall, and net buyers of equities for the first time in three months. Net buying of equities helped increase the IMX slightly month-over-month, with clients also net buyers of less risky assets, including fixed-income products. Volatility of the S&P 500 spiked during the period, as measured by the Cboe Volatility Index, or VIX, which reached the mid-20s for the first time since January.
Equity market returns were negative during the period, with the S&P 500 moving lower by 3.3% and the Dow Jones Industrial Average down 2.9%. The Tech sector was particularly volatile, with the Nasdaq Composite lower by 4.4%. Equity markets were influenced by a horde of news during the period. The tariff war with China heated up, with each country announcing plans for further escalation. Consumer confidence posted the lowest number since 2016, and the biggest monthly drop since 2012. For the first time since 2007, the 2-year and 10-year Treasury yield curve inverted, while the 30-year yield also reached the lowest level ever. Among positive news, manufacturing activity, measured by the Chicago PMI, rebounded back to expansionary territory following a six-point jump from July's three-and-a-half year low. Also, consumer prices rose broadly, with core inflation hitting 2.2%.
TD Ameritrade clients seemed to use the volatility during the August IMX period to purchase certain names. Walt Disney Company DIS was a net buy after it traded lower by 5% during the period, and it announced a partnership with Target TGT to open Disney stores within Target stores. Amazon.com, Inc. AMZN traded lower by 8.5% during the period and has fallen for six straight weeks, and was net bought. Microsoft Inc. MSFT was a net buy, with the federal government announcing a massive 10-year, $7.6 billion computing contract to a trio of vendors to provide Microsoft office software for the Pentagon. Beyond Meat Inc. BYND paused it's upward run during the period, trading lower by over 25% after hitting an all-time high during July, and was a net buy. UBER Technologies Inc. UBER reached a new low since its IPO in May as the company continues to come under fire to reclassify drivers as employees instead of freelancers, and was net bought.
Although they were net buyers, TD Ameritrade clients found some names to sell during the August period. Apple Inc. AAPL was net sold for the third month in a row as the company announced plans to start online sales in India. Semiconductor makers Micron Technology Inc. MU and Qualcomm Inc. QCOM were both net sells during the period. Both stocks received analyst upgrades during the period, and were pressured by the tariff tension with China. Corteva Inc. CTVA, the agricultural input provider that was spun off from Dupontde Nemours Inc. DD, saw a volatile period after the U.S. Department of Agriculture updated its crop production estimates for the coming harvest, and was net sold. AT&T Inc. T was a net sell after the stock reached a 52-week high during the period as the company reached a multi-year content carriage agreement with Starz. Lam Research Corp. LRCX beat on earnings and raised their dividend, and was net sold.
Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.
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.
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