Schwab Trading Activity Index™: January Score Kicks off the New Year With a Slump

Rhea-AI Summary

Charles Schwab's Trading Activity Index (STAX) declined to 49.45 in January 2025 from 51.16 in December, indicating a 'moderate low' trading activity compared to historical averages. Schwab clients adopted a defensive approach, becoming net sellers in Information Technology and Communications sectors while net buying Energy, Real Estate, and Utilities.

The S&P 500 experienced volatility in January, initially declining amid inflation concerns that pushed the 10-year Treasury yield to 4.8%. Markets later rebounded following benign December inflation data and strong earnings from major sectors. However, the month ended with uncertainty after the Federal Reserve paused rate cuts and news about China's DeepSeek AI technology impacted tech stocks.

Top stocks bought by Schwab clients included NVIDIA, Palantir, Apple, Tesla, and Microsoft, while major sells included Disney, Boeing, Bank of America, Walgreens, and Starbucks.

Positive

• Strong earnings reported from major U.S. banks, airlines, communication services, and info tech firms
• Benign U.S. December inflation data helped market recovery
• Markets reached new highs with 10-year yield dropping below 4.6%

Negative

• STAX index decreased to 49.45 from 51.16, indicating reduced trading activity
• S&P 500 declined nearly 1% in January
• 10-year Treasury yield reached 14-month high of 4.8%
• Increased market volatility with VIX rising above 22
• Federal Reserve paused rate cuts

Insights

Market Research Analyst

The January STAX reading of 49.45 reveals a compelling narrative about retail investor psychology and market positioning. The decline from December's 51.16 reflects more than just cautious sentiment - it signals a sophisticated defensive repositioning by retail investors amid complex market dynamics.

The sector rotation pattern is particularly telling: the exodus from Information Technology and Communications sectors in favor of Energy, Real Estate and Utilities represents a classic "flight to quality" movement. This defensive positioning is more nuanced than typical risk-off scenarios, as evidenced by the selective accumulation of AI-related stocks during pullbacks.

Three key behavioral patterns emerge from the data:

• Reduced dip-buying conviction compared to Summer 2024, indicating eroding confidence in quick rebounds
• Tactical sector rotation focusing on dividend-yielding defensive sectors, suggesting income prioritization over growth
• Selective technology exposure, maintaining positions in market leaders while reducing broader sector exposure

The trading activity in popular names provides important insight into retail sentiment. The accumulation of NVIDIA, Palantir and Microsoft suggests investors are maintaining strategic exposure to AI leadership, while the selling of traditional blue chips like Disney, Boeing and Bank of America indicates reduced confidence in classic cyclical recovery plays.

The VIX movement pattern, particularly the spike above 22 following the DeepSeek AI news, demonstrates how technological disruption news can rapidly shift market sentiment. This volatility response, combined with the STAX data, suggests retail investors are becoming more sophisticated in their risk management approach, selectively maintaining exposure to secular growth themes while reducing cyclical risk exposure.

Schwab clients were net sellers in January, reducing exposure in the Information Technology and Communications sectors while net buying Energy, Real Estate and Utilities

WESTLAKE, Texas--(BUSINESS WIRE)-- The Schwab Trading Activity Index™ (STAX) decreased to 49.45 in January, down from its score of 51.16 in December. 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.

The reading for the four-week period ending January 31, 2025, ranks “moderate low” compared to historic averages.

“Schwab clients took a fairly defensive approach in January,” said Joe Mazzola, Head Trading & Derivatives Strategist at Charles Schwab. “We saw many responding to the month’s sometimes-contradictory headlines and economic reports by rotating out of higher-beta names. When the markets took a dip mid-month, we didn’t see the same kind of buying behavior we did during last summer’s pullback, although later in the month, many did seem to take advantage of the opportunity to buy AI names at a discount. Clients appear to be taking a selective approach and are in large part proceeding into the new year with caution.”

The S&P 500 stumbled out of the gate in January, losing almost 1% from the December closing level by mid-month amid inflation worries that drove the benchmark 10-year Treasury note yield to a 14-month intraday high of 4.8% on January 14. Rising yields may have reflected concerns about policy proposals on tariffs and immigration from the incoming presidential administration, as well as the Federal Reserve's hawkish December meeting and a stall in previous progress against inflation.

Relatively benign U.S. December inflation data allowed yields to ease and the markets rebounded in mid-January after the new administration refrained from imposing immediate tariffs on imports from China and other countries. Solid earnings from major U.S. banks, airlines, communication services, and info tech firms helped the markets recover to new highs, and the 10-year yield dipped below 4.6%. In the final week of the STAX reporting period, however, the S&P 500 dropped about 1% after the January Federal Reserve Open Market Committee (FOMC) meeting featured a pause in rate cuts and news of China's DeepSeek AI technology bruised AI-associated tech names.

Wall Street's early January setbacks coincided with a mild increase in volatility. The Cboe Volatility Index (VIX) rose to just above 22 intraday on January 13, the day the SPX hit its monthly intraday low below 5,800 and down more than 1% from the start of the year. New restrictions imposed early in the month on U.S. chip exports led to tech weakness and rising volatility ahead of reports on consumer and producer inflation for December, both of which were ultimately relatively tame. The inflation data, along with solid earnings from major U.S. banks later that week, helped temper volatility, and the VIX fell below 15 in late January before rebounding above 22 on an intraday basis following the DeepSeek news that shook the market on January 27. The VIX flagged for the remainder of that week and closed the month below 18.

Popular names bought by Schwab clients during the period included:

• NVIDIA Corp. (NVDA)
• Palantir Technologies Inc. (PLTR)
• Apple Inc. (AAPL)
• Tesla Inc. (TSLA)
• Microsoft Corp. (MSFT)

Names net sold by Schwab clients during the period included:

• Walt Disney Co. (DIS)
• Boeing Co. (BA)
• Bank of America Corp. (BAC)
• Walgreens Boots Alliance Inc. (WBA)
• Starbucks Corp. (SBUX)

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.

0225-T2JC

View source version on businesswire.com: https://www.businesswire.com/news/home/20250210116868/en/

At the Company

Margaret Farrell

Director, Corporate Communications

(203) 434-2240

margaret.farrell@schwab.com

Source: The Charles Schwab Corporation

FAQ

What caused SCHW's Trading Activity Index to decline in January 2025?

The STAX declined due to defensive positioning by investors, who reduced exposure to high-beta stocks and showed cautious buying behavior during market dips, particularly in response to contradictory headlines and economic reports.

Which sectors did Schwab (SCHW) clients favor in January 2025?

Schwab clients were net buyers in Energy, Real Estate, and Utilities sectors, while reducing exposure in Information Technology and Communications sectors.

What were the top 5 stocks bought by SCHW clients in January 2025?

The top stocks bought by Schwab clients were NVIDIA (NVDA), Palantir Technologies (PLTR), Apple (AAPL), Tesla (TSLA), and Microsoft (MSFT).

How did market volatility affect SCHW trading activity in January 2025?

Market volatility increased with the VIX rising above 22, contributing to cautious trading behavior and defensive positioning among Schwab clients.

What impact did the Federal Reserve's January 2025 meeting have on SCHW client trading?

The Federal Reserve's decision to pause rate cuts contributed to market uncertainty and defensive positioning among Schwab clients, reflected in the lower STAX reading.