Schwab clients were net sellers of equities overall; At a sector level, they were net buyers of Energy and Consumer Staples, while Information Technology, Consumer Discretionary, and Communication Services saw the most selling

The Schwab Trading Activity Index™ (STAX) decreased to 47.10 in September, down from its score of 53.16 in August. 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.

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

“In September there was no shortage of market-affecting economic data, and Schwab’s clients responded in kind by de-risking and taking profit opportunities,” said Joe Mazzola, Head Trading & Derivatives Strategist at Charles Schwab. “For now, it seems that the market has accepted the proactive framing the Fed has adopted with regards to its policy decision, and in large part we’re seeing that clients are optimistic about the U.S.’s economic prospects. But there’s no doubt that the extent of the rate cut in September caught many by surprise and, taken in combination with all the other economic data swirling during the month, it makes sense that clients pulled back a bit even as the markets soared – although it is worth noting that this is one of the biggest divergences we’ve seen between market performance and the STAX score in the history of this analysis.”

Equities got off to a rough start in September, with the S&P 500 down by more than four percent for the first week - its worst week of 2024 to-date. Though equities recovered the very next week, it’s possible that the weak start played into concerns over seasonality (some traders may view September as a historically weak month for stock performance), and amid a backdrop of rising geopolitical tensions and an impending U.S. Federal Reserve meeting, clients chose to de-risk and shed equities in the first two weeks of the month. In contrast to August’s activity, those sales were not met with corresponding equity dip buys. In fact, many clients rotated a portion of their portfolios from equities into fixed income, which experienced strong inflows during the STAX period.

Both the Dow Jones Industrial Average® and the S&P 500 hit new highs of 42,628.32 and 5,767.37 respectively in the closing days of the September STAX period. The Nasdaq Composite closed the period at 18,189.17, up 2.68% and within five percent of its all-time-high set in July of this year.

The September STAX period was heavily impacted by market-moving economic data. On September 5, initial jobless claims came in at 227,000, slightly fewer than expected. Despite this favorable data, the S&P 500 sold off by 1.75% the following day. The U.S. Bureau of Labor and Statistics released its Employment Situation Summary on September 6, which showed non-farm payrolls rose by only 142,000 and revisions to prior months’ data that underscored a softening labor market. The unemployment rate did fall to 4.2%, but the S&P 500 sold off by more than 90 points regardless. The Consumer Price Index (CPI) came in better than expected at 2.5% for the trailing 12 months and the Producer Price Index (PPI) increased 0.2%, which was in-line with expectations. Second quarter Gross Domestic Product (GDP) estimates remained at 3% while the real first quarter GDP was revised upwards from 1.4% to 1.6%; the primary drivers were increased consumer and federal government spending.

On September 18, the FOMC announced a 50-basis point reduction to the Fed Funds rate, its first rate cut in four years. While a rate cut was widely anticipated, the decision to cut by 50 bps was a surprise to many market participants. The S&P settled nearly 100 points higher the following day and continued to rally through the remainder of the September STAX period.

The CBOE Volatility Index® (VIX) spiked (intra-month) by 50% for the second consecutive month and closed the period 13% higher at 16.96. The 10-year Treasury yield fell by 4.14% to close the period at 3.75%. The U.S. Dollar Index declined, closing at 100.42, down 1.26%. Front month WTI Crude Oil futures fell by 7.30% to close the period at $68.18 per contract, as current supply and output forecasts from Saudi Arabia continued to outpace demand.

Popular names bought by Schwab clients during the period included:

• NVIDIA Corp. (NVDA)
• Palantir Technologies Inc. (PLTR)
• Intel Corp. (INTC)
• Alphabet Inc. (GOOG/GOOGL)
• Microsoft Corp. (MSFT)

Names net sold by Schwab clients during the period included:

• Tesla Inc. (TSLA)
• Advanced Micro Devices Inc. (AMD)
• Alibaba Group Holding Ltd. (BABA)
• AT&T Inc. (T)
• Nio Inc. (NIO)

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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