TD Ameritrade clients decreased exposure to equity markets during the November IMX period. The IMX score decreased 0.28, or 4.92%, to 5.41 from 5.69 in October.
For the first time since February, TD Ameritrade clients were net sellers overall and net sellers of equities. They took advantage of markets at all-time highs early in the period to sell, and decreased holdings in Financials, Industrials, Communication Services, and Energy. Amid the selling, they were net buyers of Health Care. Market volatility decreased during the period as markets increased. The Cboe Volatility Index, or VIX, started the period near 40 but slowly decreased and ended the period in the low 20s.
Equity markets posted strong gains during the November IMX period. The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all posted double-digit gains during the period, up 11.3%, 12.9%, and 11.9% respectively. Markets increased early in the period as U.S. election results came in helping reduce uncertainty for investors, with the expectation that a divided government would result in modest measures on taxes and spending.
All three indices reached all-time highs on the news, with the Dow Industrials surging about 1,500 points in one day to an intraday record. Markets took a brief pause as the death toll from the coronavirus pandemic topped 250,000 in the U.S., with hospitalizations reaching a record. Unemployment claims also rose unexpectedly as the virus continued to limit the economic recovery. Positive news was released during the period regarding a COVID-19 vaccine, with Pfizer and partner BioNTech reporting better-than-expected results in a pivotal study, showing their vaccine more than 90% effective. Later in the month, Moderna said its experimental coronavirus vaccine was 94.5% effective at protecting people in an early look at pivotal study results. Optimism around multiple vaccine candidates pushed markets higher, and the Dow Jones topped 30,000 for the first time ever.
Trading
TD Ameritrade clients were net sellers of equities during the November period, but found some names to buy. Pfizer Inc. PFE was net bought as the company reported its COVID-19 vaccine, developed with partner BioNTech, proved better-than-expected at protecting people from the virus and reported that United Airlines began operating charter flights to position doses of Pfizer's vaccine for quick distribution if the shots are approved by regulators.
Alibaba Group Holding Ltd BABA sold off over 20% from highs the previous period as lawmakers in the U.S. are set to vote on forcing Chinese companies with shares traded on American exchanges to comply with audit-oversight rules or leave U.S. markets. The stock was net bought on the weakness. DraftKings Inc DKNG was net bought as the company announced a partnership with the Detroit Pistons covering daily fantasy, sports betting, and iGaming. Also benefiting the company during the period were reports that Canada is looking to decriminalize sports betting.
Amazon.com, Inc. AMZN has seen a surge in online sales during the pandemic that is driving record results, and the company announced $500 million in holiday bonuses to its front-line staff. The stock was net bought during the period. Plug Power Inc PLUG announced it raised $1 billion through bought-deal equity financing to fund its green hydrogen program, which includes the construction of green hydrogen facilities in the U.S. and was a net buy as it reached a 52-week high.
Additional popular names bought include NIO Inc NIO and Paypal Holdings Inc PYPL.
TD Ameritrade clients used market highs to sell some positions. Big banks Bank of America Corp BAC and JPMorgan Chase & Co. JPM were net sold. Both stocks reached the highest prices in months as hopes for an economic recovery pushed bank stocks higher after positive vaccine news, with each stock up nearly 10% in one day following the Pfizer vaccine announcement.
The Walt Disney Co DIS reached the highest price in nearly one year as vaccine news pushed the stock higher on hopes the company's theme parks could return to normal, as the majority of the company's parks are open but operating at limited capacity. The stock was net sold during the period. Micron Technology, Inc. MU was net sold as the stock traded to the highest price since September 2000 as analysts see cloud demand improving for the memory chip maker, and demand builds from hyperscale data-center builders. Starbucks Corporation SBUX traded to an all-time high as the company beat on earnings and hosted its "Red Cup Day" on November 6. The promotion of giving a free, collectable holiday-themed cup is "shockingly effective" at driving traffic and resulted in the 3rd highest traffic day in company history, with the stock net sold during the period.
Additional names sold include Delta Air Lines, Inc. DAL and MGM Resorts International MGM.
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.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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