From Euphoria To Panic: Retail Investors Fled Stocks In February

Over the weekend, we reported that after looking at the recent violent reversal in ETF flows, which resulted in the biggest outflow from equity ETFs since the Feb 5 Quant Crash, JPM was getting concerned that retail investors are no longer "buying the dip."

As JPM wrote "the potential withdrawal of retail investors as the marginal buyer of equities could create clear downside risk for equity markets for the near term - especially after buying an unprecedented $100bn of equity ETFs in only one month during January." Incidentally, the January inflow coincided with what many dubbed the market's blow-off top, or mania, phase.

We now have confirmation that JPM was right because according to TD Ameritrade,  in February euphoria turned to panic as mom and pop investors ran for cover from tumbling stocks at the fastest pace since at least 2010.

As shown in the chart below, TD Ameritrade's Investor Movement Index (IMX) tumbled to a reading of 5.95 last month from 7.79 in January, a plunge of 23%, the largest monthly decline since TD Ameritrade started tracking the figures in 2010, according to a press release. This was also the second straight loss for the gauge, which fell 9 percent in January.

“After the amazingly quiet 2017, we saw 2018 start with some volatility,” said JJ Kinahan, chief market strategist at TD Ameritrade. “It appears that TD Ameritrade clients decided to significantly limit their volatility risk in the market, changing their game plan from less speculative to more of a low beta weighted one.”

Speaking to Bloomberg, Kinahan added that the drop demonstrated "our clients really showing a lot of caution for the period. After last year where our clients built up their exposure all year long, we saw a little bit of a click down in January, and a significant click down in February.”

That said, the decline didn’t persist throughout the month, according to Kinahan. Instead, the broker-dealer’s clients picked up some holdings around Feb. 9 when the selloff subsided. But shortly after, they resumed selling with force."

Hence JPM's concern that retail investors may now be selling rallies instead of buying dips.

According to TD Ameritrade, the equities that were sold the most in February were Gilead Sciences and Facebook. Bristol-Myers Squibb was also net sold after it reached an 18-month high, as was Snap which reported a revenue increase which led to a jump in share prices. Finally, Target was net sold following an analyst upgrade and increased price estimate. Additional names sold included ConocoPhillips, Juno Therapeutics, and Bioverativ.

And yet, despite the sharp pullback in risk, clients remained net buyers in the period. Among the biggest net buys were General Electric and Ford as both companies neared multi-year lows. Apple and Amazon were also net buys, despite reporting better than expected earnings then trading lower following market volatility. Boeing traded higher following better-than-expected earnings and was also a net buy. Microsoft was a net buy after beating earnings, as was Alibaba Group, which was down almost 20 percent from recent highs during the period.


Iconoclast421 Mon, 03/05/2018 - 14:56 Permalink

No shit sherlock. Of course they fled. Look at it. You'd be a fool not to at least buy some puts if not just gtfo. I maintain my position that there is a pattern forming that makes right now literally one of the absolute best shorting opportunities you might ever see. And I mean short term, like 5 days max. I've been waiting weeks for this pattern to form and it actually has done it. And I mean down to the letter, even the rally of today. My model had a target of 2730-2740.

Yen Cross Mon, 03/05/2018 - 15:00 Permalink

   It looks like the BoJ is on the bubble today.

    NI225 CFD's, usd/jpy,eur/jpy, Treasury yields, equity markets, all ramped up like 16 year old kid on Viagra.

Bryan Mon, 03/05/2018 - 15:13 Permalink

Next up is a screaming rally to let all the retail traders know they made a big mistake and to get them all in again so they can once again be fleeced.

MusicIsYou Mon, 03/05/2018 - 15:23 Permalink

Yep, they're getting out of the retailers before the companies fold. That's like soon as babyboomers get older buying less and less guns investors will pull out of gun making companies before the gun makers go under, because there's not enough millennials into guns to keep gun makers afloat.  And then the remaining babyboomers who have guns won't be able to get supplies for their guns. Nobody is taking your guns, your guns are walking away from you. Because you were too busy getting down to Elvis Presley, and focused on fanning yourself on the beach for your entitled vacations, instead of securing the future. Bye bye guns, it was nice knowing you. "I'll have a blue Christmas without you."

Htos1 Mon, 03/05/2018 - 16:02 Permalink

Retail stocks? That was over by '96, when the first credit cards were accepted over the internet. After cashing out Microsoft, IBM, and Cisco, I transferred it to Amazon, when it was just books, oh,  and UPS/FedEx. Dot yeah.......

Tegrat Mon, 03/05/2018 - 20:13 Permalink

I don't know about anyone else but i'm feeling like this will be the year we get a big crash. Anyone else? Also, I just read an advertisement with Harvey Dent. He's very bearish next 5 years. Does anyone here follow him?