Maybe they just sensed something in the air.
401k participants moved money from equities to fixed income on nearly all trading days, 20 of 22, in the month of August, according to the Alight Solutions 401(k) Index.
Yet thankfully, on average, only 0.01% of 401k balances were traded daily. Net trading activity in August was 0.13% of balances, up from 0.07% in July.
Trading inflows mainly went to stable value, bond, and specialty/sector funds. Outflows were primarily from large U.S. equity, small U.S. equity, and company stock funds.
After reflecting market movements and trading activity, average asset allocation in equities remained the same at 70.2% in August. New contributions to equities decreased from 69.4% in July to 69.3% in August.
The news comes after the firm reported in April that a rising stock market coupled with slow and steady trades into equities brought 401k investors to their highest level of equity exposure in 20 years.
Although April had no days of above-normal activity, the month saw nearly all days have net trading activity favor equities over fixed income. Interestingly, there has only been one above normal activity day all year—January 6, when investors sold large U.S. equities amid chaotic events at the U.S. Capitol.
According to Alight, a “normal” level of relative transfer activity is when the net daily movement of participants’ balances, as a percent of total 401k 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 2 times the average daily net activity of the preceding 12 months.
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.
