The November numbers are in and show Donald Trump as the clear winner and 401k participant behavior as the clear loser.
According to the Aon Hewitt 401(k) Index, it was a busy month for investors in 401k plans. On average, 0.035 percent of balances traded each day—which seems small, but is actually the highest level since January 2013.
In the days leading up to the U.S. Presidential election, trading activity was above-normal with money moving from equities to fixed income, signaling fear on the part of participants.
For context, a “normal” level of transfer activity is when the net daily movement of participants’ balances, as a percent of total 401(k) balances equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months.
A “high” relative transfer activity day is when the net daily movement exceeds two times the average daily net activity. A “moderate” relative transfer activity day is when the net daily movement is between 1.5 and 2 times the average daily net activity of the preceding 12 months.
After the election, once markets calmed from the immediate volatility, the second half of the month saw investors trading into equities, though at a slower pace than at the beginning of the month.
Other key November observations
- There were eight above-normal trading days in the month, the highest since May 2015
- The net trading activity on November 9th (the day immediately after the election) was 0.10% of balances—about 4 ½ times the normal trading level and easily the highest trading day of 2016 and among the highest in recent history
After combining contributions, trades, and market activity in participants’ accounts, the percentage of balances in equities at the end of November increased slightly to 65 percent from 64.4 percent at the end of October. New contributions are unchanged from the previous two months, with 65.7 percent of employee contributions investing in equities.
Overall, November was a volatile month for the markets. In the U.S., equities began the month down and then rallied. U.S. Large-Cap equities increased nearly 4 percent while U.S. Small-Cap equities increased by over 11 percent.
While U.S. equities surged, it was generally a down month for fixed income and international equities. U.S. bonds fell by over 2 percent and international equities also fell by over 2 percent.