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Schwab Trading Activity Index: Score remains at moderate level despite August dip Page 1

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The Schwab Trading Activity Index (STAX) fell to 53.16 in August, down from 54.81 in July. The only index of its kind, STAX is a proprietary, behavioral index that analyzes the stock holdings and trading activity of retail investors from Schwab’s millions of client accounts to provide insight into what investors actually did and how they positioned themselves in the markets each month.

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Schwab Trading Activity Index vs. S&P 500 (Graph: Charles Schwab)

Schwab Trading Activity Index vs. S&P 500 (Graph: Charles Schwab)

The measurement for the five-week period ending August 30, 2024, is rated as “moderate” compared to historical averages.

“Schwab clients appeared to be rotating out of equities and into fixed income as a way to reduce risk, which drove the overall STAX score down this month,” said Joe Mazzola, chief trading and derivatives strategist at Charles Schwab. “While the August trading period started with a bang on August 5 — a day that many have called a ‘meltdown’ or ‘crash’ — markets recovered remarkably quickly, and despite the overall net selloff, we saw many Schwab clients use the volatility to their advantage and seize the opportunity to buy the dip.”

Equity market volatility continued throughout the August STAX period. However, major indices enjoyed multi-day winning streaks, with the Dow Jones Industrial Average reaching a new high of 41,585.21 on the last day of the period, August 30. The “yen carry trade” was still in play in early August following the Bank of Japan’s 15 basis point hike on July 31. Once the unwinding was complete, it likely reduced some of the selling pressure on U.S. equities. U.S. equity markets experienced another significant selloff in late August following somewhat weaker-than-expected payrolls data.

Initial jobless claims came in at 249,000 on August 1, slightly higher than expected. On its own, this metric is not enough to signal a softening labor market. However, the Federal Open Market Committee (FOMC) noted a day earlier that enough data points from recent months have pointed to progress toward employment and inflation targets and that a turn toward interest rate easing is imminent, with an announcement of a rate cut expected in September. The U.S. Bureau of Labor and Statistics released its Employment Situation Summary on August 2, which said the unemployment rate rose to 4.3% and nonfarm payrolls rose by 114,000. Both metrics missed consensus estimates.

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