News of the stock market tumble has triggered a big bump in participant trading – and almost exclusively from equities to fixed income.
The Alight Solutions 401(k) Index™ shows that 401(k) trading activity has been exceptionally high in recent days, with trading on Monday almost 12 times the “normal” level of trading. Alight notes that the last time trading occurred at that level was in August 2011, coinciding with the last time the S&P 500 saw its biggest single-day drop.
On Friday, Feb. 2, while the S&P 500 dropped by a little more than 2% for the day, net trading activity was 0.058% of balances, roughly three times the trading activity of a typical day. Nearly all of the trades were from equity funds and into fixed income instruments (such as money market and stable value funds).
On Monday, while the S&P 500 dropped by more than 4% (its biggest single day drop since August 2011), the Alight Index noted that net trading activity was almost 12 times the trading activity of a typical day, at 0.176% of balances.
On Tuesday, the S&P 500 recovered somewhat, posting a gain of 1.74%. Once again trading was high – net trading activity was 0.068% of balances, more than four times the trading activity of a typical day, and once again the majority of the trades were from equities to fixed income
February’s trading activity stands in sharp contrast to January, when the majority of 401(k) trades were from fixed income to equities. In January, only 4 of the 21 trading days saw 401(k) investors favoring equities. All four of the trading days so far in February have had more money going to fixed income than equities, according to Alight.