IMXSM Index decreased in February

The Investor Movement Index® (IMXSM) decreased to 6.79 in February, down from 7.07 in January. The IMX is TD Ameritrade’s proprietary, behavior-based index, aggregating Main Street investor positions and activity to measure what investors actually were doing and how they were positioned in the markets.

February’s reading for the period ending February 25, 2022 ranks “Moderate” compared to historic averages. While the month started with strong equity demand, the swift rise of geopolitical concerns, combined with inflation numbers pushing higher and continued uncertainty on the cadence of Fed rate raising that emerged at the end of the period led many retail investors to sell equities and move into safe haven assets.

While this selling pushed the IMX score lower this month, clients were net buyers in February, using the pullback as an opportunity to move toward more ‘traditional’ names and add to positions that they felt could weather uncertainty well.

February started with some relative strength for equities after the significant drop across all major indices in January. The much-anticipated monthly employment report seemed to provide confirmation that the Federal Reserve could move full-steam-ahead with its interest rate hiking cycle.

But while the markets’ initial focus was primarily on the looming policy shift from the Fed, attention quickly turned to the escalating situation between Russia and Ukraine.

As investors came to realize that this confrontation would escalate far beyond the scale of the 2014 Crimea incursion, markets quickly repriced, with pronounced moves in commodities across the board as well as energy, metals, and agriculture products.

The surge in inflation expectations along with the potential for lowered growth expectations led to markets pricing in the potential for a stagflationary environment.

After the Fed-induced pullback in January, the added geopolitical concerns sent the S&P 500 into correction territory for the first time since February 2020.