Monthly report, formerly the TD Ameritrade Investor Movement Index®, provides unique insights into retail trading behavior at an unprecedented scale from Schwab's millions of retail investor clients

Schwab today introduced the Schwab Trading Activity Index (STAX), offering timely insights into retail trading behavior from one of the industry’s largest retail investor client bases. Building on the success of the TD Ameritrade Investor Movement Index^® (IMX^SM), launched in 2013, the STAX is a new proprietary, behavior-based index that analyzes retail investor stock positions and trading activity to illuminate what investors were actually doing and how they were positioned in the markets each month.

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Following an aggregated and anonymized analysis of Schwab’s millions of client accounts, the STAX determines a score, generally ranging from 35-70, that serves as a proxy to gauge Schwab clients’ exposure to equity markets. Over time, changes in this score month-by-month serve as an indirect measure of sentiment, with a higher score indicating greater market exposure and a correlation to bullishness, and a lower score indicating lower market exposure associated with potential bearishness. For example, if the STAX score rises from 40 to 50 from one month to the next, that would indicate that Schwab’s clients, on a whole, increased their exposure to the equity markets and could mark a rise in bullish sentiment.

“As we near completion in the first half of 2024 of the industry’s largest integration of its kind, Schwab is emerging as an even stronger leader in the retail investing and trading space, serving a wide range of investors including High Net Worth, people seeking wealth management and advice, sophisticated traders, and those just getting started on their investing journey,” said James Kostulias, head of Trading Services at Charles Schwab. “The introduction of STAX is a reflection of Schwab’s leadership position in the industry and our deep understanding of trading behavior and sentiment. Going forward, we view STAX as a unique proxy for what’s happening across an incredibly diverse mix of retail investors and traders on a month-to-month basis, and we expect it to be a useful resource for clients, academics, media, and anyone else seeking to understand and keep a pulse on retail trading behavior.”

December Insights

The STAX score for December 2023 reads 44.56, an increase from the November score of 43.64.

The reading for the five-week period ending December 29, 2023 ranks “moderate low” compared to historic averages.

“The holidays tend to be an optimistic time of year for many, and this year was no exception among Schwab’s clients,” said Joe Mazzola, Director of Trading and Education at Charles Schwab. “We did see net selling on a dollar basis, which was particularly pronounced among the Information Technology, Communication Services and Financials sectors, but from an activity perspective, our clients bought more equities than they sold. It’s possible this is a sign of continued optimism into the new year, with virtually all economic indicators painting a rosier picture than in many recent months.”

U.S. equity markets continued a rally during the December STAX period as traders and investors positioned for a “Santa Claus Rally” into the year’s end. Economic data supported the rally; the U.S. Bureau of Labor and Statistics released its Employment Situation Summary on December 8, which showed that nonfarm payrolls increased by 199,000 in November, which was better than expected. The U.S. unemployment rate decreased slightly to 3.7%. On December 12, the Consumer Price Index (CPI) for the month of November rose by 0.1% to 3.1% year-over-year, further easing inflation fears. In a December 13 press conference, U.S. Federal Reserve Chair Jerome Powell remarked that tight monetary policy was having the intended effect of reducing inflation, and that the Federal Open Market Committee (FOMC) had begun discussions around potential cuts to the Federal Funds Rate in 2024. This was perceived as a dovish surprise and a major pivot from the Fed’s “higher for longer” messaging of just weeks prior and fueled a steep decline in the yield on the 10 Year Treasury Note, which fell to 3.88%.

During the December STAX period, the S&P 500 (SPX) continued an ascent, rising by 4.62% to close at 4769.83. The CBOE Volatility Index (VIX) was virtually unchanged and remained near its yearly lows. Treasury yields plummeted, with the 10-year yield ending the period below 3.9%, and the U.S. Dollar Index also finished near multi-month lows. Crude oil continued its recent decline with February futures contracts settling at $71.65 per barrel.

Popular names bought by Schwab clients during the period included:

• Pfizer Inc. (PFE)
• Alibaba Group Holding Ltd. (BABA)
• NVIDIA Corp. (NVDA)
• Microsoft Corp. (MSFT)
• Exxon Mobil Corp. (XOM)

Names net sold by Schwab clients during the period included:

• Apple Inc. (AAPL)
• Meta Platforms Inc. (META)
• Tesla Inc. (TSLA)
• Block Inc. (SQ)
• Home Depot Inc. (HD)

2023 in Review

The STAX ended 2022 at its lowest level since April 2020 but began 2023 with three consecutive months of increasing scores. A resurgent tech trade driven by hype around increased investment into artificial intelligence bolstered sentiment. April saw the first decline in the STAX for 2023 as uncertainty surrounding the health of the banking system dampened sentiment. The STAX bounced back sharply to close out the second quarter, finishing at 46.76 in June, its highest level in over a year. Equities continued to rally throughout much of the summer, and the STAX reached 48.08 in August, its highest level of 2023. Interest rates rose dramatically throughout the fall months, pressuring equities. The STAX posted three straight monthly declines before bouncing back in December to end the year at 44.56 after a dovish pivot from the Federal Reserve sent equites near all-time highs.

About the STAX

The STAX value is calculated based on a complex proprietary formula. Each month, Schwab pulls a sample from its client base of funded accounts, which includes 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 STAX.

For more information on the Schwab Trading Activity Index, please visit www.schwab.com/investment-research/stax. Additionally, Schwab clients can chart the STAX using the symbol $STAX in either the thinkorswim^® or thinkorswim Mobile platforms.

Investing involves risk, including loss of principal. Past performance is no guarantee of future results.

Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.

Historical data should not be used alone when making investment decisions. Please consult other sources of information and consider your individual financial position and goals before making an independent investment decision.

The STAX is not a tradable index. The STAX should not be used as an indicator or predictor of future client trading volume or financial performance for Schwab. STAX data includes that from accounts of TD Ameritrade clients which have not yet transferred to Charles Schwab & Co., Inc., as part of our planned integration.

TD Ameritrade, Inc., member FINRA/SIPC, a subsidiary of The Charles Schwab Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank.

About Charles Schwab

At Charles Schwab, we believe in the power of investing to help individuals create a better tomorrow. We have a history of challenging the status quo in our industry, innovating in ways that benefit investors and the advisors and employers who serve them, and championing our clients’ goals with passion and integrity.

More information is available at aboutschwab.com. Follow us on X, Facebook, YouTube, and LinkedIn.

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