Schwab Trading Activity Index™: Score Ascends to Moderate Levels in March

Rhea-AI Summary

Schwab clients were net buyers in March, with a focus on Information Technology, Health Care, and Consumer Staples sectors. The Schwab Trading Activity Index (STAX) increased to 51.65, the highest since May 2022, reflecting moderate market exposure. Despite mixed macroeconomic data, U.S. equity markets reached all-time highs during the period.

Insights

Market Research Analyst

Observing the uptick in the Schwab Trading Activity Index to 51.65 signals a shift in retail investor sentiment and behavior. This increase, being the highest since May 2022, implies a growing confidence among Schwab clients, which could be reflective of broader retail market trends. The focus on sectors like Information Technology, Health Care and Consumer Staples indicates a strategic approach to investing, favoring sectors that are either poised for growth, such as tech, or offer stability, like consumer staples, in volatile markets.

The detailed buying patterns, including favored stocks like NVIDIA and Tesla, suggest a keen interest in companies with strong innovation potential and market leadership. Conversely, the selling off of names such as Coinbase and Disney might point to a risk-off approach to companies facing sector-specific challenges or broader market headwinds. These behaviors can influence market liquidity and sector valuations, potentially leading to a self-reinforcing cycle of investor sentiment and stock performance.

Financial Analyst

The macroeconomic data presented, including jobless claims and nonfarm payrolls, provides a mixed picture, which typically leads to market uncertainty. However, the rally in U.S. equity markets, despite this, suggests that investors may be pricing in future growth expectations or reacting to other variables such as corporate earnings or geopolitical events. The divergence between the Consumer Price Index and Producer Price Index growth rates could be indicative of inflationary pressures that businesses are facing, which may not yet be fully passed on to consumers.

Additionally, the Federal Reserve's stance on inflation and interest rates is a critical factor for market movements. Powell's comments on inflation decreasing gradually could be interpreted by the market as dovish, potentially delaying rate hikes and thus being a short-term positive for equities. The volatility in the 10-year Treasury yield and the stability of the U.S. Dollar Index are also important indicators of investor sentiment and risk appetite, affecting international investments and currency markets.

Commodities Analyst

The sharp rise in May Crude Oil Futures during the March STAX period is noteworthy, as it contrasts with the stability seen in other economic indicators like the U.S. Dollar Index and Treasury yields. An 8.7% increase in oil prices can have a significant impact on energy sector stocks and inflation expectations, potentially affecting consumer spending and corporate profit margins. This rise in oil prices could be a response to geopolitical tensions, supply constraints, or expectations of economic growth driving up demand.

The implications for stakeholders are multifaceted. For businesses, higher energy costs could lead to increased operational expenses, while for consumers, it could mean higher prices at the pump, affecting disposable income. Investors may need to monitor the energy sector closely, as it could influence market dynamics and sector allocation decisions in the short to medium term.

Schwab clients were net buyers in March, with the most pronounced buying within the Information Technology, Health Care, and Consumer Staples sectors

WESTLAKE, Texas--(BUSINESS WIRE)-- The Schwab Trading Activity Index™ (STAX) increased to 51.65 in March, up from its score of 47.65 in February. The only index of its kind, the STAX is a proprietary, behavior-based index that analyzes retail investor stock positions and trading activity from Schwab’s millions of client accounts to illuminate what investors were actually doing and how they were positioned in the markets each month.

Schwab Trading Activity Index March 2024 (Graphic: Charles Schwab)

The reading for the four-week period ending March 28, 2024 ranks “moderate” compared to historic averages and marks the highest reading since May 2022.

“In the face of undeniably mixed macroeconomic data, the markets soared this month, and the STAX score continued its rise in step,” said Joe Mazzola, Director of Trading and Education at Charles Schwab. “Despite the market highs, however, Schwab clients remain in the moderate range of market exposure as measured by the STAX. They net bought equities in March, but we continue to see that retail investors are engaging in strategic, thoughtful buying. There’s palpable enthusiasm when it comes to names related to technology, for example, but clients also found areas to moderate and trim exposure.”

U.S. equity markets continued to rally and reached new all-time highs during the March STAX period despite key data pushing back against the narrative that Fed rate cuts could begin as early as May. On February 29, initial jobless claims came in at 215,000, slightly higher than expected, and the U.S. Bureau of Labor and Statistics’ Employment Situation Summary released on March 8 showed that nonfarm payrolls increased by 275,000 in February - significantly better than expected. However, the unemployment rate increased to 3.9%, higher than the anticipated 3.7%. The Consumer Price Index (CPI) rose, as anticipated, by 0.4% for the month of February, bringing the 12-month increase to 3.2% before seasonal adjustment, while the Producer Price index (PPI) came in much higher than expected at 0.6% vs expectations of 0.3%. U.S. Retail Sales for February increased 0.6% from the previous month, slower than an expected increase of 0.8%.

On March 20, U.S. Federal Reserve Chairman Jerome Powell indicated that despite recent readings, inflation is gradually decreasing, although confidence as to the timing of achieving the target rate may be understandably shaky. This was reflected in the month’s Consumer Confidence reading, which dipped below expectations and February’s reading in at 104.7. But traders seemed to move past any lingering worries over recession or a meaningful stock market pullback as they drove both the Nasdaq® and S&P 500® to soaring new heights. Meanwhile, the CBOE Volatility Index (VIX) declined from 13.75 to 13.01, low by historical measures, as the 10-year Treasury yield exhibited a bit of its own volatility trading within a 30-basis point range before settling basically unchanged. The U.S. Dollar Index, too, was barely changed, closing at 104.55. May Crude Oil Futures, however, rose sharply by 8.7% and closed the March STAX period at $83.17.

Popular names bought by Schwab clients during the period included:

• NVIDIA Corp. (NVDA)
• Tesla Inc. (TSLA)
• Apple Inc. (AAPL)
• Advanced Micro Devices Inc. (AMD)
• Palo Alto Networks Inc. (PANW)

Names net sold by Schwab clients during the period included:

• Coinbase Global Inc. (COIN)
• Walt Disney Co. (DIS)
• PayPal Holdings Inc. (PYPL)
• Block Inc. (SQ)
• Netflix Inc. (NFLX)

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 millions 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, Inc. 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.

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.

0424-VNCA

View source version on businesswire.com: https://www.businesswire.com/news/home/20240408112995/en/

Margaret Farrell

Director, Corporate Communications

(203) 434-2240

margaret.farrell@schwab.com

Source: The Charles Schwab Corporation

FAQ

What sectors did Schwab clients focus on in March according to the PR?

Schwab clients focused on Information Technology, Health Care, and Consumer Staples sectors in March.

What is the Schwab Trading Activity Index (STAX) and how did it change in March?

The STAX is a behavior-based index analyzing retail investor stock positions. It increased to 51.65 in March from 47.65 in February.

What was the reading of the STAX for the four-week period ending March 28, 2024?

The reading for the period was ranked 'moderate' compared to historic averages, the highest since May 2022.

What were some key macroeconomic data points discussed in the PR?

The PR mentioned data related to jobless claims, nonfarm payrolls, unemployment rate, Consumer Price Index (CPI), Producer Price Index (PPI), U.S. Retail Sales, and Consumer Confidence.

Which popular names were bought and sold by Schwab clients during the period?

Popular names bought included NVIDIA Corp. (NVDA), Tesla Inc. (TSLA), Apple Inc. (AAPL), Advanced Micro Devices Inc. (AMD), and Palo Alto Networks Inc. (PANW). Names sold included Coinbase Global Inc. (COIN), Walt Disney Co. (DIS), PayPal Holdings Inc. (PYPL), Block Inc. (SQ), and Netflix Inc. (NFLX).