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Portfolio > ETFs > Broad Market

TD Ameritrade Looks at Retail Investors, Sees Positive Signs

By Jeff Berman

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The latest TD Ameritrade Investor Movement Index grew to 5.17 in November — up 6.8% from October and its highest point so far in 2019, driven by positive signs in the stock market and from early holiday season sales, the firm said Monday.

“Less risky assets were in favor” last month and included fixed income products, while clients increased their “exposure to U.S. equity markets by buying more” exchange-traded funds, according to TD Ameritrade.

Meanwhile, “net buying in equities with increasing relative volatility also helped push the IMX higher,” it said, adding: “Market volatility was generally light during the period, with the Cboe Volatility Index, or VIX, having a closing price below 12 for the first time in over a year.”

The IMX is TD Ameritrade’s proprietary, behavior-based index and it aggregates Main Street investor positions and activity to measure what the firm says investors are actually doing and how they’re positioned in the markets.

“There was a lot to like in November, including better-than-expected earnings and optimism surrounding trade,” according to JJ Kinahan, chief market strategist at TD Ameritrade. “The signs were there for a strong holiday season, and with that investors were more willing to increase their exposure to the market, ending the period as net buyers of equities,” he said in a statement.

However, it was not all roses. Although the IMX came in at its highest point since November 2018, the November reading still ranks as “Moderately Low” compared with historic averages, the firm pointed out.

(Chart: TD Ameritrade) (Chart: TD Ameritrade)

On the biggest shopping day of the year, Black Friday, the top stocks TD Ameritrade clients traded included three tech companies: Alibaba Group (BABA), Amazon (AMZN) and Roku (ROKU), with Amazon, no surprise, being a top Black Friday stock for the fifth straight year, according to TD Ameritrade.

More than one-third (34%) of the trades placed on Black Friday — the day after Thanksgiving that traditionally kicks off the holiday shopping season — were placed via a mobile device, which the firm said was a record high. In 2018, 31% of Black Friday retail trades were placed on mobile devices, it noted.

“Once the Thanksgiving leftovers are cleared away, we’ve found that many investors use their mobile devices to stay engaged with the market while spending time with family and friends,” according to Kinahan. “Our clients’ appetite for market access via mobile has continued to increase every year, and Black Friday is the perfect example of this.”

TD Ameritrade also saw record-breaking mobile averages for its 2019 fiscal year (Oct.1, 2018 – Sept. 30, 2019), including: An average of 232,000 mobile trades each day, up from an average of 197,900 in fiscal 2018; 27% of total trades were placed on a mobile device, compared to 24% a year ago; and an average of 768,170 daily mobile users compared with 642,470 in fiscal 2018, it said.

Equity markets grew during the November IMX period, with all three major U.S. indexes posting record results, it said. The S&P 500 jumped past 3,100 for the first time ever, while the Dow Jones industrial average broke 28,000 for the first time, with the indexes up 3.9% and 4.1%, respectively, TD Ameritrade noted. The Nasdaq Composite, meanwhile, increased 5.1%, producing the best gains, TD Ameritrade said.

Retail investors at TD Ameritrade bought shares in stock with popular names during the November IMX period, including Ford Motor Co. (F), McDonald’s (MCD), Microsoft (MSFT) and Walt Disney Co. (DIS), which benefited from the launch of its Disney + streaming service as well as the theatrical release of its animated film sequel “Frozen II.”

TD Ameritrade said its clients also “used market highs to net sell some popular names,” including Bank of America (BAC), Citigroup (C), Netflix (NFLX) and Tesla (TSLA).

There were some significant differences in the stocks that TD Ameritrade’s millennial clients net bought in November, it pointed out. For example, while millennials net bought Virgin Galactic Holdings (SPCE) and Canopy Growth Corp. (CGC), the “total client population did not,” TD Ameritrade said, adding: “There were no differences on the sell side between the two populations.”

Each month, TD Ameritrade pulls a sample from its client base of more than 11 million funded accounts that it said includes all accounts that completed a trade in the past month. The holdings and positions of this statistically significant sample are evaluated to calculate individual scores, and the median of those scores represents the monthly IMX, it explained.

Jeff Berman

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