Pension Indicator Updated for November 30, 2017

November 2017: A Lot to be Thankful for in November...Unless You Are a Browns Fan

By: Grant Guyuron, Sr. Managing Director, Harltnad

Olan Sponsors should generally be happy with November results.  Equities continued to rally in the month, driving most asset pools higher.  Even modest exposure to the equity markets should have led to outperformance against liabilities in the month.  That said, long-term interest rates remain stubbornly low, and any move higher would be relief for most plan sponsors.  But all things considered, there was much to be thankful for in November…unless you are a Browns fan.

The Browns continued their losing ways in November with a 0-4 month; they were outscored by 57 points over those four games.  The browns are now 0-13 after losing to Green Bay this past week.  Not surprisingly, the Browns are last in the NFL in points per game (14.7) and tied for 26th in points against (25.7), meaning that they are losing by an average 11 points every week.  On the bright side, the Browns took proactive measures to upgrade their front office with the hiring of John Dorsey as their new General Manager to replace Sashi Brown.

So things are looking up.  Long-term interest rates can’t get much lower and the Browns certainly can’t get any worse, right?

Market Update

U.S. equity markets extended their gains with the S&P 500 returning 3.1% for November, while small caps as measured by the Russell 2000 advanced 2.9%.  Earnings season is just about wrapped up for the holidays; 98% of S&P 500 companies have reported earnings, reflecting 6.3% year-over-year earnings growth1. Based on U.S. equity multiples that are above historical averages, earnings growth may be an important driver of future returns.

Foreign developed equity markets, as represented by the MSCI EAFE Index, continued their advance, gaining 1.0%. Japan’s Nikkei Index had another strong month returning 3.3% following October’s reelection of Prime Minister, Shinzo Abe. The MSCI Emerging Markets Index returned 0.2%, resulting in a 32.8% year-to-date return.

Jerome “Jay” Powell is set to become the next Chair of the Federal Reserve in January, at which time Janet Yellen will step down entirely from the Fed Board. Jay has served as a Fed board member for the past five years and is viewed as a stable figure, expected to continue the current monetary policy of gradual rate increases to avoid disrupting the recovery.

The Bloomberg Barclay’s Aggregate Index total return for November was -0.13% and +3.07% year-to-date.  The Fed has raised rates twice this year with an expectation of one more hike in December2.

Sources:

1 Factset, 1/27/17

2 Bloomberg

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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.

Year to Date Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) 7.0% 5.8% 5.5% 4.2%
 Recently Frozen 4.9% 3.6% 3.4% 2.1%
 Ongoing Traditional 2.6% 1.4% 1.2% -0.1%
 Cash Balance 6.6% 5.4% 5.1% 3.8%
Month-over-Month Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) 1.3% 1.2% 1.0% 0.7%
 Recently Frozen 1.2% 1.0% 0.8% 0.5%
 Ongoing Traditional 1.0% 0.8% 0.6% 0.3%
 Cash Balance 1.3% 1.2% 1.0% 0.7%
12-Month Change Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) 12.8% 11.2% 10.9% 9.5%
 Recently Frozen 10.6% 9.0% 8.7% 7.4%
 Ongoing Traditional

8.2%

6.7% 6.3% 5.0%
 Cash Balance 12.5%

10.9%

10.6% 9.2%

FrozenManyYears1117

RecentlyFrozen1117

Ongoing1117

CashBalance1117

Disclosure