Main Street investor behaviors reflect further declines in volatility as markets rise
November 11, 2015 — OMAHA, Neb.–(BUSINESS WIRE)–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.
The October 2015 Investor Movement Index for the four weeks ending October 30, 2015, reveals:
• Reading: 4.79 (compared to 4.76 in September)
• Trend direction: Positive
• Trend length: 1 month
• Score relative to historic ranges: Middle
After a large decrease in September, the IMX moved modestly higher in October to 4.79.
Exposure to the equity markets within TD Ameritrade client accounts increased slightly in October as the markets saw month-over-month gains and overall market volatility decreased. Amid the lower overall volatility many of the widely held positions in client accounts saw their volatility increase relative to the overall market, which in turn raised the IMX. These increases, however, were partially offset by net selling in TD Ameritrade client accounts. The result of these activities was a modest increase in the IMX reading.
After a brief dip to begin the October IMX period, the equity markets stabilized and climbed higher. The S&P 500 and NASDAQ Composite both saw gains of greater than 7%, while the Russell 2000 was 3.5% higher to end the month. The Dow Jones Industrial Average saw strong gains in October, with an 8% increase month over month. Weaker economic data in October and an inflation target that was below the desired threshold resulted in dovish comments from the Federal Reserve in regard to any increase in their key interest rate.
Additionally, there were hints of a possible expansion of the European Central Bank’s quantitative easing program. This news seemed to ignite the markets, as the major large cap indices had their best month since October 2011. Volatility in the S&P 500 as measured by the VIX saw a sharp decline throughout the month and ended the October IMX period at around 15, near its historical average level.
Net sellers in OctoberAmid the lower overall volatility many of the widely held positions... saw their volatility increase relative to the overall market
“Our clients were net sellers in October as they found opportunities to sell at higher prices as the market was up and volatility returned to historical averages,” said Nicole Sherrod, managing director of trading, TD Ameritrade. “For example, clients had held onto McDonald’s during previous dips and turned into net sellers as the company’s stock price reached a new all-time high. Our clients were net buyers of some retailers, specifically Amazon and Starbucks, ahead of this holiday season.”
Despite the rising prices in October, TD Ameritrade clients did seem to find some stocks to purchase. Dividend-paying companies were popular net buys in October. Kinder Morgan Inc. (KMI) and Energy Transfer Partners LP (ETP) both have dividend yields greater than 7% and were net buys in October. TD Ameritrade clients also seemed to find some attractive prices on companies that have seen declines recently, as GoPro Inc. (GPRO) and SunEdison Inc. (SUNE) were also net buys. Both companies also saw analyst downgrades in October. Retailers also appeared to attract client dollars, as Wal-Mart Stores Inc. (WMT), Amazon.com Inc. (AMZN), and Starbucks Inc. (SBUX) were all net buys. Walt Disney Co. (DIS), which saw sharp declines in August, was a net buy for the third month in a row. Its shares have rallied to near all-time highs since the August decline.
TD Ameritrade clients seemed to treat October market rally as an opportunity to sell some popular issuers. General Electric Co. (GE), which has been and still is one of the most widely held securities at TD Ameritrade, reached a year-to-date high in October and was net sold. Technology sector issuers Intel Corp. (INTC) and Microsoft Corp. (MSFT) also saw increases in October and were net sells. McDonald’s Corp. (MCD) was net sold as well. The company reached a new all-time high and was in the news with its announcement to serve breakfast all day. The Coca-Cola Co. (KO) was also a net buy in October as it posted better than expected earnings for the quarter.
The IMX value is calculated based on a complex proprietary formula. Each month, TD Ameritrade pulls a sample from its client base of 6 million funded accounts that 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 October 2015, 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.
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Source: TD Ameritrade Holding Corporation
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