The dog days of summer gave way to August angst, but July was able to avoid the volatility recently seen, according to the Alight Solutions 401(k) Index.
It found that July was a slow trading month for 401k investors overall, with only one above-normal day. And the fixed income flow continued, with July marking the 18th month in a row that net trades have moved from equities to fixed income funds.
On average, only 0.014% of 401k balances were traded daily, and 19 of 22 days favored fixed-income funds. Inflows mainly went to bond, international equity, and money market funds, while outflows were primarily from company stock, large U.S. equity, and small U.S. equity funds.
After reflecting market movements and trading activity, average asset allocation in equities was 67.7%, unchanged from June to July. New contributions to equities also remained at 67.7%, the same level as June.
July market observations
Capital market returns were mixed in July with large U.S. equities (represented by the S&P 500 Index) gaining 1.4%, small U.S. equities (represented by the Russell 2000 Index) returning 0.6%, U.S. bonds (represented by the Bloomberg Barclays U.S. Aggregate Index) rising 0.2%, but international equities (represented by the MSCI All Country World ex-U.S. Index) fell 1.2%.
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 is when the net daily movement exceeds two times the average daily net activity. A “moderate” relative transfer activity 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.