Investor Movement Index Summary: October 2020

Exposure to equity markets remained relatively flat in TD Ameritrade client accounts during the October IMX period. The IMX score decreased 0.02, or 0.35%, to 5.69 from 5.71 the previous period.

TD Ameritrade clients were net buyers overall, and net buyers of equities during the period. They preferred Consumer Discretionary, Information Technology, and Energy stocks. Market volatility increased during the period, with the Cboe Volatility Index, or VIX, increasing above 40 late in the period for the first time since June.

Market volatility returned during the October period. Equity markets increased for the first couple of weeks, nearing all-time highs. During the final two weeks of the period, markets sold off as coronavirus cases increased worldwide. For the period, all three major U.S. indices ended lower. The S&P 500 decreased 0.86%, while the Dow Jones Industrial Average moved lower by 2.47%. The Nasdaq Composite was essentially flat, ending the period off 0.02%. Economic data was mixed during the period. It was announced that retail sales increased during September for the fifth straight month as consumers spent heavily on vehicles, clothing, and sporting goods. Hopes of a second stimulus deal also helped push markets higher. The market rally stalled as U.S. unemployment claims rose to the highest level since the end of August, raising questions about the strength of the economic recovery. At the end of the period, COVID-19 cases began to increase worldwide with record numbers in the U.S., and numerous European countries announced additional restrictions pushing markets lower.

Trading

TD Ameritrade clients were once again net buyers of equities during the October period. Apple Inc AAPL was net bought as the stock traded lower. The company announced its latest iPhone model during the period and beat earnings estimates but moved lower. Clients were also net buyers of AT&T Inc. T which traded lower during the period after missing on earnings, nearing a 52-week low and pushing the dividend yield above 7.5%. Electric car makers Tesla Inc TSLA and Nio Inc NIO were both net buys. TSLA reported an earnings and revenue beat and its fifth consecutive quarterly profit, while NIO received multiple analyst upgrades and price target increases, with one analyst saying the company is a long-term winner in the China EV market. DraftKings Inc DKNG traded to an all-time high early in the period, then traded lower by over 40% later in the month after the company announced a share offering and the NFL announced additional positive COVID tests among players, causing many investors to anticipate the cancellation of games. Pfizer Inc. PFE said it could be ready to apply for emergency-use authorization of its Covid-19 vaccine by late November, assuming it receives positive efficacy and safety data from late-stage human trials, the first time it or any other leading Western vaccine developer provided such a specific timeline. The stock was net bought during the period.

Additional popular names bought include Exxon Mobile Corporation XOM, Workhorse Group Inc WKHS, and Advanced Micro Devices, Inc. AMD.

TD Ameritrade clients were net sellers of Moderna Inc MRNA as the stock reached the highest point since July. The company has one of the leading coronavirus shots in development and announced it had received $1.1 billion of customer deposits for its COVID-19 vaccine. Micron Technology, Inc. MU beat on earnings early in the period and received an analyst upgrade that cited improving demand and pricing trends ahead for the DRAM memory sector, and was net sold. Beyond Meat Inc BYND was net sold as the stock reached an all-time high early in the period, announcing it is launching the Beyond Burger at 210 KFC locations across mainland China for three weeks. MGM Resorts International MGM missed earnings estimates but announced all of the company's properties were open as of the end of September, and was net sold. Duke Energy Corp (DUK) traded higher and was net sold after NextEra Energy made an offer to take over the company.

Additional names sold include Alteryx Inc AYX, Seagen Inc SGEN, and TJX Companies Inc TJX.

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. 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.