Ending the month in positive territory may not have been enough to reassure investors
New readings from the TD Ameritrade Investor Movement Index, a proprietary behavior-based index.
December 10, 2018 — OMAHA, Neb.–(BUSINESS WIRE)–Despite a late-month rally fueled by retail earnings, the TD Ameritrade1 November Investor Movement Index® (IMXSM) continued its downward trend for the second consecutive month to 5.27, a 14 percent decline from its October reading of 6.10. The IMX is a proprietary, behavior-based index, aggregating Main Street investor positions and activity to measure what investors actually were doing and how they were positioned in the markets.
“Retail investors continued to engage with the market by increasing their overall exposure, but reduced equity holdings in stocks for less volatile investments, like fixed income related products. This shift lowered the IMX reading,” said JJ Kinahan, chief market strategist at TD Ameritrade.
Throughout November, U.S. equity markets responded positively to the results of U.S. midterm elections, comments from Federal Reserve Chairman Jerome Powell and strong holiday sales. Still, a variety of concerns may have weighed on retail investors including rising interest rates and slowing overseas economic growth coupled with geopolitical issues and falling crude oil prices.
At its low point, the S&P 500 Index was down more than 10 percent from its previous closing high two months earlier and Nasdaq fell even more steeply. But by the end of November, the S&P 500 and Dow Jones Industrial Average were both up in excess of 3 percent, while the Nasdaq Composite gained more than 2 percent.
“U.S. stocks took a hit in November and ending the month in positive territory may not have been enough to reassure investors,” said Kinahan. “Concerns over the bond market and U.S.- China relations are top of mind for investors, and we’ll need to keep an eye on interest rates and the state of the economy moving forward.”
Leveraging Volatility?
Many TD Ameritrade clients used November’s volatility to their advantage, frequently buying equities during market dips.
Top equity buys included:
- Apple Inc. (AAPL), which set expectations of lower iPhone sales in 2019 and was down 17.5 percent during the period.
- Amazon.com Inc. (AMZN), after the company reported a slowdown in core retail revenue growth before rebounding at month-end.
- General Electric (GE), after the company reached its lowest point since the financial crisis following concerns about the company’s finance arm.
- Nvidia Corp. (NVDA), which sold off roughly 18 percent following an earnings miss during the period.
- Netflix (NFLX), as a third-quarter beat on earnings was offset by concerns regarding future profitability.
Throughout the month, retail investors at TD Ameritrade also sold popular names, including:
- Tesla Inc. (TSLA), which announced a new chairman to replace Elon Musk and reached production of 1,000 Model 3’s per day.
- Starbucks (SBUX), after rallying 10 percent following a beat on earnings and multiple analyst upgrades during the period.
- Procter & Gamble (PG), after announcing the successful completion of its acquisition of consumer health business, Merck KGaA.
- Teva Pharmaceuticals (TEVA) and Pfizer Inc. (PFE) were both net sold. TEVA rallied early in the period after beating on earnings, while PFE announced a distribution agreement with AbbVie.
As 2018 comes to a close, retail investors have plenty of potentially market-moving events to consider in December. Geopolitical and trade concerns, particularly around China, should continue to be a central theme, as will Treasury yields and economic growth.
