How Are 401k Participants Reacting to Washington Craziness?

Equities favored over fixed income funds

What behavior are the headlines fueling?What behavior are the headlines fueling?

The inauguration of a new president, outrage in the streets, media reaction and “alternative facts”—it’s all a bit much. So what moves, if any, are 401k participants making in light of what’s happening?

January started with light trading activity for investors in defined contribution plans, according to the Aon Hewitt 401(k) Index, and didn’t do much else from there.

“There were no days of above-normal trading in January,” according to the company, soon to be part of private equity firm Blackstone. “On average, 0.017 percent of balances traded each day.”

And for 13 of the 20 trading days in January, 401k participants favored equities over fixed income funds in their trades, possibly signaling a Trump bounce and the view that the world might not be ending after all.

“After combining contributions, trades, and market activity in participants’ accounts, the percentage of balances in equities was 65.9 percent at the end of January, up from 65.4 percent at the end of December,” Aon adds. “New contributions continue to favor stocks, with 66.1 percent of employee contributions were into equities—an increase from 65.2 percent in December.

As for overall market observations, January saw positive gains.

  • International equities increased 3.5 percent and U.S. Large-Cap equities (represented by the S&P 500 Index) increased by nearly 2 percent.
  • S. Small-Cap equities increased 0.4 percent, and
  • S. bonds increased 0.2 percent during January.

In related Aon news, private equity firm Blackstone said Friday that it will buy acquire Aon’s HR and benefits platform for a whopping $4.8 billion.

It claims it’s the largest benefits administration platform in the United States, and serves approximately 15 percent of the U.S. working population across more than 1,400 companies. Aon and the new, stand-alone company will continue to work together on behalf of shared clients and prospects.

“We are excited to acquire a world-class leader of scale in health, retirement, and HR services, providing critical human resources and benefits administration services to millions of employees and their families throughout the United States and Canada,” Peter Wallace, a senior managing director at Blackstone, said in a statement. “Blackstone sees tremendous opportunity for investing in leading businesses within the technology-enabled services sector, where we believe there is a significant opportunity to accelerate future growth.  We look forward to working with the excellent management team to continue to invest in and grow the company.”

The company will evolve into a new standalone business run by Aon’s Chris Michalak.

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