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Takeaways from TD Ameritrade's September investor movement index

JJ Kinahan, TD Ameritrade chief market strategist, joins Yahoo Finance to discuss where retail traders sought opportunity in the markets during September.

Video Transcript

ADAM SHAPIRO: Let's keep talking about where markets are headed and two things that we just heard from Emily-- the price of copper, but also what's going on with oil and much more. We're going to discuss all of that now with JJ Kinahan. He is TD Ameritrade's chief market strategist. It's always good to see you, JJ. Thank you for joining us.

JJ KINAHAN: Hey, Adam.

ADAM SHAPIRO: I want to point out to everybody, you know, TD Ameritrade has the Investor Movement Index. And what I love about this-- and I think a lot of investors can benefit from-- is if you want to see what the herd is up to, what investors are doing, at least, you can see what the TD Ameritrade investors are doing, where they're moving, where they're not moving. Sometimes the herd goes off a cliff.

But this is the kind of data that you can use. For instance, people were buying Apple, people were buying Nvidia, people were buying Ford. When you look at what investors are doing, are they ignoring the analysts and this kind of pause, waiting for Q3, and also ignoring the worry about inflation?

JJ KINAHAN: Yeah, Adam. Well, thanks for bringing that up. And they're also buying SoFi, I might add. So it was kind of fun to see that last month. And what I like about the index is it's what people are actually buying and selling, not what they say they're going to buy or sell. So it measures actual activity. And, you know, you mentioned a few of the names there.

And Ford has been particularly popular over the last five months with our clients, I think part of it being it's a way to play the electric vehicle space in a way that's maybe, shall we say, more affordable for an average account. One of the things I think that's often understated was how good at managing money the average retail trader is. It's not like a professional trader, where you don't really think about the money for a trade. As an individual, you have to.

So it's kind of really interesting to me that people have really been drawn to Ford over the last few months. Apple gets a double benefit, as does Microsoft a little bit, Adam. And that is when we go down, people consider them blue chip stocks. When we go up, people consider them growth stocks. So they get a real nice bounce from both of those situations. And let's face it. The buy the bounce mentality-- or buy the dip, I should say, mentality and hope of the bounce-- has been something that's been incredibly successful for most investors over the last 10 years-- I should say those investors who have used that philosophy.

ADAM SHAPIRO: JJ, we should create the woulda, coulda, shoulda index because some of us remember when Ford was trading at, like, $1.50 back in 2008. Talking about two things that Emily mentioned-- and you brought it up in a most recent note to your clients-- one, rising copper prices, but also what we're witnessing with oil. Now, a lot of us understand that the oil situation could be because lack of supply with increased demand. But is there something else at play with economic growth? Because when you see copper prices going up, that's telling us something.

JJ KINAHAN: Absolutely, and, you know, it's really interesting to me that as much as we hear about-- there was a note from Goldman Sachs over the weekend-- cutting the economic picture in the US going forward. Yet we see all these signs from commodities of growth in the economy and inflationary pressures overall. And I think that those two things just alone that we see in today's trading and in Saturday's note shows us the problem many investors are having in the market right now. That is, we continue to see so many mixed signals. And it's one of the reasons I think the Fed has continued to kick the can.

That being said, the inflationary pressures are very real. You know, crude oil, let's face it, that's the first thing that hits most people in the pocketbook in the form of when they go to fill up their gas tank. Or if they're taking an Uber or a cab or something, it costs more money to do so because it's costing those people more money to run their cars. So, you know, they can say inflation is transitory, et cetera, but that is something that people will feel pretty quickly. And what concerns me is, what does this look like as we head into Q4 and into the holiday season and for the start of 2022?

ADAM SHAPIRO: Let's talk about the holiday season specifically, because the index that TD Ameritrade publishes pointed out that investors last month were selling American Airlines. They were selling Delta Airlines. We're going to get Delta earnings on Wednesday.

JJ KINAHAN: Yeah, Wednesday.

ADAM SHAPIRO: And we already got guidance from Delta. Back in September, they filed an 8-K in which they said, look, the drop in ticket sales that they saw bottomed out at the end of August and the beginning of September. So if they just delayed the recovery, it would seem to me-- I mean, shares right now are essentially flat-- looks like those who were selling last month may be in store for a wake up. It would seem buy the dip here might be in play, especially as we head towards the holiday travel season.

JJ KINAHAN: Yeah, you have to remember one thing. There were buyers earlier in the year, overall, the airlines. So some of this could just be taking profits. But yes, you're right. They sold two major airlines with Delta and American. We get a little taste of that on Wednesday. I think we're all very interested to hear what they have to say in terms of, were there cancelations of flights?

And most importantly now, I think a question that maybe didn't exist is much a month ago, that, you know, to bring our conversation back to it a little bit is, how is that crude oil factor going to factor into ticket pricing going forward? Somebody's got to pay for that. And that's become significantly more expensive for airlines and really interested to get their take on what that means for them for the rest of the year and how they're thinking about the future of those prices, as we both know, one of their primary inputs.

ADAM SHAPIRO: JJ, Savi Syth over at Raymond James actually put a note out on that very issue. Delta, though, the one airline that actually-- they all hedge their fuel costs. But Delta has the actual refining properties. But, you know, if we get to talk to Ed Bastian, maybe we ask him about that.

I want to ask you what you're going to pay attention to, because there are hundreds of thousands of people who are trading via TD Ameritrade. What are you going to pay attention to in this quarter's earnings reports? Is it the performance, or is it going to be the guidance, as we're looking forward to the fourth quarter and beyond?

JJ KINAHAN: I'm primarily interested in the guidance, but I think we're going to have two phases to earnings. The first phase, I think, is going to be a very positive one, and that's going to be the banks this week, where you get JP on Wednesday, and then you get Wells Fargo, Bank of America, Citigroup on Thursday. Blackrock's also Wednesday, where I believe you're going to hear very positive things.

Why? The quarter, for the first time in a while, they-- I won't say they got tailwinds, but they're not getting headwinds quite as much anymore from the interest rate picture. So they actually got to make money in a traditional banking function. So, that's great for them.

However, I think the second part of earnings season, you may start to see a fall-off when we get to some of the manufacturing and retail, particularly. And depending on the technology space, you'll have different areas of effect. Why do I say that? The supply chain issue is really one that we know is going to be hitting us in the face. So much has been written about it recently. We saw FedEx commenting about it quite a bit in their earnings.

So I think that the questions are really going to be for the CEOs in manufacturing and technology. How is the supply chain issue affecting you? And for the retailers, as you and I both know, this is the most important quarter of the year. If they don't have supply, it becomes a very, very difficult situation for them to make-- hard to sell things you don't have or are going to take a lot longer to get into stock.

ADAM SHAPIRO: And so, let's wrap it up with something perhaps people at TD Ameritrade, the clients there have an advantage, especially through that index. Because there is a metric now that the parked ships off of the California coast, that the number of those ships has declined by about 12%, as more people come back to work. So will we start seeing that? The retail investors seem to be further ahead on that than perhaps some of the more traditional guidance we get from analysts. Do you think we'll start seeing that in the next reading from the index?

JJ KINAHAN: Yeah, it'll be interesting to see. So I think that where you'll see retail investors start to really sort of vote on that will be by buying some of the true retailers themselves. And so I'm very interested to see if we see-- you know, hopefully, we'll talk next month, Adam. And in there, it'll have some of the retailer names because that, I think, will be a true vote of confidence in what's happening to the supply chain issues.

ADAM SHAPIRO: JJ, would love to talk with you about all of this next month and hopefully score a bit. There was a huge sale, clearance sale with Macy's. You were talking about the retailers. I couldn't help, but, you know, I got the email, like millions of other Americans. JJ Kinahan--

JJ KINAHAN: Awesome.

ADAM SHAPIRO: --TD Ameritrade chief market strategist.

JJ KINAHAN: Always a pleasure, Adam.