Investor Movement Index Summary: December 2020

Exposure to equity markets increased during the December IMX period. The IMX increased 15.7%, or 0.85, from 5.41 to 6.26 reaching the highest point in almost three years.

TD Ameritrade clients were net buyers overall and net buyers of equities during the period. They used volatility to add to positions in Health Care and Industrials and added broad-based market exposure with net buying in U.S. stock ETFs and mutual funds. Market volatility was generally light during the period. The Cboe Volatility Index, or VIX, which measures volatility of the S&P 500 Index, increased above 30 only once during the period.

Equity markets moved higher during the December IMX period, reaching historic levels in the process. The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all rose to record levels, with the S&P 500 closing above 3,700 and the Nasdaq Composite nearing 13,000. All three indices posted increases during the period, with the Nasdaq having the best returns after increasing nearly 5%. Markets improved on the back of investor optimism that Congress would pass another coronavirus relief package. Positive news was also seen regarding the pandemic, even as a winter wave of new cases pushed the death toll above 300,000 in the U.S. A special Food and Drug Administration advisory panel recommended broad distribution of the first COVID-19 vaccine in the U.S., clearing the way for the FDA to grant emergency authorization to two vaccines. The first vaccine was received by a nurse in New York, provided by Pfizer and BioNTech, kicking off the most urgent immunization campaign in decades.

Trading

TD Ameritrade clients were net buyers of both Pfizer Inc. PFE and Moderna Inc MRNA as each company received FDA approval to begin distribution of their COVID-19 vaccines. Both stocks traded lower during the period, and clients were buyers on the weakness. Electric car makers NIO Inc NIO and Tesla Inc TSLA were also bought on weakness during the period as each company announced an equity offering. NIO pulled back from all-time highs reached during the previous period, trading lower by as much as 30% following an offering to sell up to 69 million shares. The extra cash could help the company grow by adding manufacturing and distribution capacity as they attempt to gain market share. TSLA entered the S&P 500 for the first time, which was seen as positive news by many investors, but traded lower as it announced a plan to raise $5 billion via a share offering. salesforce.com, inc. CRM traded lower and was net bought as it announced its acquisition plans of Slack Technologies Inc WORK, which could transform Salesforce into one of the largest players in business software. Square Inc SQ reached an all-time high during the period, then traded lower and was net bought on the weakness. The company announced its Cash App will allow the user of its Cash Card to earn bitcoin for the purchases they make.

Additional popular names bought include Palantir Technologies Inc PLTR and Luminar Technologies Inc LAZR.

Although clients were net buyers of equities, they found some names to sell during the period. Slack Technologies Inc WORK was net sold after the stock price increased over 40% late last period following an acquisition announcement by salesforce.com, inc. CRM. Fastly Inc FSLY was net sold as the stock increased over 70% from lows seen in early November after a new coronavirus strain in Europe increased the case for more work-from-home orders, which could benefit the company's edge cloud platform business. Oil stocks Occidental Petroleum Corporation OXY and Haliburton Company HAL were both net sold on strength. Each company received an analyst upgrade during the period, and oil prices recovered slightly on hopes that coronavirus vaccines would help restore demand to more normal levels. Twitter Inc TWTR reached a 52-week high as it announced an acquisition of Squad, an app for video chat and screen sharing, and was net sold.

Additional names sold include Bank of America Corp BAC and Viatris Inc VTRS.

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. Market volatility continued into the fall of 2020 before markets headed higher, reaching all-time highs. TD Ameritrade clients increased equity market exposure to the highest level in nearly three years to end 2020.

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.