Investor Movement Index Summary: June 2020

Exposure in TD Ameritrade client accounts increased during the June IMX period. The IMX score increased by 4.6%, or 0.20 points, to 4.55 from 4.35 the previous period.

TD Ameritrade clients used the volatility during the June period to increase exposure to equity markets. Clients were net buyers overall, and net buyers of equities, with large buying among the Consumer Discretionary, Industrials, and Financials sectors. Net buying among equities helped push the IMX score higher. Volatility increased during the middle of the period, with the Cboe Volatility Index, or VIX, which measures the volatility of the S&P 500 Index, increasing above 40 for the first time in nearly two months.

Equity markets were mixed during the period. The S&P 500 and Dow Jones Industrial Average both declined, moving lower by 1.16% and 1.45%, respectively. The Nasdaq Composite registered a gain, moving higher by 2.82%. During the period, the S&P 500 traded above 3,200 for the first time since February, and the Nasdaq Composite topped 10,000 for the first time ever. During the middle of the period, the Dow Jones Industrial Average fell more than 1,800 points, its worst day since a series of punishing selloffs in March, over worries about spikes in U.S. coronavirus infections. Later, optimism began to take hold after an uptick in economic activity in China and the U.S. suggested the initial stages of healing from the pandemic. Then, near the end of the period stocks sold off as infection rates increased, with some states pausing reopening plans. The Federal Reserve ordered banks to cap dividends and halt stock buybacks on worries that a prolonged economic downturn could saddle them with hundreds of billions of dollars in losses on soured loans but did indicate the largest U.S. banks are likely strong enough to survive the crisis.

Trading

TD Ameritrade clients were once again net buyers of equities during the period, using weakness to add to positions. Boeing Co BA was a net buy. The company expects its 737 MAX certification flight test soon, and many believe it has enough cash on its books to survive the pandemic. Norwegian Cruise Line Holdings Ltd NCLH and Carnival Corp CCL were both net buys, with each stock trading up to $25 early in the period, only to end the period near $15. NCLH announced it has extended its sailing suspensions through September 30, while CCL was downgraded by S&P citing the "cruise industry may face an extended period of weak demand." Airline companies Southwest Airlines Co LUV and American Airlines Group Inc AAL were net bought on weakness. Both stocks traded higher early in the period on hopes of an economic recovery and increased demand, but fell as the period progressed and COVID-19 cases increased in the U.S. LUV announced a three-day sale for fall travel, with many analysts expecting a price war in the industry, while AAL said it would raise $3.5 billion through a mix of shares and notes to increase the availability of its cash deposits. Walt Disney Co DIS was net bought as the company announced it will delay the reopening of its Disneyland park in Anaheim, California, pushing shares lower. The company also announced “Mulan,” a live-action epic, will now debut in theatres August 21, 2020. Slack Technologies Inc WORK traded at a 52-week high early in the period as the company announced it will collaborate with Amazon on the future of enterprise workplace, and was net bought.

Additional popular names bought include AT&T Inc. T, Wells Fargo & Co WFC, and MGM Resorts International MGM.

TD Ameritrade clients were net sellers of Gilead Sciences, Inc. GILD during the period. GILD’s proposed COVID-19 treatment Veklury (remdesivir) secured a recommendation for a conditional marketing authorization from the European Medicines Agency (EMA). Alibaba Group Holding Ltd BABA neared a 52-week high as Asian shares traded at a 4-month high at the end of the period as investors remained upbeat on the outlook for a re-opening of the global economy, and the stock was net sold. Snap Inc SNAP was net sold as the stock reached its highest price in 3 years following an analyst upgrade, a recovering advertising market, and the continued rollout of new features and tech within Snap's main app. IQIYI Inc IQ was net sold after shares of the Chinese video streaming platform moved higher during the period on reports of a takeover approach from social media and gaming company TENCENT HOLDING/ADR TCEHY. IQ, which is majority-owned by Chinese search giant Baidu Inc BIDU, has been courted by Tencent with an offer to buy a majority stake in IQ. BIDU also moved higher on the news, and was net sold by TD Ameritrade clients. Kraft Heinz Co KHC reached a 52-week high during the period as consumers are eating more at home because of coronavirus restrictions, with analysts noting sliced meat and nuts are doing better, with Kraft benefitting as it owns the Oscar Mayer and Planters brands.

Additional names sold include Abbott Laboratories ABT and Westinghouse Air Brake Technologies 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 pullback 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. During the spring of 2020, the IMX reached 3.90, its lowest point in years after equity markets sold off on pandemic fears. The IMX began to rebound into the summer of 2020 as equity markets began to rebound after a slight uptick in economic activity.

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.