Volatility, Earnings & Interest Rates: Retail Investor Perspective

May 22, 2015 | Kendra Galante

The IMX, a behavior-based benchmark of Main Street investor positions and activity, dipped to a new two-year low in April as TD Ameritrade clients lowered their exposure to equity markets.

Chief Strategist JJ Kinahan explains that retail investors had gone into portfolio preservation mode as the market reached all-time highs. Many clients seemed to use April as an opportunity to take some profits and buying activity was targeted toward undervalued stocks and sectors that didn’t look as frothy.

The April IMX

  • Reading: 4.63 (compared to 4.75 in March)
  • Trend direction: Negative
  • Trend length: 1 month
  • Score relative to historic ranges: Middle

The Retail Investor Perspective

Volatility in the S&P 500 as measured by the VIX reached a year-to-date low in April, easing some global and macroeconomic fears. Long-time TD Ameritrade client Charles Frischer says volatility is not a primary concern for him:

“I like to look for good companies and make long-term investments. I don’t believe in focusing on volatility and only looking at the next month. I have a much longer-term outlook.”

Some positive earnings announcements and reduced concerns about an interest rate hike by the Federal Reserve seemed to help push the markets upward in April. Frischer says the eventual rise in interest rates doesn’t worry him too much:

“I stay focused more on the medium and long-term and don’t get so caught up with the next quarter point rate increase and whether it’s going to be in September, November or December. I believe folks who get caught up with what the Fed’s going to do are missing the boat. I think it’s best to stay focused on the companies.”

A popular net buy in April was Apple Inc. (AAPL), ahead of its earnings announcement and as news of Apple Watch orders came in. Frischer highlights a few reasons why Apple continues to be so appealing to many retail investors:

“I believe the earnings release was remarkable. I consider the Apple Watch, glitch or no glitch, to be a home run. I think the products are great, the execution is great, the software is wonderful, and people love the company. To me it really is an amazing American story.”

Overall, the downward movement in April’s IMX shows the continuing sophistication of the retail investor as they continue to strategically rotate their portfolios to lower beta positions and settle in for the long haul – despite what volatility, earnings and interest rate news comes their way.

Learn More

For more information on the IMX, including historical data going back to December 2010, as well as a copy of the full report visit www.tdameritrade.com/IMX.