Pension Indicator Updated for May 31, 2022

April Showers Bring May (Pension) Flowers

By: Brian Hrabak, CFA, Clearstead

Ongoing inflation concerns, supply-chain issues, geopolitical risks, and uncertainty regarding slowing economic growth drove a continued sell-off in equities through most of May before a strong late month rally led to a very modestly positive month. The Federal Reserve raised the fed funds rate by 50 basis points at their early May meeting1 and reinforced future rate hikes with an aggressive tone regarding lowering inflation. The Fed also announced their balance sheet reduction plan beginning in June through letting bond holdings roll off its balance sheet every month1.

The front-end of the Treasury yield curve (2 and 5-year) experienced a decline in yields, while the long end rose slightly. The 2-year yield declined 16 basis points to 2.56% while the 20-year yield increased 5 bps to close at 3.26%2. Investment grade corporate spreads tightened by 5 basis points2 based on light supply following the risk-off tone in the market.

Equity market returns rebounded from the early May sell-off to close generally higher. The S&P 500 returned +0.2%, the MSCI EAFE +0.8% and the MSCI Emerging +0.4%2. Within fixed income, the Bloomberg Aggregate Bond Index returned 0.6% while the Bloomberg Long Govt/Credit Index declined 0.3% for May2.

Portfolio returns were mixed with more muted returns compared to recent months. Returns were between -0.1% and +0.6% leaving funded statuses predominantly unchanged for the month since the interest rate environment resulted in a modest liability increase of 0.2% - 0.6% for the month. Despite the increased volatility in risk assets this year, plan sponsors should find themselves in a much-improved funded status position compared to year-end.

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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

1www.federalreserve.gov

2Bloomberg

Year to Date Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
Frozen (for several years) 3.8% 2.4% -0.8% -4.4%
 Recently Frozen 9.5% 8.0% 4.6% 0.8%
 Ongoing Traditional 15.8% 14.2% 10.6% 6.6%
 Cash Balance 5.2% 3.7% 0.4% -3.2%
Month-over-Month Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
 Frozen (for several years) -0.7% -0.7% -0.4% 0.0%
 Recently Frozen -0.5% -0.5% -0.2% 0.2%
 Ongoing Traditional -0.2% -0.2% 0.1% 0.5%
 Cash Balance -0.7% -0.7% -0.4% 0.0%
12-Month Change Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
 Frozen (for several years) 4.9% 3.4% 0.1% -3.4%
 Recently Frozen 8.7% 7.1% 3.7% 0.1%
 Ongoing Traditional
13.0% 11.3% 7.7% 4.0%
 Cash Balance 6.0% 4.4% 1.1% -2.4%


Frozen Plan 7 31

Recently Frozen Plan 7 31

Ongoing Plan 7 31

Cash Balance 7 31

Disclosure