Pension Indicator Updated for March 31, 2022

Rates "March" Higher

By: Brian Hrabak, CFA, Clearstead

Ongoing inflation concerns amid soaring commodity prices driven by Russia’s invasion of Ukraine drove a continued sell-off in equities through the beginning of March before an ensuing recovery in equities led to a mostly positive month. The February Consumer Price Index rose 7.9%1 over the past twelve months, a four-decade high dating back to 1982. The Federal Reserve raised the fed funds rate by a quarter point at their mid-March meeting2. The Fed reinforced future rate hikes with a more aggressive tone regarding inflation and officials indicated possible rate hikes at each of the six remaining meetings in 20222.

U.S. Treasury yields “marched” higher with the yield curve flattening further in March. The 2-year yield rose 90 basis points to 2.34% while the 10-year yield increased 51 basis points to also close at 2.34%1. Investment grade corporate spreads tightened by 6 basis points1 following the rally in the equity market as investors took advantage of the higher yields.

Equity market returns rebounded from the early March sell-off early to close generally higher. The S&P 500 returned +3.7%, the MSCI EAFE +0.6% while the MSCI Emerging declined 2.3%1. Within fixed income, the increase in interest rates led to the Bloomberg Aggregate Bond Index losing 2.8%. The Bloomberg Long Govt/Credit Index fell more substantially, -3.9% for March1.

Portfolio returns were mixed during the month with growth oriented assets outperforming liability driven strategies. Returns were between +0.9% and -2.1% which were more than offset by higher discount rates, leaving funded statuses better off. The higher interest rate environment resulted in a substantial liability decrease of 2.7% - 3.6% for the month. Pension plan sponsors find themselves in an improved funded status at the end of the first quarter, despite the increased volatility in risk assets this year.

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Information provided in this article is general in nature, is provided for informational purposes only, and should not be construed as investment advice. Performance data represents past performance.  Past performance is not indicative of future results

1Bloomberg

2www.federalreserve.gov

Year to Date Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
Frozen (for several years) 3.6% 2.6% 0.5% -2.0%
 Recently Frozen 6.2% 5.2% 3.0% 0.5%
 Ongoing Traditional 8.8% 7.8% 5.6% 3.0%
 Cash Balance 4.2% 3.2% 1.1% -1.4%
Month-over-Month Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
 Frozen (for several years) 3.6% 2.7% 1.6% 0.5%
 Recently Frozen 4.1% 3.1% 2.0% 0.9%
 Ongoing Traditional 4.5% 3.5% 2.5% 1.3%
 Cash Balance 3.8% 2.9% 1.8% 0.7%
12-Month Change Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
 Frozen (for several years) 6.8% 5.3% 3.0% 0.2%
 Recently Frozen 7.0% 5.5% 3.1% 0.3%
 Ongoing Traditional
7.2% 5.7% 3.3% 0.5%
 Cash Balance 7.0% 5.5% 3.1% 0.3%


Frozen Plan 7 31

Recently Frozen Plan 7 31

Ongoing Plan 7 31

Cash Balance 7 31

Disclosure