Schwab Trading Index hits 4-Year High in June as Retail Investors Buy the Dip

Charles Schwab's retail investor sentiment gauge climbed to its strongest reading in four years during June, as clients used market pullbacks to add positions even though major indexes ended the month slightly lower. The firm said Monday that its Schwab Trading Activity Index (STAX) rose to 59.12 from 55.08 in May, a gain of 7.33%. Across Schwab's millions of client accounts, net buys exceeded net sells by more than two-to-one for the month. After a weaker first week, the index advanced in each subsequent week of June.

Joe Mazzola, head trading and derivatives strategist at Charles Schwab, said that although major market averages pulled back from recent all-time highs and finished June with minor losses, client activity showed no sign of a typical 'June swoon.' The strongest buying activity coincided with mid-month dips during the weeks ended June 12 and June 19.

By sector, information technology was the most net-bought group for the second consecutive month, followed by communication services and consumer discretionary names. On the selling side, financials, health care and consumer staples saw the largest net outflows.

The June data also came against a shifting Federal Reserve backdrop. The probability of a rate hike later this year rose from 50% at the end of May to nearly 83% by the end of June, following the debut of Fed Chair Kevin Warsh.

Among individual names, the most popular stocks bought by Schwab clients included Space Exploration Technologies, Nvidia, Micron Technology, Microsoft and Amazon. The most net-sold names were Berkshire Hathaway, UnitedHealth Group and Snowflake.

Generation X remained the most bullish age cohort, with its sentiment reading reaching a two-year high, while Generation Z displayed the most risk-averse behavior.