Communication Services, Information Technology and Industrials were Schwab clients’ only net-bought sectors in October as clients returned to individual stock picking

Key Takeaways:

• The Schwab Trading Activity Index™ (STAX) increased to 61.94 in October, up from its score of 58.92 in September.
• Schwab clients favored Information Technology stocks, “buying the dip” and gravitating back towards individual stocks after having favored ETFs in September.
• A recent client survey indicates investor sentiment is likely to hold steady when it comes to buying equities in November, although bullishness among active traders shows signs of softening.

The Schwab Trading Activity Index™ (STAX) increased to 61.94 in October, up from its score of 58.92 in September. 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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“After favoring ETFs in September, Schwab’s retail clients turned back to individual stocks in October, particularly those Information Technology and AI-related stocks that took a dip amid funding concerns,” said Joe Mazzola, Head Trading Strategist at Charles Schwab. “Clients appeared to be looking for growth opportunities, fueled by hopes of an AI bounce-back.”

In October, investors digested a September jobs report that showed just 29,000 new positions added and higher inflation data that put consumers under pressure. September personal income inched up 0.2% month-over-month, according to the U.S. Bureau of Economic Analysis (BEA), missing Briefing.com expectations of 0.3%, as spending rose 0.5%, slowing from August's 0.9% jump. Adjusted for inflation, the picture grew starker; spending was essentially flat, while after-tax income fell 0.3%.

However, gross domestic product (GDP), manufacturing data, and consumer confidence generally appeared solid, and despite inflation, the Federal Reserve voted 10-2 to keep rates paused at its late-October meeting after raising rates in September.

Anticipation of the November U.S. midterm election and mega-cap earnings season likely influenced last month’s investor caution, and though the STAX showed many of Schwab’s clients taking new positions in growth stocks, the market itself entered a defensive crouch in October, with money flowing into Staples, Health Care, and Treasuries. The 10-year Treasury note yield took a major skid in October, closing the month near eight-week lows at around 4.92% despite high oil prices.

Only three of 11 S&P 500 sectors—Communication Services, Information Technology, and Industrials—recorded net buying in October, down from seven in September. Sectors like Consumer Discretionary and Staples were among the weakest in terms of client buying interest, suggesting that clients looked for growth stocks in October. From a demographic perspective, all cohorts became more bullish, with Gen X clients continuing to lead net buying. The more active traders tracked by the STAX remained heavily skewed toward net buying in comparison to their less active investor counterparts, reaching their highest level of market exposure since segment tracking began more than two years ago.

A recent survey of more than 550 of Schwab’s retail clients indicated that overall, 19% are bullish about investing in equities in November, compared with 17% in October. Schwab’s most active trader clients remain more bullish than their investor counterparts, though their bullishness has softened somewhat from 33% to 25%. Clients also indicated less willingness to buy the dip in sectors with notable decline in November (35% are likely to buy the dip, compared with 39% in October). Geopolitics and inflation remain the leading influences on clients’ investing decisions, with geopolitical developments ranking among the top three influences for 60% of clients, followed by inflation reports at 53%, earnings results and guidance at 40%, and Fed commentary or interest rate decisions at 33%.

Popular names bought by Schwab clients during the October period included:

• Space Exploration Technologies Corp. (SPCX)
• NVIDIA Corp. (NVDA)
• Micron Technology, Inc. (MU)
• Alphabet Inc. (GOOGL)
• Intel Corp. (INTC)

Names net sold by Schwab clients during the period included:

• Microsoft Corp. (MSFT)
• Tesla Inc. (TSLA)
• Apple Inc. (AAPL)
• Palantir Technologies Inc. (PLTR)
• Walmart Inc. (WMT)

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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