In a possible bellwether of economic attitudes overall, the Aon Hewitt 401(k) Index saw 401(k) investors continue to be more conservative with their retirement investments in March. In total, 0.25 percent of balances traded in March—up slightly from 0.21percent in February. There was only one day of above-normal trading activity. The asset classes with the most inflows were fixed income funds and the funds with the most outflows were primarily equity funds. Seventeen out of 22 trading days showed more inflows to fixed income.
After combining contributions, trades, and market activity in participants’ accounts, the percentage in equities rose to 64.8 percent at the end of March, slightly up from 64 percent at the end of February. New contributions still favor stocks, but the contributions to equities remained flat at 66 percent at the end of March, a slight change from 65.9 percent at the end of February.
First Quarter 2016 Review
A volatile start to the year on Wall Street created the busiest trading quarter in nearly three years for participants in defined contribution plans. As a percent of balances, 0.82 percent of balances traded in the first quarter of 2016—well ahead of Q4 2015’s figure of 0.36 percent and the highest level since Q3 2013.
Trading activity favored fixed income instruments with GIC/stable value and bond funds receiving the majority of the inflows. Target-date funds and Large U.S. equity funds had the largest percentage of outflows.
Market Observations
For the month of March, U.S. bonds, U.S. Large-Cap equities , U.S. Small-Cap equities and International equities all had positive returns.
In the first quarter of 2016, market returns were mixed. U.S. bonds and U.S. Large-Cap equities had positive returns, while U.S. Small-Cap equities and International equities experienced negative return.
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.
