The “flight to safety,” in a sense, continues.
A declining month on Wall Street saw increased trading activity among 401k investors, according to the Alight Solutions 401(k) Index.
Net trades in May amounted to 0.21% of balances—the highest for a month this year. Additionally, there were three days of above-normal activity.
On average in May 0.016% of 401k balances were traded daily, and 17 of 22 days favored fixed income funds.
Trading inflows mainly went to bond, stable value, and money market funds and outflows were primarily from large U.S. equity, target date, and mid-U.S. equity funds.
May investment portfolios
- After reflecting market movements and trading activity, the average asset allocation in equities decreased from 68.2% in April to 67.0 % in May.
- New contributions in equities remained at 67.9% from April through May.
May market observations
Although U.S. bonds (represented by the Bloomberg Barclays U.S. Aggregate Index) gained 1.8% during May, equity markets fell. Small U.S. equities (represented by the Russell 2000 Index) declined -7.8%, large U.S. equities (represented by S&P 500 Index) dropped -6.4%, and international equities (represented by the MSCI ACWI ex-US Index) were down -5.4%.
How it’s measured
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 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.