Alight Solutions 401(k) Index™: September 2026 observations

Participant trading remained limited in September, even as all four market benchmarks declined for the month. Total transfers represented just 0.06% of starting balances, with only one above-normal¹ trading day.

Trading activity generally favored fixed income. Participants transferred assets toward fixed income on 17 of 21 trading days—81% of days. Stable value and money market funds received 87% of trading inflows, while large U.S. equity, mid U.S. equity and international equity funds accounted for 83% of outflows.

Participant portfolios and ongoing contributions remained concentrated in target date and large U.S. equity funds. Together, these two asset classes represented 61% of Index balances and 73% of contributions in September.

Participant response surrounding the Federal Reserve announcement

The Federal Reserve announced a 0.25 percentage point interest rate increase on September 16, effective September 17. The move was largely expected by markets.

Participant activity increased on the day before the decision but did not indicate a broad shift toward more conservative investments. On September 15, relative transfer activity reached 2.33 times the trailing 12-month daily average, qualifying as a high-activity day. Trading moved toward equities even as the S&P 500 declined 0.45%. On September 16, activity returned to a normal level at 0.61 times average and shifted toward fixed income. 

The increase was concentrated on a single day rather than part of a sustained rise in trading. September trading data shows activity stayed subdued after the announcement. Over the 10 trading days that followed, relative transfer activity averaged 0.59 times the trailing 12-month daily average and peaked at 0.82 times, with no above-normal¹ days. Trading favored fixed income on 8 of those 10 days, consistent with the pattern earlier in the month (9 of 11 days) rather than a new defensive shift. Equities also recovered some ground, as the S&P 500 finished September down 0.35% after being down 1.67% through September 16.

The previous interest rate increase, in July 2023, also did not prompt a defensive shift. Monthly transfers represented 0.11% of starting balances, equities were favored on 75% of trading days and stable value experienced $160 million in net outflows. Large U.S. equity received $105 million as the S&P 500 gained 3.21% during the month.

Taken together, the results suggest that a rate increase alone may not materially change 401(k) participant behavior. Market performance surrounding the decision may have a greater influence on trading direction.

September investment portfolios:

• Participant portfolios remained anchored in target date² and large U.S. equity funds, which represented 31% and 30% of balances, respectively. Combined, they accounted for 61% of total Index balances. 
• Contributions followed a similar pattern. Target date funds² received 50% of contributions ($569 million), while large U.S. equity funds received 23% ($265 million). Together, these asset classes accounted for 73% of contributions. 
• International equity funds received another 7% of contributions—$81 million. 
• This allocation pattern remained steady even as the Bloomberg U.S. Aggregate, S&P 500, Russell 2000 and MSCI ACWI ex-U.S. indexes all declined in September.

¹ A “normal” level of relative transfer activity is when the net daily movement of participants’ balances, as a percent of total 401(k) balances within the Alight 401(k) Index™, 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.

² Target date funds also include the amounts in target risk funds. The amount in the target risk funds is less than 10% of the total.