Retirement investors not hitting post-election panic button

Emotion can drive investor behavior – and feelings are in overdrive following last month’s election.Across the United States, the mood ranges from a state of mourning to euphoria, depending on one’s political views.

But retirement investors are not hitting the panic button in the wake of the Nov. 8 election. The Vanguard Group reports that mutual fund exchange activity spiked the day after the election, with about 2,500 account holders making trades. Activity is still higher than normal, but most of Vanguard’s 4 million 401(k) investors are staying put.

If anything, optimism is driving the market. For example, Fidelity Investments reports that IRA investors have turned more bullish since the election. The buy/sell ratio jumped to 1.37 last week from 1.15 in the last week of October. (A buy/sell ratio of more than 1.0 is bullish, and the 1.37 ratio indicates 37 percent more buys than sells). The S&P 500 Index has gained 2.8 percent since the election through Wednesday’s market close.

The optimism is shared by financial advisers. A post-election poll by the Financial Services Institute of more than 1,300 advisers found 56 percent expect a strong market for equities next year; 37 percent think markets will be flat and just 7 percent expect weakness.

The bullish sentiment is driven by expectations of a White House aiming to reduce business regulation and willing to pursue strong economic stimulus in the form of infrastructure spending and tax cuts. The stimulus could drive deficits higher – which in turn could lead to higher interest rates and inflation.

I have argued elsewhere that the election results pose serious threats to retirement security, including repeal of the Affordable Care Act, Medicare privatization and Social Security benefit cuts. (reut.rs/2gGG85k). But for now, retirement investors seem to be staying the course. Learn more at Reuters Money.

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