Even as the stock market had one of its best January performances in years, TD Ameritrade's Investor Movement Index (IMX) showed the brokerage's clients were net sellers of stocks, led by tech stocks.
Retail traders unloaded technology stocks the hardest, but found select EV stocks to add to their portfolios.
As inflation tempers and volatility expectations subside, TD Ameritrade expects investors to continue to increase equity exposure. An unusually low January 4.31 IMX reading increased from December's 4.17, showing investors are feeling slightly more optimistic and starting to increase their equity exposure, the firm said.
Tech Stock Buys Help Push IMX Score Higher
"While there's still a ways to go before the IMX score reaches the soaring heights it hit in 2020 and 2021, optimism among retail investors is beginning to creep back up as this year begins," said Shawn Cruz, TD Ameritrade's head trading strategist. "With inflation moderating and volatility projections starting to wane, retail investors are continuing to net sell equities but are also on a whole increasing their market exposure, potentially signaling more appetite for exposure in the months to come."
TD Ameritrade's IMX value is a proprietary formula measuring stock additions and sales from a sample of retail clients' trades. Although it covers only the brokerage's client base, it can offer insights on broad investor trends.
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The S&P 500 gained 6% in January while the Nasdaq composite rose 10.5%, showing investors are starting to reenter the stock market.
TD tracks millennial investors separately from its overall client base. While millennials were overall net sellers during January, they were net buyers of health care, real estate and utilities.
Investors Cashed Out Airlines, Techs
Facebook parent company Meta Platforms was heavily distributed in January, as investors took advantage to take profits on the stock's 23% gain for the month.
Both overall and millennial TD clients sold American Airlines into strength, capturing profits. The airline rose 30% during the index's four-week measuring period, after management gave a positive preview on Jan. 12 ahead of its Q4 earnings on Jan. 26, when it beat profit views.
TD's total client base also locked in profits on United Airlines, as the stock gained nearly 30% in January. IBD's airline industry group increased nearly 21% in January.
Clients also cashed in on Boeing as the stock gained 11.8% in January.
And investors cleaned out Netflix shares from their holdings, as the streaming service's stock added 20% in January.
Investors Rediscover Tesla Stock
Both groups of clients added EV giant Tesla stock to their portfolios, following the company's Q4 earnings report.
As investors sold tech stocks, they rediscovered others in the EV group, heavily adding Rivian Automotive and Lucid Group to their holdings.
Lucid spiked 43% on Jan. 27 in heavy volume on takeover speculation, but pulled back 8.7% the next session.
Ford Motor was also a favorite, up over 16% in January, as it puts increasing emphasis on its EV lineup. The Auto Manufacturers IBD industry group gained an impressive 30.6% in January.
Follow Kimberley Koenig for more stock news on Twitter @IBD_KKoenig.
