Schwab Trading Activity Index slides by most since June 2022 in September

The Schwab Trading Activity Index (“STAX”), a measure of retail investor stock positions and trading activity from Charles Schwab’s (NYSE:SCHW) client accounts, fell by the most since June 2022 in September 2024 as clients de-risked and took profits on the back of the Federal Reserve’s bumper half-percentage-point interest-rate reduction.

The behavior-based index, released on Monday, dropped to 47.10 last month from 53.16 in August. The reading for the four-week period ending Sept. 27, 2024, ranks “moderate low” compared with historic averages.

“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,” said Joe Mazzola, head Trading & Derivatives Strategist at Charles Schwab.

With the Fed initiating its monetary easing cycle with a larger-than-usual rate cut, many Schwab (SCHW) clients rotated part of their portfolios from equities into fixed income, which saw robust inflows during the September STAX period.

While clients were net sellers of equities overall during the period, the stock market managed to hit new highs in the closing days of the period.

By sector, clients were net sellers of communication services (XLC), information technology (XLK) and consumer discretionary (XLY), while they were net buyers of energy (XLE) and consumer staples (XLP).

Popular names bought by Schwab (SCHW) clients during the period featured Nvidia (NVDA), Palantir Technologies (PLTR), Intel (INTC), Alphabet (GOOG) (GOOGL) and Microsoft (MSFT).

Names net sold by clients during the period included Tesla (TSLA), Advanced Micro Devices (AMD), Alibaba Group Holding (BABA), AT&T (T) and Nio (NIO).