Taking Stock: NEPC's July 2022 Pension Monitor

Corporate pension plans experienced modest increases in funded status in July driven by gains in equities that offset the impact of declining interest rates. Despite persistently high readings of inflation and two straight quarters of GDP contraction, U.S. stocks rallied sharply last month. The Federal Reserve hiked its benchmark rate by 75-basis points for the second consecutive time as it continues to fight inflation, leading to an inversion in the Treasury curve. LDI-allocated plans likely outpaced total-return plans due to a greater hedge amid falling discount rates for long-term Treasuries and credit spreads. NEPC’s hypothetical pension plans experienced a funded status gain of 0.2% for the total-return plan compared to 1.1% for the LDI focused plan.