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Takeaways
- Alight Solutions, a benefits administrator, reported that Americans actively traded their retirement accounts when the stock markets briefly recovered on Monday.
- Alight reports that investors sold shares in large-capitalization firms and bought bond, stable value, and money market funds.
- The company reported that Monday was the fifth-heaviest trading session for retirement account holders, since Alight began tracking the activity of these accounts in the markets in 1997.
The trading in retirement funds soared Monday as the stock markets clawed back last week’s loss.
Investors sold large-capitalization stocks and bought fixed income funds. The value of the trades was 10 times higher than on a normal day, according to Alight Solutions, an employee benefits administrator that tracks more than 2,000,000 retirement accounts.
The company Alight said that Monday was the fifth busiest trading day since 1997 when it began tracking retirement account holders’ activity. It was also the busiest since the Covid pandemic.
Stocks fell Thursday and Friday, as investors digested the Trump administration’s plans for imposing tariffs on almost all U.S. trade partners. The S&P 500 and Nasdaq Composite ended the week down 9.1% and 10%, respectively. Monday’s market was volatile: Stocks briefly climbed on a false report Trump might delay tariffs. By the closing bell, the S&P 500 was down 0.2% and the Nasdaq gained 0.1%.
Alight said that retirement traders tended to invest conservatively, in such vehicles as stable value funds, bond, money market and bond funds. Alight said many traders sold large-cap American firms and target-date fund (TDFs) this month. TDFs automatically adjust investments when account holders approach retirement, or another milestone.
Rob Austin, Alight’s head of thought leadership, said that when the stock market has suffered large losses on a Friday, there is a high level of trading activity in 401(k). This is because people reacting to the news make portfolio adjustments over the weekends, which are not executed until Monday.
Retirement experts warn against selling stock during a recession. Investors who withdraw their assets during a slump are unlikely to recover in time to profit from the inevitable market rally, according to experts.
