Retail investors lessen exposure to equity markets while continuing net buying activity
The February 2018 Investor Movement Index® reported a significant drop to 5.95 as volatility returned to the market, TD Ameritrade, Inc. ("TD Ameritrade"), a broker-dealer subsidiary of TD Ameritrade Holding Corporation AMTD announced today. The Investor Movement Index, or the IMXSM, is a proprietary, behavior-based index created by TD Ameritrade that aggregates Main Street investor positions and activity to measure what investors are actually doing and how they are positioned in the markets.
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TD Ameritrade February 2018 Investor Movement Index TD
February IMX
The February 2018 Investor Movement Index for the four weeks ending February 23, 2018, reveals:
- Reading: 5.95 (compared to 7.79 in January)
- Trend direction: Negative
- Trend length: 2 month
- Score relative to historic ranges: Middle
TD Ameritrade clients' exposure to equity markets declined for a second month in a row, resulting in an IMX reading of 5.95 – a 23 percent decrease from the prior month. The February period was marked by increased volatility in the equity markets, which sharply lowered the IMX to levels not seen since January 2017.
The bull market rally took a pause in February – the first market correction in over two years – leading to decreased relative volatility in widely held names, including Apple Inc. (AAPL) and Facebook Inc. (FB). The selloff began following concerns about rising bond yields and inflation, initiating declines worldwide and causing all three major U.S. equity indices to enter correction territory. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all decreased more than 10 percent off recent highs, with the Dow recording its largest daily point loss in the history of the index - 1,175 points. As market volatility continued during the month, the VIX increased above 50 for the first time since August 2015.
"After the amazingly quiet 2017, we saw 2018 start with some volatility," said JJ Kinahan, chief market strategist at TD Ameritrade. "It appears that TD Ameritrade clients decided to significantly limit their volatility risk in the market, changing their game plan from less speculative to more of a low beta weighted one."
TD Ameritrade clients appeared to use the pullback in equities markets as a buying opportunity in February. General Electric Inc. (GE) and Ford (F) were net buys as both companies neared multi-year lows. Apple Inc. (AAPL) and Amazon Inc. (AMZN) were net buys, despite reporting better than expected earnings then trading lower following market volatility. Boeing Inc. (BA) traded higher following better-than-expected earnings and was also a net buy. Microsoft Corp. (MSFT) was a net buy after beating earnings and the company's success with its cloud computing and software-as-a-service initiatives. Alibaba Group (BABA), which was down almost 20 percent from recent highs during the period, was also a net buy.
Additional popular names bought include Nvidia Corp. (NVDA), Berkshire Hathaway Inc. (BRK.B) and Netflix Inc. (NFLX).
Despite being net buyers, TD Ameritrade clients found equities to sell during the period. Gilead Sciences Inc. (GILD) was net sold after reaching a 52-week high and receiving approval from the FDA for a new HIV treatment. Facebook Inc. (FB) reached an all-time high on better-than-expected earnings, and was net sold. Bristol-Myers Squibb (BMY) was net sold after it reached an 18-month high following an analyst upgrade on immuno-oncology growth prospects. Snap Inc. (SNAP) which reported a revenue increase leading to increased share prices was also net sold. Finally, Target Corp. (TGT) was net sold following an analyst upgrade and increased price estimate.
Additional names sold include ConocoPhillips Corp. (COP), Juno Therapeutics Inc. (JUNO), and Bioverativ Inc. (BIVV).
About the IMX
The IMX value is calculated based on a complex proprietary formula. Each month, TD Ameritrade pulls a sample from its client base of 7 million funded accounts, which includes all accounts that completed a trade in the past month. The holdings and positions of this statistically significant sample are evaluated to calculate individual scores, and the median of those scores represents the monthly IMX.
For more information on the Investor Movement Index, including historical IMX data going back to December 2010; to view the full report from May 2017; or to sign up for future IMX news alerts, please visit www.tdameritrade.com/IMX. Additionally, TD Ameritrade clients can chart the IMX using the symbol $IMX in either the thinkorswim® or TD Ameritrade Mobile Trader platforms.
Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.
Past performance of a security, strategy, or index is no guarantee of future results or investment success.
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.
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.
For the latest TD Ameritrade news and information, follow the company on Twitter, @TDAmeritradePR.
Source: TD Ameritrade Holding Corporation
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