Schwab Trading Activity Index™: December Score Edges Higher for Third Consecutive Month

Rhea-AI Summary

Charles Schwab's Trading Activity Index (STAX) increased to 51.16 in December 2024, up from 49.22 in November, indicating a 'moderate low' reading compared to historic averages. Schwab clients increased equity exposure, particularly in Health Care and Energy sectors, while net selling Information Technology and Communication Services.

Despite market turbulence and the absence of a significant 'Santa Claus Rally', investor sentiment remained bullish. The S&P 500 finished about 1% lower in December but achieved a 24% gain for 2024, marking back-to-back annual returns above 20% for the first time since 1998.

Top stocks bought by clients included NVIDIA (NVDA), Tesla (TSLA), Palantir (PLTR), Amazon (AMZN), and MicroStrategy (MSTR). Throughout 2024, STAX ranged from 44.73 in January to 54.81 in July, with investors focusing on AI, semiconductors, cloud computing, and electric vehicle technologies.

Positive

• STAX index showed increased investor activity for third consecutive month
• S&P 500 achieved 24% annual gain in 2024
• Back-to-back annual returns above 20% for first time since 1998

Negative

• S&P 500 declined 1% in December
• Market experienced significant volatility with VIX spiking above 27
• 10-year Treasury yield increased 10% indicating higher rate expectations

Insights

Market Research Analyst

The latest Schwab Trading Activity Index (STAX) data reveals compelling shifts in retail investor behavior and sector rotation trends. The increase to 51.16 in December, while modest, signals growing retail investor confidence despite market volatility. The sector rotation pattern is particularly noteworthy - investors are tactically reducing exposure to 2023's outperformers (Tech and Communication Services) while building positions in lagging sectors (Healthcare and Energy), suggesting a strategic rebalancing approach rather than momentum chasing.

The divergence between retail trading patterns and institutional positioning is significant. Despite the S&P 500's 24% annual gain, retail investors maintained relatively conservative positioning throughout 2024, with STAX readings staying within a narrow band of 44.73 to 54.81. This behavioral pattern indicates retail investors are becoming more sophisticated in their approach, focusing on portfolio rebalancing rather than reactive trading.

The buying patterns in AI-related stocks (NVDA, PLTR) coupled with selling in traditional tech leaders (AAPL, MSFT) suggests retail investors are making targeted bets on next-generation technology while reducing exposure to mature tech companies - a nuanced strategy that differs from previous retail trading cycles.

Financial Analyst

The STAX data provides important insights into retail investor positioning heading into 2025. The moderate-low reading relative to historical averages, combined with increased equity exposure despite market turbulence, indicates a calculated risk-taking approach among retail investors. The sector rotation into Healthcare and Energy, traditionally defensive sectors, while trimming high-performing tech positions, suggests sophisticated portfolio management techniques are being employed by retail investors.

The market's reaction to the FOMC's hawkish 2025 outlook, with the VIX spiking above 27 and the 10-year Treasury yield rising to 4.619%, demonstrates heightened sensitivity to monetary policy shifts. The 2.9% single-day drop in the S&P 500 - the largest since August 2023 - highlights the market's vulnerability to interest rate expectations.

The strengthening U.S. Dollar Index (up 2.14%) and WTI crude's 2.74% rise to $70.60 indicate complex cross-asset correlations that could impact equity market dynamics in 2025, particularly as investors adjust to a "higher for longer" rate environment.

More Schwab clients net bought equities than net sold, adding exposure in the Health Care and Energy sectors while net selling Information Technology and Communication Services

WESTLAKE, Texas--(BUSINESS WIRE)-- The Schwab Trading Activity Index™ (STAX) increased to 51.16 in December, up from its score of 49.22 in November. 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 vs. S&P 500 (Graphic: Charles Schwab)

The reading for the four-week period ending December 27, 2024, ranks “moderate low” compared to historic averages.

“Schwab clients increased their exposure to equities in December, even as major indices experienced atypical swings and turbulence,” said Joe Mazzola, Head Trading & Derivatives Strategist at Charles Schwab. “We didn’t see a significant ‘Santa Claus Rally’ this year, but investor sentiment appeared bullish, particularly at the start and end of the month. Many clients appeared to close out the year by rebalancing their portfolios, adding exposure to underperforming sectors such as Health Care and Energy and trimming positions in outperformers like Information Technology and Communication Services.”

U.S. equity markets hovered near their recent all-time highs for the first half of the December period as a muted CBOE Volatility Index (VIX) traded near 14, belying what was to come.

The U.S. Bureau of Labor Statistics released its Employment Situation Summary on December 6, which showed that non-farm payrolls rose by 227,000, more than anticipated, and the unemployment rate (4.2%) ticked higher, in line with expectations. The S&P 500’s reaction was muted, trading down slightly the following day. On December 11, the Consumer Price Index (CPI) came in as expected at 2.7% for the trailing 12 months, including a 0.3% monthly increase. On December 12, an increase in the Producer Price Index (PPI) was reported as unexpectedly hot at 0.4%. Equity markets largely shrugged this off while the yield on the 10-year Treasury Note rose by 1.73% to 4.399%.

While the Federal Open Market Committee (FOMC) statement on December 18 did not suggest a major pivot, the Committee’s 2025 outlook postulated that markets may have fewer interest rate cuts to look forward to than had been previously expected. This set off a tantrum that played out in the markets through the remainder of the period, with major indices selling off hard and the VIX spiking above 27. The 2.9% drop in the S&P 500 was its largest since August 5th and represented only the third time the index closed 2% or lower since February 21st, 2023. The S&P 500 did finish moderately lower on the month, by about 1%, though it did manage to finish 24% higher on the year and generate back-to-back years of annual returns greater than 20% for the first time since 1998.

Once the dust settled after the FOMC meeting, the VIX established a new, somewhat higher baseline, hovering just below 18 in the final days of the period and the year. The 10-year Treasury yield closed at 4.619% – a full 10% higher than where it closed last period – suggesting that markets are pricing in a “higher for longer” rate regime even as they wait for new trade and tariff policies to unfold. The U.S. Dollar Index strengthened once again, rising 2.14% to 108.00. Front month WTI Crude Oil futures rose by 2.74%, ending the period at $70.60 per contract.

Popular names bought by Schwab clients during the period included:

• NVIDIA Corp. (NVDA)
• Tesla Inc. (TSLA)
• Palantir Technologies Inc. (PLTR)
• Amazon.com Inc. (AMZN)
• MicroStrategy Inc. (MSTR)

Names net sold by Schwab clients during the period included:

• Apple Inc. (AAPL)
• AT&T Inc. (T)
• Broadcom Inc. (AVGO)
• Microsoft Corp. (MSFT)
• Walt Disney Co. (DIS)

2024 In Review

In 2024, the STAX stayed in a relatively tight range – from 44.73 in January to 54.81 in July. Clients seemed content to maintain their levels of equity market exposure as major indices repeatedly hit all-time highs throughout the year, perhaps waiting on a clear trend to develop so they might trade on that momentum. On the buy side, technologies including Artificial Intelligence, semiconductors, cloud computing and electric vehicles consistently grabbed investors’ attention this year, while on the sell side, the Consumer Discretionary, Telecommunications, Industrial and Energy sectors were most popular. In a year with dramatic shifts in Fed policy, clients demonstrated sensitivity not necessarily by rotating out of growth and into value stocks but rather by awaiting better opportunities in the growth and technology names they favored.

The five most popular names net bought by Schwab clients throughout the year were:

• NVIDIA Corp. (NVDA)
• Advanced Micro Devices Inc. (AMD)
• Amazon.com Inc. (AMZN)
• Microsoft Corp. (MSFT)
• Palantir Technologies Inc. (PLTR)

The five most popular names net sold throughout the year by clients included:

• Walt Disney Co. (DIS)
• Bank of America Corp. (BAC)
• Apple Inc. (AAPL)
• Tesla Inc. (TSLA)
• PayPal Holdings Inc. (PYPL)

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.

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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View source version on businesswire.com: https://www.businesswire.com/news/home/20250106221369/en/

At the Company

Margaret Farrell

Director, Corporate Communications

(203) 434-2240

margaret.farrell@schwab.com

Source: The Charles Schwab Corporation

FAQ

What was Schwab's (SCHW) Trading Activity Index score in December 2024?

Schwab's Trading Activity Index (STAX) reached 51.16 in December 2024, increasing from 49.22 in November.

Which sectors did Schwab (SCHW) clients favor in December 2024?

Schwab clients net bought Health Care and Energy sectors while net selling Information Technology and Communication Services sectors.

What were the top 5 stocks bought by Schwab (SCHW) clients in December 2024?

The top stocks bought were NVIDIA (NVDA), Tesla (TSLA), Palantir (PLTR), Amazon (AMZN), and MicroStrategy (MSTR).

How did the S&P 500 perform in 2024 according to Schwab's (SCHW) report?

The S&P 500 gained 24% in 2024, achieving back-to-back annual returns above 20% for the first time since 1998.

What was the range of Schwab's (SCHW) STAX index throughout 2024?

The STAX index ranged from 44.73 in January to 54.81 in July 2024.