After months of heavy trading (for retirement plans, at least) due to global unrest and a flight to safety, July brought much-needed calm to plan participants, reflected in the minimal number of 401k trades made.
“Inflation fears, high gas prices, and the volatility they bring saw flights to (perceived) safety in the prior month.”
According to Alight Solutions, a volatile June gave way to just 0.008% of 401k balances traded daily, and “There were no above-normal trading days as Wall Street posted its best month since November of 2020.”
Thirteen of 20 days in July favored fixed income funds. Trading inflows mainly went to stable value, money market, and large U.S. equity funds, while outflows were primarily from target date, bond, and company stock funds.
“After reflecting market movements and trading activity, average asset allocation in equities increased from 67.7% in June to 68.6% in July,” Illinois-based Alight reported. “New contributions to equities decreased from 68.7% in June to 68.5% in July.”
Inflation fears, and high gas prices saw much higher volatility in the prior month, continuing a trend in 401k trading recently, one that until July showed little sign of slowing.
Alight defines a “normal” level of relative transfer 401k activity as 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 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.
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.
