Market Overview

Investor Movement Index Summary: August 2020

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Exposure to equity markets increased in TD Ameritrade client accounts during the August period. The IMX score increased 0.30, or 6.48%, to 4.93.

TD Ameritrade clients were net buyers of equities for the sixth month in a row, and net buyers overall. Net buying was the heaviest among Information Technology, Consumer Discretionary, and Health Care sectors, with additional buying in less risky assets, including fixed income. Market volatility was generally light during the period. The Cboe Volatility Index, or VIX, didn't close above 25 during the period. This marks the first IMX period since January to not have a closing price higher than 25.

Equity markets continued their upward trend during the August period, with the S&P 500 and Nasdaq Composite both ending the period at record highs and crossing historic marks during the period. The S&P 500 closed above 3,500 for the first time ever, while the Nasdaq crossed 11,000 for the first time. For the period, the S&P 500 increased 7.24% while the Dow Jones Industrial Average was up 8.42%. Tech stocks led the charge higher as the Nasdaq Composite increased by 8.84%. The move higher was bolstered by hopes that a COVID-19 vaccine is on the horizon, with the Food and Drug Administration (FDA) announcing late in the period it had approved the use of blood plasma from patients who have recovered from the disease as a treatment. The FDA also announced emergency use of Abbott Laboratories' BinaxNOW COVID-19 Ag Card for detecting active coronavirus infections. The test, which is roughly the size of a credit card, takes 15 minutes to return results and will cost $5. Abbott announced it will produce 50 million tests per month, which raised hopes that we can coexist with the virus while we await a safe and effective vaccine. The Federal Reserve canceled its Jackson Hole meeting for the first time in nearly 40 years, instead holding a virtual meeting where it announced it will adopt flexible average inflation targeting into its monetary policy framework, which will allow inflation to rise "moderately" above its 2% target while keeping its benchmark interest rate near zero.

Trading

Net buying of equities continued during the August IMX period. TD Ameritrade clients were net buyers of both Apple Inc. (NASDAQ: AAPL) and Tesla Inc. (NASDAQ: TSLA) as each stock prepared for a stock split. AAPL announced a 4-for-1 stock split, the fifth time it has split its stock, while TSLA announced its first ever, 5-for-1 stock split. Microsoft Corporation (NASDAQ: MSFT) was a net buy for the second month in a row as the stock reached an all-time high. The software giant announced its pursuit of popular short video-sharing app TikTok's U.S. operations, including a possible partnership with Walmart Inc. (NYSE: WMT). Online mortgage company Rocket Companies Inc. (NYSE: RKT) began trading after an IPO early in the period and was a net buy. Healthcare sector stocks Teledoc Health Inc. (NYSE: TDOC) and Moderna Inc. (NASDAQ: MRNA) were both net buys. TDOC, which provides virtual healthcare services, agreed to an $18.5 billion merger with Livongo Health Inc. (NASDAQ: LVGO) early in the period and was net bought. MRNA announced that it was negotiating with the Japanese government to deliver 40 million doses of its COVID-19 vaccine and was a net buy. Intel Corporation (NASDAQ: INTC) traded lower late last period after issuing negative guidance and announcing delays to its next generation of chips, but the company announced a $10 billion buyback via an accelerated repurchase plan during the August period and was net bought.

Additional popular names bought include Nikola Corp. (NASDAQ: NKLA) and Fastly Inc. (NYSE: FSLY).

TD Ameritrade clients were net sellers of a few stocks on strength during the period. Clients were sellers of The Walt Disney Company (DIS) as the stock reached the highest point since late February. The company jumped higher early in the period after announcing it had signed up over 60 million subscribers to Disney+, reaching the mark four years ahead of schedule. MGM Resorts International (NYSE: MGM) also reached the highest price in months after IAC/Interactivecorp (NASDAQ: IAC) announced it had taken a 12% stake in the company, and the stock was net sold on the news. Twitter Inc. (NYSE: TWTR) was net sold as it hit the highest price in nearly ten months and is up 100% from lows in March. Ford Motor Co. (NYSE: F) announced they will begin production on their electric F-150 protype in 2021, and was net sold. Royal Caribbean Group (NYSE: RCL) increased over 40% during the period on coronavirus vaccine and treatment optimism along with rapid testing options, helping push leisure stocks higher on the potential they could open up at higher capacity. The stock was net sold during the period.

Additional names sold include Macy's Inc. (NYSE: M) and Halliburton Co. (NYSE: HAL).

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. The IMX remained range-bound during the summer of 2019 as trade-related policy concerns led to investors favoring less-risky assets, including fixed-income products. Heading into the fall of 2019, the IMX began to rebound and ended the year at the highest levels in over a year as trade war fears diminished and economic data began to improve globally. In early 2020, the bull market ended as markets pulled back due to the COVID-19 pandemic, with markets experiencing volatility not seen since the financial crisis of 2008. During the spring of 2020, the IMX reached 3.90, its lowest point in years after equity markets sold off on pandemic fears. The IMX began to rebound into the summer of 2020 as equity markets began to rebound after a slight uptick in economic activity.

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.

 

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