For the first quarter of 2021, the Mid Atlantic Trust Company 401(k) Benchmark produced a positive return of 3.69%. This is the fourth consecutive quarter with positive returns for the Benchmark, bringing the total 12-month return up to 41.97% and the hypothetical participant* balance up to $152,891.
Looking back one year ago to the end of the first quarter for 2020, the hypothetical 401(k) investor that the Benchmark tracks saw a negative return of -16.12% as the COVID-19 pandemic took hold across the United States. Since that time, the benchmark has rebounded, producing quarterly returns of 15.48% in 2Q20, 6.05% in 3Q20, 11.80% in 4Q20 and now an additional 3.69% in 1Q21. This brought the balance for the hypothetical 401(k) investor over the $150,000 level during the quarter, marking a doubling of the balance over the past 5 years. This serves as a reminder as to why experts recommend 401(k) participants “stay the course” even during the most turbulent markets.
In comparison to the major market indices, the Mid Atlantic Trust Company 401(k) Benchmark was outpaced in the first quarter by the Dow Jones (7.76%) and the S&P 500 (6.17%). The Nasdaq Composite, which delivered a blistering 43.6% return for 2020 and over 72% over the past twelve months, cooled off in the first quarter with a 2.78% return as many tech stocks that comprise the index were under pressure for much of the quarter.
|First Quarter 2021 Comparison with Major Indices||2Q20||3Q20||4Q20||1Q21||12-Mo. Return|
|Dow Jones Industrial Average||15.48||7.63||10.20||7.76||53.78|
|Mid Atlantic Trust Co. 401(k) Benchmark||15.48||6.05||11.80||3.69||41.97|
|Nasdaq Composite (Principal Return)||30.63||11.02||15.70||2.78||72.04|
|Effective Fed Funds Rate||0.05||0.09||0.09||0.09||0.07|
|S&P U.S. Treasury Bond Current 10-Year Index||-6.96||-8.2%|
In terms of asset allocation, US Stocks continued to take up a greater share of the pie, increasing from 57% of 401(k) holdings at the end of 2020 to 60% at the end of March 2021. That shift came at the expense of bonds — both US bonds, which dropped from 19% to 17% of assets and Non-US Bonds which dropped from 3% to 2%. Cash holdings increased from 4% to 5%.
ABOUT THE MID ATLANTIC 401(k) BENCHMARK
Mid Atlantic Capital Group is a leading financial services organization that provides a wide array of brokerage, advisory, and trust services to a diverse national client base of financial advisors and institutions, asset managers, and benefits administrators through its various subsidiary companies. Because we provide these services, Mid Atlantic Trust Company has plan investment data on approximately 95,000 401(k) plans representing approximately $100 billion in assets. In response to requests from our institutional clients, we have created the Mid Atlantic Trust Company 401(k) Composite Benchmark which is designed to reflect the portfolio performance across 401(k) plans serviced, in any capacity, by Mid Atlantic. See the “Methodology” section of this report for details on how the composite benchmark is calculated.
For a copy of the full report of the Mid Atlantic Trust Company 401(k) Composite Benchmark, click here.
Contact Mr. Scott Hervoyavich of Mid Atlantic Trust Company at 800-693-7800 or by emailing him at firstname.lastname@example.org
* For the hypothetical participant balances, we used a starting balance based on the average 401(k) participant balance provided by the Investment Company Institute for the year of the starting balance. In our calculation, we assumed a starting annual salary of $50,000, a combined employee/employer 9% annual contribution rate, and a 3% annual salary increase and applied the monthly rate of return of the benchmark.
Market Data as of Week Ending: 4/23/2021 unless noted otherwise
U.S. stock markets retreated slightly from their record highs in an up-and-down week after news of a potential tax hike was released. The proposal would nearly double the long-term capital gains tax rate and raise taxes on higher incomes. First quarter earnings season continues to be off to an outstanding start as 25% of companies in the S&P 500 have reported results, of those, 84% have reported a positive EPS surprise. Medium and small sized companies outperformed their large company peers while growth stocks mostly outperformed value. Health Care and Real Estate were bright spots as both sectors netted solid gains. Energy continued its pullback as oil prices declined on the news of increasing global COVID-19 cases. Emerging Market stocks outperformed both the developed foreign stock market and U.S stock market as the index booked a positive gain.
U.S. Treasury yields continued their decline last week as concerns around the global uptick in COVID-19 cases may have stoked demand for safe haven assets. The 10-year Treasury ended the week at 1.56%. Investment grade corporate bonds ended the week yielding 2.2% and high yield corporate bonds are yielding just above 4.8%.
It was a relatively light economic data week, but what was released was generally positive. U.S. weekly unemployment claims continued to fall as new claims dipped to 574,000, their lowest level since March 2020. The index of U.S. leading economic indicators rose 1.3% in March, suggesting the economy is gathering momentum. The flash reading of the IHS Markit data showed positive results as both the manufacturing PMI and services PMI reached record levels. New home sales surged past expectations as sales occurred at a seasonally adjusted rate of 1.021 million in March, its fastest pace since 2006. As expected, the ECB announced it’s keeping borrowing costs low, saying it would maintain its pace of bond purchases until the eurozone’s economy is firmly on the path to recovery.
Market Data as of Week Ending 4/16/2021 unless noted otherwise
U.S. stock markets continued their rally last week, notching gains for a third-straight week as most of the major indices surged to record highs. Earnings season kicked off last week on positive note as corporate profits for several mega and regional banks comfortably exceeded estimates. S&P 500 earnings are expected to grow almost 25% in the first quarter, the strongest growth rate since 2018. Medium and large sized companies outperformed their small company peers while growth stocks outperformed value. Gains in Materials and Health Care were met with some softness in Information Technology and Industrials. Developed foreign stocks in Europe and Asia outperformed U.S stocks and Emerging Market stocks, as the index traded near record highs.
U.S. Treasury yields declined last week as the 10-year Treasury finished 9bps lower at 1.57%, its lowest level in nearly a month. Long duration government bonds were the best performing asset class while short-term government bonds were the worst performing asset class but still managed to deliver a small gain. Investment grade corporate bonds ended the week yielding just over 2.2% and high yield corporate bonds are yielding just below 4.8%.
Economic data released during the week was generally positive. The NFIB small-business index rose to a pandemic-high of 98.2 in March, reflecting growing optimism among small-business owners. U.S. consumer prices surged in March as the CPI jumped 0.6%, pushing inflation to 2.6% over the past year. U.S. unemployment claims sank by 193,000 to a pandemic low of 576,000 in early April. Retail sales rose nearly 10% in March, the second largest gain on record, as the new round of stimulus checks helped boost spending. Economic data from China continues to be positive as the country announced an 18.3% rise in first-quarter GDP on a year-over-year basis – its largest quarterly growth rate on record.
Market Data as of Week Ending: 4/9/2021 unless noted otherwise
U.S. stock markets surged to record highs last week as the bullish theme of robust economic and earnings growth in 2021 remains intact. Investors rotated into quality consumer and tech companies from reopening themes as Treasury yields came under some pressure making growth companies more attractive. Small and medium sized companies lagged their large company peers while value stocks underperformed growth. Sectors that tend to be more cyclical and sensitive such as consumer discretionary and information technology outperformed with gains in each sector. Energy lagged the broader market as oil prices fell after OPEC+ announced it would start to gradually increase supplies later this spring. Developed foreign stocks in Europe and Asia underperformed U.S stocks and Emerging Market stocks lagged developed foreign markets.
U.S. Treasury yields declined slightly and ended the week at 1.66% as COVID-19 uncertainties persist and the Fed reaffirmed their accommodative stance. Long duration high yield bonds were the best performing asset class while short-term government bonds were the worst performing asset class but still managed to deliver a small gain. Investment grade corporate bonds ended the week yielding nearly 2.3% and high yield corporate bonds are yielding just over 4.8%.
Economic data released during the week was mixed but was overall more positive as several key reports surprised to the upside. The U.S. service economy surged in March with the ISM survey jumping to 63.7%, as Americans gained more confidence to go out. U.S payrolls increased the most since August as the Labor Department reported that employers added 916,000 jobs in March, well above the estimated 650,000. Jobless claims, however, increased for the second consecutive week as the total filed through the states was 744,000 last week. The producer price index rose 1% in March, the largest annual increase since 2011. Economic data from China’s Qingming holiday weekend resembled pre-pandemic levels as box office and cinema admissions set new records.
Market Data as of Week Ending 4/2/2021 unless noted otherwise.
U.S. stock prices rose over the holiday shortened week as President Biden’s announcement of the infrastructure plan helped buoy financial markets and the focus shifted from rising rates to economic and earnings optimism. Once passed, the bill should help keep U.S. economic growth above trend for longer than previously expected. Small and medium sized companies generally outperformed their large company peers and growth stocks outperformed value. The communication services, consumer discretionary, and information technology sectors were the best performing sectors. Consumer staples, health care, energy, and materials lagged the broader market and ended the week with small losses. Developed foreign stocks in Europe and Asia underperformed U.S stocks and Emerging Market stocks outperformed developed foreign markets.
U.S. Treasury yields rose, and the 10-year finished the week at 1.72%. Longer duration bond yields declined, and investment grade corporate bonds were the best performing asset class. Intermediate-term government bonds were the worst performing asset class. Investment grade corporate bonds ended the week yielding nearly 2.3% and high yield corporate bonds are yielding more than 4.3%.
Economic data released during the week were mixed. Consumer confidence rose to 109.7 in March, surging to a one-year high as more Americans got vaccinated and the most recent round of stimulus checks hit bank accounts. New unemployment claims rose to 719,000 in late March but is expected to being falling again when the economy continues to reopen. The ISM manufacturing index reach a 38-year high of 64.7 in March as U.S. manufacturers continue to gain momentum. The U.S. added 916,000 jobs in March, bringing the unemployment rate down to 6.0%. Despite continued vaccine rollout challenges and widened lockdown measures in some EU countries, core eurozone government bond yields increased over the week.