The Weekly Update 10/18/2024

Still Scared

Last week I came across an indicator I had not seen before.  It is an investor sentiment indicator created by Charles Schwab Corporation.  It is created from their client’s activity.

Unlike the American Association of Individual Investors (AAII) or the Fear versus Greed Index I reference here often, it measures what investors are doing with their investments versus how they feel about investing.  It is the Schwab Trading Activity Index, STAX.

In September the STAX dropped to 47.1, which is the lowest level of 2024.  The amazing part is that the STAX is dropping while the values of Corporate America, as measured by the S&P 500, are hitting new highs after new highs!

In this chart below you can see the STAX versus the S&P 500 back to January 2019 but focus on the trend from July 2024 to present day.

As you know from these notes, this is Pure FEAR! 

In Sign #2 (Money Flow) and Sign #6 (Corporate Earnings per Share) I detailed this in the October 2024 update of The Seven Signs of a Changing Economy™ (Read it Here).  Specifically, that huge institutional investors are buyers while Mr. & Mrs. 401(K) are sellers.  So, what are the sellers doing with their sell proceeds?  Yup, running for the “safety” of cash.  Sung to the tune of the most cash in history sitting on the sidelines watching and waiting for the coast to clear, with $6.5 trillion in their money belts.

What tends to happen after high fear levels?

     FOMO

     Fear Of Missing Out!

Once Mr. & Mrs. 401(K) figure out the world has always been scary and we just didn’t know it because, well you know social media didn’t exist, they will start investing to catch up.

Yes, I sound like a broken record, as I have been saying this for over two years. However, if you are a part of our client family your account has enjoyed the benefits.  Benefits that I strongly believe will continue well into 2025.

Ifwedo get an election pothole…pounce on that as an opportunity. Your future self will hug you.

Don’t fret, panic or worry if the “normal” back and fill comes knocking. It will not be as scary as the business news will tell you. Instead, I think the knocking will be an opportunity and here at TWSG, we will pounce on that, for now just pray that it comes!

At TWSG, we are well allocated for this and have our well thought out Investment Selection Matrix™, investment menu working in our collective TWSG family’s asset allocations. 

I’m interested in your thoughts, comments and observations. Feel welcome to call, email, or stop by the office and say Hi.

Respectfully,

James O. Lunney, CFP®

CERTIFIED FINANCIAL PLANNER™ Professional  

Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested in directly. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Stock investing includes risks, including fluctuating prices and loss of principal.

Asset allocation does not ensure a profit or protect against a loss.  Value investments can perform differently from the market as a whole.  They can remain undervalued by the market for long periods of time.