Investors were a little less bullish in August than they have been in recent months, according to a new report on investor trading activity from Charles Schwab, one of the nation's largest brokerage firms.
The company's proprietary Schwab Trading Activity Index $(STAX)$, which tracks investor behavior, decreased to 57.50 in August from 59.80, indicating weaker market sentiment. That is a 3.85% decline and it is the first time the STAX score fell since April. At the same time, the benchmark S&P 500 rose 2.96% last month.
"August trading activity suggests Schwab's retail clients were becoming more selective as markets recovered," says Joe Mazzola, head trading and derivatives strategist at Charles Schwab. "Rather than pulling back from the market, many appeared to rebalance, taking profits in high-beta software stocks after sharp rebounds while remaining engaged with growth and innovation leaders such as SpaceX and Nvidia."
Schwab's report also highlighted the most popular stocks bought and sold by clients. In August, clients bought Space Exploration Technologies, Micron Technology, Nvidia., Intel, and Alphabet. Conversely, clients were net sellers of Palantir Technologies, Microsoft, ServiceNow, Salesforce, and Oracle.
Schwab says that the industrial, utility, and real estate sectors were the only S&P 500 sectors to attract net buying from Schwab's retail clients in August. The information technology, communication services, and financial sectors saw the largest net selling.
The company notes that economic data released in August showed signs of a sluggish economy. The July nonfarm payrolls report released early in the month declined by 23,000. Second quarter gross domestic product (GDP) increased just 1.5% on a seasonally adjusted annual basis.
Stocks have generally marched higher despite concerns about fallout from the Iran War, rising oil prices, and persistent inflation. The benchmark S&P 500 and Nasdaq indexes are up 11% and 13%, respectively, this year.
Investors have traded more on margin this year, meaning they have borrowed from their brokerage firm to buy stocks. Investors' margin debit balances stood at $1.4 trillion as of July, the most recent month available. That is up from $1.2 trillion for December, according to data from brokerage industry self-regulatory organization Finra.