Stocks are getting pummeled as the prospect of a global slowdown increases. The S&P 500 is now down more than 10% year-to-date. Meanwhile, already superlow bond yields are getting even lower, thanks to the Federal Reserve’s latest extraordinary easing action. The 30-year U.S. Treasury bond at one point on Thursday yielded less than 2.8%.
That is the kind of one-two punch that will worsen pension deficits while also making the contributions required to fill holes even bigger. This could crimp earnings and cash flow at some publicly traded companies while putting already strained state and local-government plans under even greater pressure. In turn, this could be another weight on markets and add to further economic uncertainty.
And, if nothing else, the market’s current malaise again highlights the lunacy of both public and private pension funds continuing to believe on average that they can generate annual returns of 8%.
In the midst of the “Dot Com” boom in the late 90’s, the Church Pension Fund began to proclaim a “Theology of Abundance.” That lasted for a while, but I have not the expression in quite a while. The fund managers in the CPF are a very astute bunch, but I am wondering if they can keep up in this sinking market. I have been retired for two years now, and there has been no COLA in that time (used to be annual) and only a small bonus check (they used to give an extra check at the monthly amount).
I have faith in God, and I know he will provide for us, but at the same time, I know that that does not mean we will necessarily live in a comfortable middle-class style. I think we are all in for a bumpy ride. (And why not? Our culture thinks it can get along without God.)