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All-time US Market Highs Close Out 2016 with Bang


A trader works at the New York Stock Exchange, Jan. 9, 2017.

A trader works at the New York Stock Exchange, Jan. 9, 2017.

The year 2016 ended in spectacular fashion as the S&P 500, Dow Jones Industrial Average and NASDAQ broke all-time highs, and the retail investor went along for the ride. Macro events did not scare investors, but rather kept them engaged in the markets.

The Investor Movement Index (IMX) is a proprietary, behavior-based index created by TD Ameritrade that aggregates Main Street investor positions and activity to measure what investors are actually doing and how they are positioned in the markets. The IMX gives a look into how we are approaching the markets, not just what the big institutions like Morgan Stanley and Goldman Sachs are doing.

As popular as it is to shop on Amazon.com, the stock also saw a lot of love from investors; it was the most popular stock to buy for TD Ameritade clients in 2016. Facebook, Valeant Pharmaceutical, Gilead Sciences and Alphabet (Google) followed in buy popularity.

On the flip side, investors took advantage of taking gains off the table in stocks that made a comeback. The most popular stocks sold in 2016 by clients were Apple, Netflix, Alibaba, Bank of America and Chevron.

Retail investors were net buyers in 2016

Despite the S&P 500 down 14 percent on the February 11 low, investors held the course and remained in the market.

"2016 started with double-digit losses and concluded with double-digit gains in the market. Our clients steadily increased their exposure on the downturns and are well positioned for 2017," said Steve Quirk, executive vice president of the Trader Group at TD Ameritrade.

Even the historic Brexit vote and U.S. presidential election did not deter clients. On the surprise Donald Trump win on November 8, Dow Jones Industrial Average futures were down 800 points in pre-market trade heading into the November 9 trading session.

"In fact, Brexit was the year's biggest trading event for TD Ameritrade clients," added Quirk, reflecting on notable events throughout the year. "Not only was June 24 the top trading day of the year overall, it was also the number one day for equity and options trades for retail clients. The U.S. presidential election was clients' second-biggest trading event overall, and November 8 was the top day for futures trading. Volatility in the January sell-off of 2016 drove trading on January 20 to be the third-biggest trading day for our clients."

Repeat performance

The million-dollar question traders are asking is, will stocks continue on the upward trajectory? Quirk believes there could be some corrective action in the near-term, but the recovery may be a bit muted.

"Everybody believes we are going to have a correction at some point, and I think there will be a little bit of a pullback, but I do not think we will see the gains in 2017 like we did 2016," Quirk said. "You have to remember this bull market is nearly 8.5 years old at this point."

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