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January Jitters and Retail Trading

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February 9, 2015
January Jitters and Retail Trading

Retail investors dialed back their exposure to equity markets in January. The TD Ameritrade Investor Movement Index® (IMX℠) declined to a two year low of 4.85. U.S Equity markets headed into January at record levels, but similar to last January, equities started the year by declining approximately 5% for the month. Global economic concerns seemed to ignite a flight to safety trading as a rally in US Treasuries eventually drove the yield on the 10 year note below 1.7%, its lowest level since May 2012, and precious metals rallied to multi-month highs. Oil prices and oil related companies remained under pressure throughout January.

FIGURE 1:

Source: TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.

The decline in the IMX indicates that retail investors have a more cautious portfolio posture. An IMX reading of 4.85 puts the index in the middle of its historical range. Although the IMX declined, that doesn’t necessarily mean that clients were net sellers; clients were actually net buyers in January. The IMX measures overall equity market exposure. This month’s decline was driven by the way clients have positioned their core portfolio holdings over multiple periods and how volatile those core holdings were relative to recent equity market movements. The end result of client portfolio allocations was less leverage to equity markets during the recent rise in volatility and a lower IMX reading.

What were they Buying?

Retail investors continued  to be net buyers of oil producers. BP PLC (BP), Chevron Corporation (CVX) and ConocoPhillips (COP) all saw continued downward pressure on their stock prices, eventually finding some support in the middle of the month, and were net buys. Net buying also occurred in familiar names that pay dividends including Disney (DIS), AT&T (T) and General Electric (GE).

Additional popular names bought included Apple (AAPL), Berkshire Hathaway (BRK B), Transocean (RIG) and Caterpillar (CAT).

 What were they Selling?

The January IMX period saw net selling in retailers JC Penney (JCP) and Rite Aid (RAD) who reported favorable sales figures. Both companies saw their stock prices plunge last fall, but prices have risen since then. Names making headlines with analyst upgrades in January, like Whole Foods Market (WFM)and Lululemon (LULU), were also popular sells.  Sirius XM (SIRI) and Alcatel-Lucent (ALU), which are both lower priced securities that saw multi-month lows in October, were net buys as they returned to price levels seen before their October declines.

Additional popular names sold included Oracle (ORCL), American International Group (AIG) and Cisco Systems (CSCO).

Can't Get Enough of the IMX?

Interested in an alternative stock market sentiment measure? Get notified when Investor Movement Index results are released from TD Ameritrade.

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