In the final month of 2022, investor sentiment remained constant.

The TD Ameritrade Investor Movement Index (IMX) recorded a score of 4.17 in December, which was the same as it was in November. When compared to historical averages, the value for the five weeks ending on December 30, 2022, was considered "low."

Although some purchasing activity developed in the Consumer Discretionary, Consumer Staples, Energy, Financial, and Real Estate sectors during the month, TD Ameritrade clients tended to be net sellers of stocks overall. In terms of sales, information technology led the way.

"December had macroeconomic factors as well as the end of earnings season, but ultimately the whiplash retail traders experienced from the up-down nature of the news cycle left TD Ameritrade clients' overall market exposure unchanged, "said Shawn Cruz, TD Ameritrade's head trading strategist.

"It's a fitting conclusion to a year that revealed some major obstacles to fixing the macroeconomic issues affecting the markets, but it also provides a lot of cause for optimism going into 2023," he continued.

While TD Ameritrade clients largely cut their stock exposure throughout the period, they did find some undervalued names to buy, such as Tesla (NASDAQ:TSLA), Lucid Group (NASDAQ:LCID), Ford Motor (NYSE:F), Apple (NASDAQ:AAPL), and Walt Disney (NYSE:DIS).

Meta Platforms (NASDAQ:META), NVIDIA (NASDAQ:NVDA), Netflix (NASDAQ:NFLX), Boeing (NYSE:BA), and Starbucks were among the stocks sold during the month (NASDAQ:SBUX).

What future factors would make retail investors net buyers? Cruz outlined other key trends to look out for in 2023, including a sustained slowdown in inflation and other macroeconomic indicators, which could result in a Federal Reserve that is less hawkish. In line with most predictions, he cautioned that the U.S. economy is likely to enter a recession this year as the central bank attempts to raise borrowing costs to a level that is sufficiently onerous to keep consumer prices in check.

To evaluate what investors were actually doing and how they were positioned in the markets, the behavior-based IMX index aggregates Main Street investor positions and activity.

On January 6, 2023, as traders celebrated the stronger-than-anticipated jobs data, stocks saw their first substantial surge of the year.