Strong start to year, but investors still cautious
JANUARY may have seen the strongest start to a year for US stocks in more than three decades, but many retail investors watched the rally from the sidelines.
Clients of TD Ameritrade, already skittish at the end of last year, further cut their exposure to equities in the first four weeks of this year, the Omaha, Nebraska-based brokerage said on Monday.
The firm’s Investor Movement Index – which has tracked clients’ positioning in the market since 2010 – fell for the fourth straight month to its lowest since July 2012.
That’s as the Standard & Poor’s 500 Index gained almost 8 percent in January, the best month for the equity benchmark since 2015. The index hadn’t seen as big a January rally since 1987, when it soared 13 percent.
“Despite the longest-running government shutdown, US equity markets recovered last month, fuelled by well-received US Federal Reserve announcements and strong job numbers,” said Joe Kinahan, the chief market strategist at TD Ameritrade.
“Still, ambiguity surrounding US-China trade relations kept investors in more defensive parts of the market.”
Clients using TD Ameritrade’s platform still bought financial products, but those that were less risky with lower beta or sensitivity to market gyrations. For exchange traded funds and mutual fund purchases, the products tended to be more index-based. Clients also focused on fixed-income assets. Top stock buys included Apple and Amazon.com, while they sold names such as Facebook and Twitter.
“They’re hopeful, but they’re nervous to take a lot of risk, because we’ve still got the tariff situation waiting in the wings,” Kinahan said. “The thing that makes me nervous, and I think our clients are seeing through that, is the fact that there’s no talk of capex.” | Bloomberg