By: Russ Kamp, Managing Director, Ryan ALM, Inc.

The first quarter 2022 performance returns are rolling in and as we’ve been reporting they aren’t good. They aren’t good for equities, VC, BONDS, and likely other segments of our capital markets! With regard to fixed income, the Bloomberg Barclays Aggregate Index (formerly the Lehman Aggregate) posted its weakest quarter since 1980. In fact, the -5.9% return during the first three months is nearly twice as bad as any quarterly result since the bond bull market took hold in 1981’s third quarter. The Aggregate index has posted negative quarterly results in 19% of the 162 quarters since the fourth quarter of 1981, so a negative result isn’t rare by any stretch of the imagination. However, the largest negative quarterly result during that entire time was only -3.37% registered during Q1’21.

Given the US Federal Reserve’s recent comments regarding their singular focus on nipping inflation in the bud, this result may become a trend. For comparative purposes, there have not been more than two consecutive quarterly losses in the last 40+ years. Will the likelihood of 6 more Fed rate increases to come lead to a string of negative results? Are pension sponsors prepared for this potential event? Remember: what might be quite negative for pension assets may in fact be beneficial from a pension liability perspective. Are you monitoring your plan’s liabilities regularly in order to carefully match pension assets with those liabilities? Call us. We will show you how it is done.