September saw the S&P 500, a key indicator of broader market performance, soar to new heights, ending the month with a robust 2.02% gain. However, a closer look at trading activity on Charles Schwab’s platforms reveals a different story. The Schwab Trading Activity Index (STAX) experienced a decline, falling from 53.15 in August to 47.10 in September, indicating a dip in trading volume.
The STAX, calculated using data from millions of funded accounts on Charles Schwab, provides insights into the trading behaviors and market positioning of its client base. A reading of 47.10 places September’s trading activity in the “moderate low” range when compared to historical averages.
This divergence between market performance and trading activity can be attributed to investors navigating a landscape filled with economic data releases. Joe Mazzola, Head Trading & Derivatives Strategist at Charles Schwab, explained that investors were either proactively or reactively adjusting their positions based on economic data. While the market factored in an aggressive stance from the Federal Reserve, Schwab’s clients maintained a generally optimistic outlook on economic activity.
Schwab highlighted the unusual discrepancy between market performance and the STAX score, labeling it one of the most significant divergences in their analytical history. The firm attributed the drop in trading activity to investors exercising caution in the face of a barrage of economic data, including an unexpected rate cut in September.
Despite the dip in trading volume, the market still saw record highs. The S&P 500 and the Dow Jones Industrial Average both closed September at record highs, with the S&P 500 reaching 5,762.48 and the Dow ending at 42,330.15. The tech-heavy Nasdaq Composite Index also closed the month at a new high of 18,189.17.
Schwab’s data also shed light on the specific stocks attracting investor attention. Clients were actively buying into artificial intelligence and chip stocks like Nvidia, Palantir Technologies, and Intel, while selling off high-profile tech names like Tesla and Alibaba.
Intel, which saw its stock price rise over 6% in September, benefited from rumors of a potential stake sale and spin-off. Palantir’s inclusion in the S&P 500 Index and strong retail investor interest likely contributed to its popularity among Schwab clients. Interestingly, Meta Platforms, which has been a strong performer in October, did not make the list of top six most-bought stocks during September.
The divergence between market performance and trading activity on Schwab’s platforms suggests a nuanced picture of investor sentiment in September. While the overall market experienced growth, individual investors seem to have taken a more cautious approach, potentially reflecting a desire for greater clarity amidst a flurry of economic data releases.
