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401(k) Index &  Observations Monthly Details: July 2013

401(k) Index & Observations Monthly Details: July 2013


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Market Commentary

  • Defined contribution plan participants’ daily transfer volumes were low in July, with transfers averaging 0.023% of balance totals per day, according to the Aon Hewitt 401(k) Index™. The trailing 12-month daily average remains at 0.028%. July had one day when transfer activity reached above-normal* levels.
  • July was a successful month for most equity market participants. Federal Reserve Chairman Ben Bernanke affirmed his commitment to keep interest rates low for the foreseeable future, and earnings beats from bellwethers like Boeing, General Electric and American Express sent most major U.S. market indices higher for the month. Large U.S. equities (as measured by the S&P 500 Index) finished the month about 5% higher, while small U.S. equities (as measured by the Russell 2000 Index) finished 7% higher for the month.
  • Daily trading slightly favored equity-based investment vehicles during July, which experienced net gains from transfer activity for over half (55%) of the days.
  • Daily trading slightly favored equity-based investment vehicles during July, which experienced net gains from transfer activity for over half (55%) of the days.
  • Outflow activity was led by company stock funds, with $235 million (45%) of flows. Bond funds also decreased significantly, by $216 million (41%). Premixed was the third and only additional asset class to experience large outflows, down by $60 million (11%).
  • The majority of asset classes experienced net inflows during July. Most noteworthy, GIC/stable value funds received $129 million (25%), small U.S. funds received $107 million (20%), and large U.S. funds received $104 million (20%). International and mid U.S. funds also received $74 million (14%) and $57 million (11%), respectively.
  • Employee discretionary contributions, another measure of participant sentiment, jumped to 64.8% in equities for July, up from 63.8% in June. This is a record high for the Index since September 2005 (64.7%).
  • By the end of July, participants’ overall equity allocation reached 63.3% from 62.2% at the end of June. The increase was due to market gains, and the current equity allocation is the highest since March 2008 (63.1%).

The following tables show Aon Hewitt 401(k) Index™ statistics and the returns of major market indices for periods ending July 31, 2013.

Index Returns

July 2013 YTD
Barclays Capital Aggregate Bond Index 0.14% -2.31%
S&P 500 5.09% 19.62%
Dow Jones Industrial Average 4.12% 19.93%
Russell 2000 Index 7.00% 23.97%
NASDAQ Index 6.64% 20.96%
MSCI EAFE Index 5.28% 9.60%
MSCI Emerging Markets Index (Net) 1.04% -8.62%

Index Statistics

July 2013 YTD
Average Daily Net Activity 0.023% 0.031%
Number of Fixed Income Days 10 (45%) 64 (44%)
Number of Equity Days 12 (55%) 82 (56%)
Number of Above Normal Days 1 34

*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 Aon Hewitt 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.

Monthly Details: Aon Hewitt 401(k) Index™ Observations