Schwab clients were net buyers as the markets notched new highs, though signs of caution remain

Key Takeaways:

The Schwab Trading Activity Index™ (STAX) increased to 55.08 in May, up from its score of 50.10 in April.
Schwab clients were net buyers in May, though three of the 10 most net-bought names were diversified exchange-traded funds (ETFs), suggesting a degree of caution remained.
At the sector level, Information Technology led the net-buy list in May, followed by Consumer Discretionary and industrials. Communication Services, Health Care, and Energy were net-sold.

The Schwab Trading Activity Index™ (STAX) increased to 55.08 in May, up from its score of 50.10 in April. The only index of its kind, the STAX is a proprietary, behavior-based index that analyzes retail investor stock positions and trading activity from Schwab's millions of client accounts to illuminate what investors were actually doing and how they were positioned in the markets each month.

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"As major indexes reached new heights in May, Schwab clients were net buyers of equities, although the popularity of diversified ETFs during the period suggests a degree of caution remained," said Joe Mazzola, Head Trading and Derivatives Strategist at Charles Schwab. "Overall, this STAX score itself climbed during the period but remained below the levels seen in February and March of this year."

First-quarter S&P 500 earnings growth of nearly 27% marked the strongest quarter since late 2021, which helped sustain bullish sentiment for the balance of the year. Importantly, that earnings momentum also meant valuations did not expand dramatically despite the broader market rally. Economic data in May generally pointed to resilience, particularly in jobs and manufacturing. Inflation remained a concern, however, and Federal Reserve policymakers kept a hawkish tone. By the end of the STAX period, the CME FedWatch Tool reflected roughly a 50% chance of a rate hike later this year—a sharp reversal from earlier in the year, when investors had been pricing in two to three rate cuts.

One notable May trend was clients' use of options, rather than equity purchases, to gain exposure to rallying tech stocks while keeping risk somewhat lighter. Put selling accelerated during the month, as investors looked for better stock entry points. (Importantly, short puts risk purchasing the underlying stock at the strike price when the market price of that stock will likely be lower.) Clients also looked overseas for opportunity, particularly in South Korea, where markets rallied on the back of the memory chip boom.

At the sector level, information technology led the net-buy list in May, followed by consumer discretionary and industrials. The biggest net-sell sectors were communication services, healthcare, and energy. From a generational perspective, STAX scores rose across every investor generation in May after falling in April. Generation X (1965–1980) remained the most bullish, followed by Baby Boomers (1946–1964). Millennials (1981–1996) trailed closely behind, while Generation Z (1997–2012) once again posted the lowest reading.

Popular names bought by Schwab clients during the period included:

NVIDIA Corp. (NVDA)
Micron Technology Inc. (MU)
Intel Corp. (INTC)
Microsoft Corp. (MSFT)
Amazon.com Inc. (AMZN)

Names net sold by Schwab clients during the period included:

Apple Inc. (AAPL)
Advanced Micro Devices Inc. (AMD)
Tesla Inc. (TSLA)
Crowdstrike Holdings Inc. (CRWD)
Oracle Corp. (ORCL)

About the STAX

The STAX value is calculated based on a complex proprietary formula. Each month, Schwab pulls a sample from its client base of millions of funded accounts, which includes accounts that completed a trade in the past month. The holdings and positions of this statistically significant sample are evaluated to calculate individual scores, and the median of those scores represents the monthly STAX.

For more information on the Schwab Trading Activity Index, please visit www.schwab.com/investment-research/stax. Additionally, Schwab clients can chart the STAX using the symbol $STAX in either the thinkorswim^® or thinkorswim Mobile platforms.

Investing involves risk, including loss of principal. Past performance is no guarantee of future results.

Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.

Options carry a high level of risk and are not suitable for all investors. Certain requirements must be met to trade options through Schwab. Please read the Options Disclosure Document titled "Characteristics and Risks of Standardized Options" before considering any option transaction.

Historical data should not be used alone when making investment decisions. Please consult other sources of information and consider your individual financial position and goals before making an independent investment decision.

The STAX is not a tradable index. The STAX should not be used as an indicator or predictor of future client trading volume or financial performance for Schwab.

About Charles Schwab

At Charles Schwab, we believe in the power of investing to help individuals create a better tomorrow. We have a history of challenging the status quo in our industry, innovating in ways that benefit investors and the advisors and employers who serve them, and championing our clients' goals with passion and integrity.

More information is available at aboutschwab.com. Follow us on X, Facebook, YouTube, and LinkedIn.

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MEDIA:

Margaret Farrell

Charles Schwab

Phone: 203-434-2240

Schwab Trading Activity Index™: STAX Score Rebounds in May