Investor Movement Index Summary: October 2019

The IMX increased to the highest point in five months during the October period, reaching 4.84. This was an increase of 7.3%, or 0.33, from the previous period.

TD Ameritrade clients were net sellers of equities during the period, once again favoring less-risky assets including fixed income. Net buying of equities with increased relative volatility, along with relative volatility increasing among widely held products, resulted in the score increasing from the previous month.

Equity markets moved higher during the period. The S&P 500 increased over 2%, with the Dow Jones Industrial Average up 0.5%. The Technology sector outpaced the relative market, with the Nasdaq Composite up 3.8% during the October period. Early in the period, market volatility increased as macro-economic worries intensified following poor manufacturing data. Markets got a bump mid-month after the Trump administration announced they had come to a “very substantial phase one deal” with China. The jobless rate also fell to the 50-year low of 3.5%, marking the lowest rate since December of 1969. Corporate earnings season kicked off and by the end of the October IMX period, 40% of the S&P 500 had reported earnings with 80% reporting a positive earnings surprise.

Trading

TD Ameritrade clients were net buyers of Walt Disney Company DIS for the seventh month in a row, with Verizon Communications Inc. VZ announcing they would offer one year of free Disney Plus service to its wireless subscribers. Amazon.com, Inc. AMZN traded to the lowest point since June after it announced its profit fell 26% during the third quarter as it continued to spend heavily in its attempt to offer its Prime customers one-day shipping, and was net bought. Ford Motor Co. F was a net buy after it lowered its full-year expectations, but received a couple of analyst upgrades. Microsoft Corp. MSFT beat on earnings at the end of the period, and announced the Pentagon picked it for its JEDI Cloud-Computing contract, and was a net buy. AT&T Inc. T entered the streaming wars as it announced plans for its own streaming service, HBO Max. The company stated it is aiming to reach 80 million global subscribers by 2025, and was net bought.

Additional popular names bought include Abbvie Inc. ABBV, Slack Technologies Inc. WORK, and Energy Transfer LP ET.

TD Ameritrade clients were net sellers of equities during the period. Apple Inc. AAPL was net sold for the fifth month in a row as the stock hit an all-time high and was up over 12% during the period on the back of a couple of analyst price target increases. Tesla Inc. TSLA beat on earnings late in the period and reported confidence in reaching its vehicle-delivery goals this year, increasing over 15% on the news, and was net sold. Nvidia Corp. NVDA was a net sell as the stock traded at the highest price in 11 months following the company's announcement of its supercomputing platform. Big banks Bank of America Corp. BAC and Citigroup Inc. C were both net sold. Both stocks increased during the period as interest rates edged higher, with the 10-year Treasury yield increasing from 1.67% to 1.80% during the period. Facebook Inc. FB launched a news service for select users, with the New York Times, Fox News, and USA Today-owner Gannett among the wide range of publishers who have signed up, and was net sold.

Additional names sold include Netflix Inc. NFLX, Intel Corp. INTC, and Wabtec Corp. WAB.

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.

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.