Investor Movement Index Summary: September 2020

TD Ameritrade clients continued to increase exposure to equity markets during the September IMX period. The IMX score increased 15.8%, or 0.78, to 5.71 from 4.93 the previous period.

Equities were once again in favor, with TD Ameritrade clients net buyers overall and net buyers of equities during the period. Buying was particularly heavy in the Information Technology and Consumer Discretionary sectors. Market volatility increased during the period, as measured by the Cboe Volatility Index, or VIX, which increased above 35 for the first time since June.

Early in the period, new highs were reached in the S&P 500 and the Nasdaq Composite, with the Nasdaq increasing above 12,000 for the first time. The Dow Jones Industrial Average also increased above 29,000 for the first time since February. Gains were short-lived, as the Nasdaq fell nearly 5% on the fourth day of the period, leading a market decline across all U.S. stock indices. Late in the period, losses picked up steam as hopes for additional fiscal stimulus dimmed and new coronavirus cases rose, pushing the Nasdaq into correction territory. For the period, the S&P 500 decreased 6.0% while the Dow Jones fell 5.2%. The Nasdaq posted the biggest decrease, down 6.7% for the period. An abundance of economic news had investors questioning the strength of the recovery. It was announced that U.S. employers added 1.4 million jobs in August, pushing the unemployment rate to 8.4%. Unemployment claims also held steady during the period, a sign for many investors that the labor-market recovery is losing steam six months into the pandemic in the United States. Johnson & Johnson Co. (JNJ) became the fourth company to announce its experimental coronavirus vaccine had entered final-stage testing in the U.S., which was welcome news as the death toll in the U.S. topped 200,000. Federal Reserve officials projected no plans to raise interest rates through 2023 and said they were committed to providing more support to an economy that faces an uneven recovery from the coronavirus pandemic.

Trading

TD Ameritrade clients used market volatility to add to positions during the September period. They were net buyers of Apple Inc. AAPL, Tesla Inc TSLA, and Microsoft Corporation MSFT after each hit an all-time high early in the period but sold off as the period progressed. AAPL and TSLA each executed a stock split and traded lower with the overall market, with clients buying on the weakness. MSFT announced the launch of a cloud communications service to rival Twilio, composed of cloud-based voice and video calling, chat, and telephony features, and was net bought. Chip makers NVIDIA Corporation NVDA and Advanced Micro Devices, Inc. AMD were both net buys on weakness as the sector has been highly volatile amid profit-taking early in the period and coronavirus uncertainty. Retailers Walmart Inc WMT and Amazon.com, Inc. AMZN were both net bought after reaching all-time highs early in the period, then trading lower. Each stock could potentially benefit from an additional stimulus package should one be approved by Congress. Docusign Inc DOCU, which offers eSignature solutions as part of the DocuSign Agreement Cloud, reached an all-time high early in the period, but traded lower despite beating earnings forecasts and lifting its second-half outlook on the back of companies requiring more digital signatures from a growing number of remote workers, and was net bought.

Additional popular names bought include Rocket Companies Inc RKT, AT&T Inc. T, and Facebook, Inc. FB.

TD Ameritrade clients were net sellers of Uber Technologies Inc UBER on strength during the period, with the company winning back its license to operate in London after a legal battle which granted the ride-hailing app an 18-month license to continue operating in the city. Airlines Delta Air Lines, Inc. DAL and JetBlue Airways Corporation JBLU were both net sold as the industry has been battling renewed fears of more lockdowns, especially in the U.K., and the looming expiration of U.S. government aid to protect airline jobs. Ford Motor Company F, whose stock price has been relatively range-bound over the past few months, announced it would invest nearly $1.5 billion in two manufacturing plants in Canada to produce electric vehicles by 2025, and was net sold. Twitter Inc TWTR reached a 52-week high during the period following an analyst upgrade and price target increase, and was net sold.

Additional names sold include MGM Resorts International MGM and Snapchat Inc SNAP.

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.