US: TD Ameritrade IMX

Mon Jan 05 11:30:00 CST 2015

Actual Previous
Level 5.12 5.11

Equity market exposure in TD Ameritrade client accounts remained relatively unchanged as the IMX increased from 5.11 to 5.12 in December and equity markets headed into the new year at record levels.

TD Ameritrade clients have recently maintained a lower level of equity market exposure than in the previous quarters as investors have gone through a visible increase in equity market volatility over the past few months. The continued decline in oil prices seemed to fuel global growth concerns and by the middle of December, the S&P 500 fell 5 percent from its all-time high at the beginning of the month. However, like all the previous dips in 2014, the S&P 500 quickly recovered.

U.S. equity markets appeared to be stimulated by the Federal Reserve's encouraging statements around the economy and that it will be "patient in beginning to normalize the stance of monetary policy." Domestic economic data also continued to be generally positive in December.

The S&P 500 and the Dow Jones Industrial Average eventually climbed to fresh all-time highs heading into the new year. Small- cap stocks measured by the Russell 2000 appeared to be range bound throughout the year, but finally broke through an upside resistance level at the end of December and also reached record levels. The NASDAQ Composite is within a few hundred points of the high it achieved in 1999 during the dot-com boom.

Similar to November's buying activity, December saw clients buying shares of names that saw price declines. Oil producers were popular again, with net buying activity in Halliburton (HAL), Chevron Corporation (CVX), and BP PLC (BP), as the falling price of crude oil dragged their stock prices down to new 52-week lows. The energy sector was not the only sector where declining prices led to net buying. Apple (AAPL) and GoPro (GPRO), both consumer goods companies, were net buys after their stock prices fell. Mobile services providers AT&T (T) and Verizon Communications (VZ) were popular buys; their stock prices dropped in December to levels at or near the lows for the year, which drove each company's dividend yields higher.

Additional popular names bought included Kinder Morgan Inc. (KMI), Twitter (TWTR), Southwest Airlines (LUV), and Transocean (RIG).

Net selling activity in December was also similar to November's activity. The financial sector saw some popular names as net sells during the month of December. Bank of America (BAC), Citigroup (C), and American International Group (AIG) were all names that many TD Ameritrade clients took opportunities to sell. In the technology sector, Facebook (FB), Yahoo (YHOO), and Cisco Systems (CSCO) saw net selling activity. Stock prices of retailers Target (TGT) and Walgreens (WAG) saw sharp rises in December and both were popular sells in November as well.

Additional popular names sold included Whole Foods Market (WFM), Pfizer (PFE), and Oracle (ORCL).

According to TD Ameritrade, inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.

The Investor Movement Index, (or the IMX) is a proprietary, behavior-based index created by TD Ameritrade designed to provide insight into Main Street sentiment. It measures what investors are actually doing, and how they are actually positioned in the markets. The IMX does this by using data representing the holdings/positions, trading activity and other data from an anonymous sample from six million funded accounts. These data are used to create a snapshot that can be monitored over time, or compared to other market indicators, to suggest the current sentiment of the real portfolios held by retail investors.

Wall Street often looks to TD Ameritrade, one of the largest online brokerage firms for insight into the mood, sentiment, and behavior of retail investors. Up to now, Wall Street has largely relied on opinion surveys - which measure what investors are thinking or what they're saying - to provide this information. With six million funded client accounts spanning investors of all ages, account sizes, and experience levels, TD Ameritrade is in a unique position to offer a quantitative, behavior‐based index that can better reflect what investors are actually doing.

The IMX can provide insight into whether investors are growing more bullish or bearish on equities.

The IMX measures the level of exposure of Retail Investor Portfolios to the U.S. equity market. The IMX has not been indexed to a specific year or normalized. Scores should be viewed in the context of historic ranges and recent trends. When reviewing month over month results and trends over time it's most important to put IMX values into context by considering historical ranges. For example, the historical range can be put into 5 quintiles - High, Moderately High, Neutral, Moderately Low and Low. The higher the score is the more bullish the level. Other important considerations include recent trends up/down and the duration of trends.