Volatility rocked capital markets in the third quarter as equities declined 5% and short-term interest rates increased by over 150 basis points. During the quarter, the Federal Reserve hiked rates two times by 75 basis points each. In addition to the two rate hikes, Fed Chair Powell suggested that the U.S. economy could experience “some pain” from tighter monetary policy. The change in funded status of U.S. corporate pension plans varied depending on asset allocation, as both equities and fixed income sold off. Estimated plan liabilities based on long-duration fixed-income yields were lower in the third quarter, providing a bright spot for corporate pension plans. The funded status of a total-return plan increased 5.2% with lower allocations to long-duration fixed income, while the LDI-focused plan saw its funded status fall by 0.2%.
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