The IMX reached an all-time high for the second month in a row, increasing 0.70% and ending the December period at 8.59.
TD Ameritrade clients were once again net buyers, increasing exposure to equity markets during the December period. The buying activity increased the IMX slightly, up 0.06 from the previous period to 8.59. Volatility remained modest, with relative volatility of many widely held names decreasing, and net buying causing the increase in the IMX. Trading volumes trailed off near the end of the period during the holiday season, helping reduce volatility.
Major market indices increased once again during the December IMX period. The S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite all reached all-time highs during the period, with the Dow Jones leading the way, up 4.9% during the December period. The Nasdaq Composite briefly reached a new all-time high mid-month, increasing above 7,000 for the first time ever, but then pulled back and ended the December IMX period slightly above the previous period. Tax reform helped push equity markets higher, with Congress passing legislation on both corporate and individual tax rates. The Federal Reserve also proceeded with an anticipated rate increase, increasing its discount rate by 0.25 percent, with Chair Janet Yellen saying, "The committee expects the labor markets to remain strong, with sustained job creation, ample opportunities for workers and rising wages."
Trading
Heading into a holiday season expected to break sales records, TD Ameritrade clients were net buyers of online retailer Amazon.com, Inc. AMZN as the stock reached an all-time high early in the period. Semiconductors were once again net bought, including Nvidia Corporation NVDA and Micron Technology, Inc. MU. Both stocks have increased in excess of 80% during the year, but pulled back during the December period. Chinese stocks Alibaba Group Holding Ltd. BABA and Tencent Holdings Ltd TCEHY both saw slight volatility during the period and were net buys. For the third month in a row, General Electric Company GE was a net buy. The stock reached a 52-week low during the period as the company works on its new turnaround plan.
Additional popular names bought include Microsoft Corporation MSFT and Bank of America Corp BAC.
TD Ameritrade clients appeared to use the equity market increases to sell some names in December. Ford Motor Company F, which was up following an analyst upgrade during the period, was a net sell. Kroger Co. KR was a net sell following an earnings beat and its CEO reporting it had its best Black Friday ever, setting it up for a good holiday season. Wells Fargo & Co. WFC increased during the period following the corporate tax overhaul and Fed rate increase, and was net sold. Valeant Pharmaceuticals Intl Inc VRX increased over 25% during the period, and was net sold. AT&T Inc. T and Verizon Communications, Inc. VZ each saw gains in excess of 10% during the period and were net sold.
Additional names sold include Chipotle Mexican Grill, Inc. CMG and Exxon Mobile Corporation XOM.
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, 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.
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.
Information from TDA is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade.
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