Investor Sentiment Increase: Triumph of the IMX

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The TD Ameritrade Investor Movement Index (IMX) increased 1.76% in July, continuing a recovery trend following the Coronavirus market panic of March.

The IMX is the aggregate of TD Ameritrade client investment positions, which ascertains the behavior of Main Street Investors. IMX value is calculated using a sample of the client base of 13 million, which includes the accounts that have made a trade in the previous month.

The trend of movement of the Index has found a historical correlation with the movement of the S&P 500 Index, therefore US investors regard the IMX as one of the best metrics of market sentiment.


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TD Ameritrade clients were overall net buyers of securities and commodities.
Clients’ preferred industries included Consumer Discretionary, Healthcare, and Information Technology Services.

The equities that TD Ameritrade clients net bought included:

  • Tesla, Inc. ($TSLA)
  • Pfizer Inc. ($PFE)
  • Apple Inc. ($AAPL)
  • Microsoft Corporation ($MSFT)
  • Nikola Corporation ($NKLA)
  • Crowdstrike Holdings, Inc. ($CRWD)

Some of the names that clients net sold during the period included:

  • Roku, Inc. ($ROKU)
  • Facebook, Inc. ($FB)
  • Costco Wholesale Corporation ($COST)
  • FedEx Corp. ($FDX)
  • Twitter ($TWTR)
  • United Airlines Holdings, Inc. ($UAL)

Volatility trailed off during the month of July into August, as measured by the Cboe Volatility Index, otherwise known as VIX. The VIX began the period in the mid-30s descending into the low 20s by the start of August.

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Equity market indices increased throughout the period as optimism about the economy reopening took hold.
The S&P 500 and Dow Jones Industrial Average increased by 8.71% and 5.65%, respectively.

The Nasdaq Composite experienced the largest percentage gain of the three major U.S. indices, up 10.13% during the period. The COVID-19 pandemic continued to dominate market decisions, with deaths in the U.S. passing 160,000 as the country leads a fractured confederate response to viral mitigation.

The U.S currently leads the world in the number of cases and fatalities. Congress began discussing additional stimulus measures with the Senate passing a $1 trillion coronavirus relief bill proposal, but the bill stalled in the House.

Economic data was mixed during the period. It was announced that consumer spending increased 5.6% during June but appeared to recede during the July period as coronavirus cases began to resurge. The real estate market experienced a substantial rebound in May and June.

GDP was also a point of focus.

The U.S. economy contracted at a record annual rate during the second quarter, down 32.9%. This was the steepest drop in over 70 years as the pandemic weakened consumer spending and regional investment. Federal Reserve Chairman Jerome Powell announced that the Fed will keep interest rates near zero for the foreseeable future.

The Fed is “committed to using our full range of tools to support the economy in this challenging time.” – Federal Reserve Chairman Jerome Powell

TD Ameritrade clients were net buyers of equities during the period. There was a strong investment focus on the electric automotive industry by clients. Purchases included NIO Inc. ($NIO), Tesla Inc. ($TSLA), and Nikola Corp. ($NKLA).

NIO said it delivered over 10,000 vehicles in the quarter ending in June, exceeding the company’s quarterly projections. Moreover, NIO delivered 3,740 vehicles in June which was a monthly record. The stock traded higher following the news and peaked at an all-time high.

Tesla was a net buy for the first time in four months; the company is preparing its planned Texas Gigafactory and has an upcoming battery and investor day in September where it is predicted the company will unveil its new million-mile battery. Nikola was net bought by consumers as the company announced it had signed up blue-chip customers for its fuel-cell truck, including Anheuser-Busch InBev ($BUD).

TD Ameritrade clients sold a significant amount of equities. ROKU Inc. ($ROKU) increased over 25% during the month after receiving an increased valuation related to an upbeat outlook for streaming demand amid a surge in U.S. coronavirus cases, which could lead to businesses and theatres closing or limiting capacity again, and was net sold.

Facebook Inc. ($FB) was net sold as the stock reached an all-time high. The company beat  revenue and earnings projections, nearly doubling net income year on year growth. Facebook has also signed several deals with entertainment labels: Universal Music Group, Sony Music Entertainment ($SNE), and Warner Music Group ($WMG) to secure the right to show music videos.

High estimates from merger expansion and revenue growth indicate a non-sustainable peak in accordance with market growth projections.

All in all TD Ameritrade investor sentiment reflects an optimism of enhanced shareholder value, following revenue projections from new product announcements, for net buys. For a net sell, Investors play off of the decreased trade volume following peak market capitalization metrics, such was the case for Facebook.

Main Street investors continue to have an optimistic albeit cautious approach to equity investment.

 

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Noah Hill

Equity Research Analyst

Noah Hill is a rising senior at Boston University, majoring in economics and minoring in computer science. Noah is passionate about data science, statistical analysis, and financial markets. As an active participant in the VentureCafe Initiative, Noah has associated himself with emerging leaders in the FinTech community, understanding both the passion and technology that drives the future of investment management/analysis. As a quantitative analyst in his Finance Club, he has collaborated to provide comprehensive investment strategies for a $650k student-run fund. With this background, Noah places an emphasis on statistical modelling and the impact of sentiment when deciding on an action to take with an equity. In his spare time, you can find Noah singing opera or reading up on political philosophy.

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