Investors were increasingly bullish on U.S. stocks in August despite some confusing economic data, a possible reduction in Fed stimulus and the turmoil in Syria, according to data culled from the largest pool of retail traders by TD Ameritrade.
The firm's proprietary "Investor Movement Index," released Monday, showed a 5.16 reading last month, up from 4.87 in July and was among the five highest readings ever in the indicator's three-year history.
"They continue to look for buying opportunities in what appears to be a more confusing economic environment," said Nicole Sherrod, TD Ameritrade managing director. "And they are buying on the dips again."
While retail investors have a reputation for being the so-called dumb money, those who use TD's trading platform correctly turned bearish in July, just before the S&P 500 had its worst month in more than a year in August, falling 3.1 percent. In fact, the IMX index has correctly predicted the market's next move over the past three months.
These individual traders are bullish at a time when mixed signals on the strength of the U.S. economy are causing great uncertainty. Last week, a pair of reports from the ISM—one on the manufacturing sector and another for services—both came in better than expected. But Friday's jobs number fell flat—with employers adding just 169,000 jobs in August.
In addition, final numbers for June and July were revised sharply downward and the number of unemployed still actively looking for work fell to a 35-year low.
And some experts say more market volatility could be on its way in September. Congress is back from its summer recess and will likely vote on a strike against Syria by Friday. Next week, the Federal Reserve may reach a decision to begin scaling back its $85 billion bond-buying program.
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