Investor Movement Index Summary: April 2020

Exposure to equity markets decreased in TD Ameritrade client accounts for the third month in a row during the April period. The IMX moved lower by 6.25%, or 0.26, from the previous period to reach 3.90.

TD Ameritrade clients were net buyers overall for the second month in a row. They were also net buyers of equities, but as volatility among widely held names decreased during the period, the IMX score moved lower. Buying was particularly heavy in the Industrials and Consumer Discretionary sectors. The Cboe Volatility Index, or VIX, which measures volatility of the S&P 500 Index, remained elevated compared to historical levels, but decreased over 45% during the period.

The COVID-19 pandemic continued to influence equity markets during the April IMX period, with investors looking for any positive sign that lockdowns were effective. Equity markets rebounded after large losses in March. During the period, the S&P 500 increased 11.6%, with the Dow Jones Industrial Average up 9.9%. The Nasdaq Composite posted the best gains, increasing 15.1%. Volatility was still prevalent, with the S&P 500 moving in excess of +/-1% during 16 of the 19 market days during the period. Early in the month, the Dow industrials posted a daily gain of 1,600 points as investors looked to early signs that stay-at-home orders in the U.S. and Europe may be helping slow the coronavirus pandemic. Unemployment claims reached historic levels as the pandemic stifled economic activity, pushing the total to over 20 million during a one-month period. Oil prices headed lower as demand weakened and entered negative territory. Congressional leaders and the White House reached another stimulus deal, this time for nearly $480 billion in aid for small businesses, hospitals, and additional testing for the coronavirus.

Trading

Equities were net bought in TD Ameritrade client accounts for the second month in a row on weakness. Airline companies Delta Air Lines, Inc. DAL, American Airlines Group Inc AAL, and United Airlines Holdings Inc UAL were all net bought, as each stock traded lower during the period. Each company is set to receive billions of dollars in aid from the U.S. government in the form of payroll support and low-interest loans as the companies suffer from the COVID-19 pandemic. Cruise line operators Carnival Corp CCL and Royal Caribbean Cruises Ltd RCL were also net bought. CCL was lower during the period, while RCL was flat, with each company working on plans to reduce operating expenses and capital expenditures in response to lower revenue. Boeing Co BA was net bought for the second month in a row, with the stock lower by 20% during the period, as the company announced plans to walk away from its proposed $4.2 billion combination with Embraer SA's commercial-aircraft business. Big banks Bank of America Corp BAC and Wells Fargo & Co WFC were both net bought. Each stock is significantly lower since the beginning of the year, as both grapple with slowing economic growth and a lower interest rate environment after the Federal Reserve slashed interest rates to 0% last month. Exxon Mobile Corporation XOM was net bought for the second month in a row. The stock rebounded during the period after crude futures extended their rebound and Treasury Secretary Steven Mnuchin flagged plans to help the troubled sector. Microsoft Corporation MSFT participated in the Tech sector rally, with the stock up over 16%, and was a net buy.

Additional popular names bought include Ford Motor Company F, Walt Disney Co DIS, General Electric Company GE, and AT&T Inc. T.

TD Ameritrade clients were net sellers of Otis Worldwide Corp OTIS during the period. The company is one of the five global leaders in elevators and the only elevator pure play in the U.S. stock market, and received an analyst upgrade during the period. Westinghouse Air Brake Technologies Corp WAB, which announced a partnership with Tronix3D to provide much needed personal protective equipment (PPE) for Excela Health, a health system provider of advanced medical care in Pennsylvania, was net sold. Chinese internet companies IQIYI Inc IQ and TENCENT HOLDING/ADR TCEHY were both net sold during the period. TCEHY introduced one of its top online games to new markets, from Russia to the Middle East, at a time the Covid-19 pandemic is fueling an unprecedented global gaming boom. IQ introduced a new interactive section on the international version of the iQIYI App for a hit show, and was net sold. Carrier Global Corp CARR, a provider of heating, ventilating, and air conditioning (HVAC), refrigeration, fire, security, and building automation technologies worldwide, received an analyst upgrade and traded higher during the period, and was net sold.

Additional names sold include Glu Mobile Inc. GLUU and Corteva Inc CTVA.

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. Heading into the fall of 2019, the IMX began to rebound and ended the year at the highest levels in over a year as trade war fears diminished and economic data began to improve globally. In early 2020, the bull market ended as markets pulled back due to the COVID-19 pandemic, with markets experiencing volatility not seen since the financial crisis of 2008.

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.