Some clients sit out best start in stocks since ‘87

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January may have seen the strongest start to a year for U.S. stocks in more than three decades, but many retail investors watched the rally from the sidelines.

Clients of TD Ameritrade, already skittish at the end of 2018, further cut their exposure to the stock market in the first four weeks of the New Year, the Omaha, Nebraska-based brokerage said Monday. The firm’s Investor Movement Index — which has tracked clients’ positioning in the market since 2010 — declined for the fourth straight month to its lowest since July 2012.

That’s as the S&P 500 gained almost 8% in January, the best month for the equity benchmark since 2015. The index hadn’t seen as big a January rally since 1987, when it soared 13%.

“Despite the longest running government shutdown, U.S. equity markets recovered in January fueled by well-received Fed announcements and strong job numbers,” Joe Kinahan, chief market strategist at TD Ameritrade, said in a statement. “Still, ambiguity surrounding U.S.- China trade relations kept investors in more defensive parts of the market.”

Clients using TD Ameritrade’s platform still bought financial products, but those that are less risky with lower beta — or sensitivity to market gyrations. For ETFs and mutual fund purchases, the products tended to be more index-based. Clients also focused on fixed-income assets. When it came to stocks, top buys included Apple and Amazon, while they sold names like Facebook and Twitter.

“They’re hopeful but they’re nervous to take a lot risk because we’ve still got the tariff situation sort of waiting off in the wings,” Kinahan said. “The thing that makes me nervous, and I think our clients are seeing through that, is the fact that there’s no talk of capex.”

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