What are they telling us? 401(k) participants (once again) moved money from equity to fixed income, although a strong stock market meant the flow somewhat slowed.
The participants’ behavior is part of an ongoing trend, according to the Alight Solutions 401(k) Index.
More specifically, June saw, on average, 0.017% of 401(k) balances traded daily and 17 of 20 days favored fixed-income funds.
As mentioned, trading inflows mainly went to bond, stable value, and money market funds and outflows were primarily from large U.S. equity, company stock, and small U.S. equity funds.
Equity Allocation Trends
- After reflecting market movements and trading activity, average asset allocation in equities increased from 67% in May to 67.7 % in June
- New contributions in equities decreased from 67.9% in May to 67.7% in June
June Performance Review: Strong Gains in Equities and Steady Bond Growth
Capital markets were strong in June. Large and small U.S. equities (represented by the S&P 500 Index and Russell 2000 Index, respectively) were up 7.1%, while international equities (represented by the MSCI All Country World ex-U.S. Index) increased 6.0%. U.S. bonds (represented by Bloomberg Barclays U.S. Aggregate Index) gained 1.3%.
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 Solutions 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 two times the average daily net activity of the preceding 12 months.
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.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.