This week we got an update from the Schwab Trading Activity Index, also called the STAX. We initially covered this data in Tuesday’s Closer for subscribers, but we also wanted to highlight it here on Think BIG.

Whereas most investor sentiment readings like the AAII survey directly ask investors how they feel about the market, indicators like the STAX are derived by measuring what retail investors are actually doing in their accounts.In September, Schwab’s Trading Activity Index fell to 47.1, which is the lowest reading since January.That drop occurred even though the stock market continued to rally to new all-time highs.

The STAX data dates back to 2019, and as shown below, the index surged in late 2020 through late 2021 during the first post-COVID bull market when Americans were flush with stimulus cash and were actively bidding up pretty much everything that traded!At the time, the STAX index saw record highs with readings above 75 in June and November 2021.November 2021 was ultimately the peak for growth stocks before the bear market of 2022.

Notably, there’s a big difference between the STAX reading now versus 2021. The stock market is currently up 60%+ off the late 2022 lows and has registered 44 all-time highs already this year. Similarly, the market was also making a new high after a new high back in 2021. During this year’s rally, though, the STAX has remained quite subdued compared to going gangbusters in 2021. This tells us that there’s less complacency, enthusiasm, and overall interest in the market right now versus 2021 levels, which is good if you’re a long-term bull.
The Schwab STAX index was established in 2019, but before TD Ameritrade’s acquisition by Schwab, it had a counterpart index called the Investor Movement Index that featured data dating back over a decade. Standardizing the two indices shows they’ve had comparable readings with only minor discrepancies.As mentioned earlier, current sentiment levels are much more depressed than at the time of past record S&P 500 highs like in 2020/2021 and 2017. During those periods, these trader activity indices were well over 2 standard deviations above the historical average. Right now, they’re basically neutral, meaning retail investors are neither overly bullish or bearish.More By This Author:Bears Head To Hibernation Early Small Businesses Fearing The Election October Isn’t Just Volatile In The U.S.