Strong Stock Market Boosts 401(k) Investors’ Equity Exposure

In April, it reached the highest levels since 2001, according to Alight.

A surging stock market, coupled with slow and steady trades into equities, brought 401(k) investors in April to their highest level of equity exposure since 2001, according to the Alight Solutions 401(k) index.

During the month, nearly all the trading days favored equities over fixed income; four days favored fixed income funds, and 17 days favored equity funds. Also of note was the fact that April has no days of above-normal trading activity.

The average net trading activity was a mere 0.013% of 401(k) balances—the lowest value since December 2019.

401(k) investors transferred an average of 0.16% of their starting balance during the month. Year-to-date, this has been a total of 0.56%.

Trading inflows went mainly to large U.S. equities, target-date funds (TDFs) and international equities. Outflows came primarily from stable value funds, bond funds and money market funds.

Asset classes with the most trading inflows in April were large U.S. equities (taking in 44% of inflows valued at $184 million) followed by TDFs (17%; $171 million) and international equities (16%; $68 million).

Asset classes with the most trading outflows in April were stable value funds (48%; $204 million), bond funds (24%; $106 million) and money market funds (13%; $53 million).

The average asset allocation to equities was 69.8% at the end of April, the highest value since June 2001. New contributions to equities remained unchanged from March, at 69.9%.

Asset classes with the largest percentage of total balance at the end of April were TDFs (30%; $78.8 billion), large U.S. equity funds (25%; $68.5 billion) and stable value funds (8%; $21.2 billion).

Asset classes with the most contributions in April were TDFs (48%; $715 million), large U.S. equity funds (20%; $302 million) and international equity funds (7%; $105 million).

Also last month, the Bloomberg Barclays U.S. Aggregate index was up 0.8%, the S&P 500 was up 5.3%, the Russell 2000 was up 2.1%, and the MSCI All Country World ex-U.S. index was up 2.9%.