Investor Movement Index February Summary
The IMX posted the largest monthly decrease ever in February, as volatility returned to the market, decreasing over -23% to 5.95.
The IMX was sharply lower during the February period, and decreased to levels not seen since January 2017. Volatility of the S&P 500, as measured by the CBOE Volatility Index, or VIX, spiked during the period, decreasing the relative volatility of many widely held names, including General Electric Company (NYSE: GE), Apple Inc. (NASDAQ: AAPL), and Facebook Inc. (NASDAQ: FB).).>
The recent bull market rally took an abrupt pause during February, notching the first market correction in over two years. All three major U.S. equity indices, the Dow Jones Industrial Average, the S&P 500, and the NASDAQ Composite, entered correction territory during the period, with all three decreasing more than 10% off recent highs. The Dow fell 1,175 points on February 5, its largest daily point loss in the history of the index. Both the Dow and the S&P 500 decreased in excess of 4% on February 5, eliminating early gains this year. Market volatility spanned asset classes, with the small-cap Russell 2000 decreasing over 11% off highs. The selloff began following concerns about rising bond yields and inflation, sparking declines worldwide. Market volatility rocketed higher, with the VIX increasing above 50 for the first time since August 2015. The 10-year Treasury yield neared the 3% mark for the first time in years.
TD Ameritrade clients appeared to use the pullback in equities markets as a buying opportunity, and were net buyers of equities during the February IMX period. General Electric Inc. (GE) and Ford Motor Company (NYSE: F) both neared multi-year lows, and were net buys. Apple Inc. (AAPL) and Amazon.com, Inc. (NASDAQ: AMZN), each of which reported better than expected earnings during the period, but traded lower following market volatility, were also net buys. Boeing Co (NYSE: BA), which traded higher during the period following better-than-expected earnings and higher projected demand for planes, was also a net buy. Microsoft Corporation (NASDAQ: MSFT) was a net buy as its cloud computing and software-as-a-service initiatives have proven successful and a beat on earnings. Alibaba Group Holdings Ltd. (NYSE: BABA), which was down almost 20% from recent highs during the period, was also a net buy.
Despite being net buyers, TD Ameritrade clients seemed to find some attractive exit prices during February. Gilead Sciences, Inc. (NASDAQ: GILD) received approval from the FDA for a new HIV treatment and reached a 52-week high early during the February period, and was net sold. Facebook Inc. (FB) reached an all-time high on better-than-expected earnings, and was also a net sell. Bristol-Myers Squibb Co (NYSE: BMY) was net sold after it reached an 18-month high following an analyst upgrade on immuno-oncology growth prospects. Snap Inc. (NYSE: SNAP) reported a revenue increase during the period, which led share prices to increase above its March 2017 IPO price, and was net sold. Target Corporation (NYSE: TGT) was net sold following an analyst upgrade and increased price estimate as the company's initiative to reimage its stores takes shape.
Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.
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 news 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 declined 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.
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