From Geopolitics to Groceries: What's Driving Retirement Savings Behavior
Francis LLC's Edward McIlveen, CFA breaks down what investors and plan sponsors need to know right now: why staying diversified and continuing contributions beats reacting to headlines; how strong corporate earnings and historical post‑midterm trends support equities; practical menu changes-small, permanent allocations to TIPS/treasuries and a 5–7% diversified commodity sleeve-to hedge inflation and geopolitical risk; and shifting participant/sponsor behavior, including a rise in 401(k) loans (~$10–11k average) and occasional match reductions among smaller employers. Actionable takeaways for advisors, HR leaders, and long‑term investors.
Jeffrey Snyder, Broadcast Retirement Network
Ed, great to see you. Thanks for joining us on the program this morning.
Edward McIlveen, CFA, Chief Investment Officer, Francis, LLC
Thanks for the invite, appreciate it, Jeff.
Jeffrey Snyder, Broadcast Retirement Network
And I really enjoy when I get the opportunity to talk to a chief investment officer, especially in light of current market events. You got you in particular, but people in your category of professionals bring a lot of balance because you bring that long-term perspective to the client. So let me start off with kind of a level set.
Markets are at all time high, the time we're recording this. You look at the Dow, you look at the S&P, you look at the NASDAQ, major indices, doing really well. The US economy by and large has been really well, but we've got a lot of geopolitical events, including prices, affordability, gas.
How is that shaping or does that shape or reshape your thinking when it comes to the broader US economy?
Edward McIlveen, CFA, Chief Investment Officer, Francis, LLC
It's an interesting time to just be thinking about being an investor and how do you work through and navigate through all this. And as we work with our clients, the messaging stays pretty much the same. And that is, believe it or not, the simplest answer in many cases is just have a diversified portfolio.
If you are doing something like investing in a target retirement day portfolio, offered by Vanguard, American Funds, T-Royal Price, whatever, the best thing to do in a moment like this is just keep making your contributions. And when looking back at the data, sitting with clients and say, hey, you know what, if I asked you how you think you're doing right now in your portfolio, probably you're gonna have a little bit more of a melancholy tone to your response. But let's look at the data.
The data says that if you're in, let's say a target retirement day 2040 product, you're up about over 25% at this point on a 12 month basis, looking at from like May of 2026 back to May of 2025. And people are just, they're kind of dumbfounded when they think about that. They're like, but wait a minute, the headlines are what they are and the politics is what it is.
What's really happening underneath all of this? And through all this, we really do point to a couple of key fundamental factors. Big picture, corporate earnings growth has been extremely strong.
When you look at the S&P 500 and you look at their earnings season, it has really been a resounding success. And I think that is obviously a surprise to the upside, given particularly just this overall just malaise of the tone within the market at this point, you look at different sentiment indicators. And as we sit here today, consumer confidence is ultra, ultra low.
And this is, believe it or not, it's probably one of the better contrarian indicators that we can find. And it doesn't seem like that this should be happening. They have markets at all time highs and consumer sentiment at these kinds of lows.
But in thinking about just the sentiment, which admittedly is a lot more art than it is science in some ways, it is usually a time to get more interested in stocks, not less interested. And so as we think about the geopolitics and what's happening here within the United States, upcoming midterm elections, yeah, there's always volatility that's associated with this. But one of the things I do like to just point out is some of the things that we have looked at in terms of understanding the political environment, there's probably gonna be some kind of fairly big changes that are gonna happen within Washington after the midterm elections.
But when you go back in time and you take a look at the history of the stock market, particularly the S&P 500, 12 months following every midterm election, going back into the 1950s, the market has been positive. There's not a down period 12 months after the midterm election. And this is something that typically I just like to talk about it as the midterm election phenomenon or midterm election effect.
This has been observed by different technical analysts over the years. And sometimes I'll be asked like, well, why is this the case? And kind of the reality is it's not knowable.
It's perhaps just reality that markets like elections. And the important thing is that for your audience and for our investors, hey, it doesn't matter who wins. So if the Republicans win, Democrats win, and whoever maintains control, market environment likes the fact that an election has taken place and now the market can start to absorb what the new status quo is going to be through all this.
So the perspective that we try to give amidst all of these different things that are having a high degree of uncertainty, admittedly so. We just had an analyst return from London, sat down with a number of investment managers and their scenario analysis around, well, what's going to happen with the price of oil? What's going to happen with Iran?
It ranges from, hey, oil could be $60 a barrel again to up to $200 a barrel again. So these are the things that, when you have this kind of wide array of opinions, you have to really take a few steps back and just kind of look back to history and think, all right, should I change anything from a long-term strategy standpoint? Answer is no.
And I guess just kind of put the icing on the cake here. Hey, whatever the politics are, whatever your personal views and opinions are, go ahead and go to the polls and vote your conscience, but don't associate or make significant changes with your investment portfolio that would align with what you think your politics should be within your investment portfolio. Just grin and bear it and keep moving forward.
Jeffrey Snyder, Broadcast Retirement Network
I like that long-term perspective. I mean, I've always kept that perspective. I think it's important.
I agree with you. Let me ask you about the investment lineup. And I wanna, with all that in mind, what you just said in terms of the marketplace and kind of staying the course, when you look at the investment lineup and some of the inflation that people are experiencing, where do products, for example, like TIPS retirement income, which I think is getting a lot of play within our industry, I mean, you can't go to a conference without hearing about that, private markets.
How does that, or does that fit into your construction or your recommendations to clients about building the best menu for that diversified portfolio for participants?
Edward McIlveen, CFA, Chief Investment Officer, Francis, LLC
Yeah, a few thoughts to add here. It is almost impossible to predict when you're gonna have unexpected inflation. I mean, kind of by definition, it's unexpected.
And so you have that issue. And that really obviously became a big bear in 2022. Then you have these geopolitical flare-ups that happen and missiles flying into Iran, Maduro gets pulled out of Venezuela.
Nobody's able to predict these things. Even some of the sharpest geopolitical strategists that we follow, some of them were just wrong about various events, but hey, this is the world that we live in. And when it comes to building out a menu and how to think about allocations into things that might hedge against this, well, we get to some kind of inflation protection.
And some of this, treasury bonds, TIPS bonds, having a five to 10% allocation and something like that as a constant, a good idea. Second would be an exposure to something that is commodity and inflation sensitive. This would be, and we propose not necessarily having a gold fund, but having a diversified approach and basket where you have exposure to energy commodities, agricultural commodities and metals, both precious and industrial.
And these have been shown to be very, very good hedges longterm. It's commodity markets are very volatile. They're very technical and they do have some quirks to them that from an individual investor standpoint, nobody can really go out and within some of the commodity baskets that we see, you'll see things like the traditional oil, energy and gasoline and so on.
But there's things in there like lean hogs, which by the way, is one of my favorite commodities to talk about. So all these things are used as ways to help offset the highly uncertain and unknown. And the long-term studies that we have seen suggest that having an allocation of five to 7% within a commodity kind of a framework, that can be very good and complimentary.
So when something's going one direction, like equities and bonds in 2022, commodities were a pretty strong offset to that. And same thing is kind of interesting here within the month of March of 2026, you saw commodities have a big boom. Nobody was really calling for oil to be near $100 a barrel.
And what caused it? Well, it was a geopolitical spat. So thinking back about how do we build a menu around this?
There's all kinds of different economic environments. It's not just these unexpected inflation and geopolitical issues that just kind of come out of nowhere. But there are gonna be longer periods of time when you have a secular rise in inflation and a secular rise in growth, maybe at the same time, maybe slightly different.
And having a commodities and inflation linked component within a portfolio, that's gonna be very helpful over a 10, 20 and 30 year investment time horizon.
Jeffrey Snyder, Broadcast Retirement Network
Let me ask you about, if I may, about participant behavior, because I believe that, in addition to what you're advising clients, there's also an element or practice within your business, helping participants, individuals make the best decisions possible, at least directly or indirectly through the record keepers. Affordability is a big, big, big issue. You touched on it with inflation.
Are you seeing maybe savings rates change? People may be pulling money out, loans, withdrawals, people taking money out. Are they skewing?
Because the long-term is important, but so is the short-term in terms of paying for higher food prices and higher gas. So are you seeing any changes within the client base in participant behavior?
Edward McIlveen, CFA, Chief Investment Officer, Francis, LLC
We've seen a slight uptick in participant loans. So plans that are offering that, that is something that we have seen. And when you think about it, getting a loan from the 401k plan, it's one of the easiest ways to get access to funds.
And you don't have to go through a credit report. You don't have to do anything that would create friction. It's pretty much a, you go to your record keeping platform, make a request, things are signed off, and then boom, there you go.
Average loan size that we see is about $10,000 that is coming into play. And that pretty much aligns with the national average, which is about 11,000 at this point. And we have also heard from all the different record keepers that we work with.
And we work with many within the industry. They have seen just collectively a rise within participant loans being taken. Some of it we think is due to the affordability factor.
And some of it is to folks that have been saving for many, many years are looking at the numbers and saying, well, I've got a pretty good nest egg. And I look at what the 401k loan offers, geez, I'm gonna pay myself back. Maybe it's 8%, 9%, whatever the terms are within the loans.
Well, then you're paying yourself back. And they look at this as being a savings vehicle that is gonna be able to help buy a car, put on an addition to a house or something like that. So there's really these kind of these dual factors that are going on that we see.
And participant loan behavior is very interesting to observe because it can be reflective of not only just the things, the two things I mentioned, but also the kinds of industries that companies are in. So if you are in something that would be very steady, like a university environment, we don't really see a whole lot of change in participant behavior, or even the savings rates for that matter. Companies that are more exposed to some of the cyclicality of the economy, well, a handful of them, it's just a handful of them, they've had to cut the match, but they wanna reestablish it.
So you see these pain points that start to emerge, but you also see some kind of opportunistic behavior going on with regards to how can loans be used to just better their personal life as a way of getting some easy financing.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, look, I was a record keeper back in the days where people used to, almost like day trade or arbitrage between international and the different funds. I mean, that was, I forget what we called that, but that was, people were very advantageous. Last question for you, I got about a minute and a half, two minutes left, but let me ask you about small organizations.
You touched on the inflation, we talked about investments. I feel like small businesses, they are the lifeblood of the American economy, but they're also under a considerable amount of pressure. Within your book of business, are you seeing clients that are smaller enterprises maybe cut back on the match?
So there's this participant element where people are taking money out of the retirement plan or cutting back on their savings, but also maybe because of some of the challenges, tariffs, the economic environment, businesses may be pulling back a little bit on the matches. I've been reading about that.
Edward McIlveen, CFA, Chief Investment Officer, Francis, LLC
Yeah, and so maybe pulling back on the match, there's also pulling back on the hiring component of this. And something that we haven't talked about yet is really just kind of the next level of how AI is starting to be more and more experimented with, with smaller businesses and things like Claude perplexity and so on. These are tools that I think are being found to be more and more productive.
And so there's a lot of experimentation that's going on and really some pretty good use cases that we see with respect to this. So for the stresses that are being put on the small businesses in terms of rising costs and the hiring issues, there's also this slight other offset that seems to be gaining momentum around artificial intelligence and just people getting more familiar with how to prompt a model and how can you have it solve certain problems, create different agents within your current ecosystem. So anybody that's really interested in this, there's a number of very interesting LinkedIn folks that are posting stuff all the time.
I wish I could absorb this like an AI model myself because there's so much that's going on so rapidly that does truly have a productive capacity to it. And unlike really the late 1990s where smaller businesses may have just been saying, let's just get on the internet and see what happens. Here it is the ability to take real world problems, find an answer and to be able to move forward more quickly.
The reaction function for smaller businesses has started to increase and it does, like I said, it helps offset some of the stresses that you see elsewhere within kind of the economic pain points.
Jeffrey Snyder, Broadcast Retirement Network
Well, I think we'll be talking about AI. Maybe it'll be replaced both of us, I don't know. But we'll be talking about it in all seriousness for years to come.
Ed, we're going to have to leave it there. Thanks so much for joining us on the program and we look forward to having you back again very soon, sir.
Edward McIlveen, CFA, Chief Investment Officer, Francis, LLC
Thank you so much, Jeff.
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This story was originally published May 30, 2026 at 7:30 AM.