A rising stock market in April coupled with slow and steady trades into equities brought 401k investors to their highest level of equity exposure in 20 years, according to the latest update from the Alight Solutions 401(k) Index, released this week.
After reflecting market movements and trading activity, average asset allocation in equities rose to 69.8% at the end of April, the highest value since June 2001. New contributions to equities remained unchanged from March at 69.9%.
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.
Alight’s year-to-date data through April shows that only 22 days (27%) have favored fixed income, but 60 days (73%) have favored equity.
April observations
Average net trading activity was 0.013% of 401k balances—the lowest value since December 2019. Four days favored fixed income funds and 17 days favored equity funds.
Trading inflows mainly went to large U.S. equities, target date funds (TDFs) and international equities. Outflows were primarily from stable value funds, bond funds and money market.
In March, Alight reported that 401k investors were “light traders and content to watch their balances rise” amid a volatile but rising stock market.
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