Despite market gains for most of the major indexes, October was another light trading month for 401(k) plan investors, according to the Alight 401(k) Index.
There were just two above-normal trading days during the month of October. Overall, there have been 40 above-normal trading days for 2022 as of the end of the month. In comparison, there were only three above-normal days in all of 2021, but 47 in 2020, much of which occurred in the early days of the pandemic.
On average, 0.012% of 401(k) balances were traded daily in October. In addition, 18 of 21 trading days favored fixed income funds. This is roughly consistent with the year-to-date data, which shows that 153 or 73% of trading days favored fixed income, compared to 56 days (or 27%) favoring equity.
Inflows and outflows during the month of October show that trading inflows went mainly to stable value and money market funds. In fact, stable value funds accounted for over 80% of net inflows, while outflows were primarily from target date funds (37%), company stock (35%) and large U.S. equity funds (12%), the firm reports.
After reflecting market movements and trading activity, the average asset allocation in equities increased from 67.2% in September to 68.1% in October, the Index shows. New contributions to equities saw a very minor uptick, rising to 68.1% in October from 68% the previous month.
All in all, asset classes with the largest percentage of total balance at the end of October included target date funds at 29%, followed by large U.S. equity funds at 26% and stable value funds at 10%. Similarly, asset classes with the most contributions in October included target date funds (50%), large U.S. equity funds (20%) and international equity funds (7%).
Market Performance
Meanwhile, most market returns for the common indices showed substantial gains in October. U.S. large equity (represented by the S&P 500 Index) was up 8.1% for the month, but still down -17.7% for the year. U.S. small equity (represented by the Russell 2000 Index) was up 11% for the month, but down -16.86% for the year. International equity (represented by the MSCI All Country World ex-U.S. Index) was up 2.99%, but down -24.31% for the year.
U.S. bonds (represented by the represented by the Bloomberg U.S. Aggregate Bond Index), however, were down -1.3% for October, and down -15.72% for the year.
Alight tracks the 401(k)-trading activity of over two million people with more than $200 billion in collective assets. 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 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.
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