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Stocks: Declining exposure to risk assets now ‘a 3-month trend,’ strategist says

TD Ameritrade Trading Strategist Alex Coffey joins Yahoo Finance Live to weigh in on the latest TD Ameritrade Investor Movement Index and the major buys and sells from clients in November.

Video transcript

- Well, TD Ameritrade has revealed a dip in its latest investor movement index for November, falling slightly from its October score of 4.25. So what were the key themes? Joining us with highlights is Alex Coffey, TD Ameritrade trading strategist.

Alex, good to talk to you this morning. Certainly, retail investors not immune from the jitters that we have seen in the market. It feels like the overarching theme, at least, in the previous month was really about reducing exposure.

ALEX COFFEY: No, doubt about it. First off, thanks for having me on covering this behavioral index, which takes a look at what mainstream investors are actually doing with their positions. But I think you highlighted it well.

We saw another month of declining exposure and net selling of equities. This is now a three-month trend of decreasing exposure to risk assets, as well, as a two-month trend of net selling of equity positions.

But if we're looking for sort of an optimistic point that may show possibly a bottoming out of this trend, for the third consecutive month, we've seen the rate at which the exposure is being decreased decline. So if you go back to the September month, for example, we saw a decline in the investor movement index of 7.26%.

In the October month, we saw it down by 4.92%. And looking at the total TD Ameritrade client population investor movement index for this last November period, the decline was 1.88%. So while it still continues to show a decline in exposure to risk assets, it is a moderating decline, maybe possibly showing that we could see a trend shift here in the next couple of months.

- And Alex, as we're looking at some of the things that clients have actually been buying at the moment. You've got Tesla there, Taiwan Semiconductor, Intel, Apple, Meta. What we're seeing that why do you think we're seeing so much movement in there?

ALEX COFFEY: Yeah, that's a great question. One thing that I think is important to note, throughout the year of 2022, all investors have had to adapt. It's a different market environment that we saw in 2021, and retail investors, just like their professional counterparts, adapt to those market situations.

TD Ameritrade, Charles Schwab, Thinkorswim before, all pride themselves on investor education. While we can't take all the credit for the choices that our investors are making and our clients are making, what we can say is, you know, some of the basic messages like buying low and selling high, I think, really are represented by the actions taken by TD Ameritrade clients, particularly in the month of November.

You mentioned Tesla as one of the primary names that saw buying activity. Tesla was down by about 20% in the November IMX period. This is a name that has outperformed widely many of its peers over the last few years.

This is a name that investors have really enjoyed participating in. It's one of the most widely traded names amongst TD Ameritrade clients. It's one of the most widely held names from an investment standpoint by TD Ameritrade clients.

And when we see weakness in this name, it is often accompanied by buying activity. So down 20%, we know the reasons why. Obviously, the Twitter distraction has been a big headline, as Elon Musk, of course, has seen some of his attention-- majority of attention going to the social media company that he is now the CEO and sole owner of.

But you look at also the Chinese COVID concerns, which have really ramped up, I would say as we've kind of just rounded this final turn to the final month of the year. But there were still concerns from the supply chain standpoint during the November IMX month, as well.

And, of course, there were some recalls, as well, that were announced regarding some of the Tesla vehicles. Some of the other names you mentioned, TSM, of course, was up 30% over that period, with huge October sales figures. So maybe a little bit more confidence coming into the semiconductor space.

- Yeah, Alex, you mentioned Tesla. That's a name we hear often, when we talk about your retail clients, NVIDIA, another big one. But I'm struck by some of the ones that have names that have been sold here, especially American Airlines, United Airlines, Boeing.

I mean, are you starting to see maybe some of the retail clients kind of shifting beyond, you know, for the tech focus that we tend to see, or we've tended to see in the past?

ALEX COFFEY: What I think is most emblematic of what we're seeing amongst the selling activity is these are largely names that have participated recently in the jump in equity prices. So you look at, for example, NVIDIA, it was up 17.5% during the IMX period.

But it actually fell towards the latter half of the month after a report from an earnings standpoint that really didn't excite the street. So you had a bounce back in semiconductors, but not really the fundamental information in the case of NVIDIA to back that up.

And I think that that led to some of the selling rotation out of a name like NVIDIA and maybe into a name like TSM. You mentioned the airline names. As we round this turn, and we kind of watched the baton being passed from, let's say, inflation fears to now more economic fears in terms of going into 2023, names that are tied to discretionary spending like travel names in the case of United, in the case of American, are also going to be a little bit more concerning, I think from an investment standpoint.

And I think TD Ameritrade clients voting rotating out of that reflects that also, of course, in the case of American Airlines, highly indebted name, we know, obviously, the interest rate story has been a huge part of 2022, as they have to continue to revolve that corporate debt that's going to be more pressure on American Airlines.

Boeing, you mentioned, one of the strongest performers during the IMX month. One of its strongest months in quite some time, as well. So again, another example of rotating out of names that have done quite well and finding buying activity in names that just garner more trust, names like Apple, names like Microsoft, and names like Tesla with a little--