Trading in 401(k) accounts surged on Monday, reaching levels not seen in over four years, as the U.S. stock market experienced a sharp downturn. According to the Alight Solutions 401(k) Index, trading activity was more than eight times the average daily amount, marking the highest single-day activity since March 2020.
Net trading activity on August 5 alone equaled 0.08% of plan balances, compared to 0.09% for the entire month of July. Rob Austin, Head of Thought Leadership at Alight, noted that trading spikes typically occur when markets drop by 2% or more. On Monday, the Nasdaq Composite fell 3.4%, while the S&P 500 and Dow Jones dropped 3% and 2.6%, respectively.
Most 401(k) trades shifted money to safer assets, with net inflows moving to stable value funds (61%), bonds (20%), and money market funds (18%). Large-cap U.S. equity (60%) and target-date funds (13%) saw the greatest outflows. Despite the turmoil, some retail investors saw the selloff as an opportunity to ‘buy the dip’, with daily inflows doubling to $1.8 billion. Nvidia, SPDR S&P 500 Trust, AMD, and Intel were the biggest beneficiaries.