Article March 7, 2022

US pension briefing – February 2022


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Key takeaways

  • Equity returns were negative again in February; the yield curve flattened over the month and saw rates rise over all maturities.
  • Credit spreads widened also as investors flocked towards safe haven assets with growing political conflict in Russia and Ukraine.
  • The combination of rising discount rates and declining asset values will keep funded status levels fairly level if not slightly higher for the month.

February 2022 summary

The biggest driver of investment volatility during the month came from the rising tension between Russia and Ukraine. Global and US equities fell about 2% during the month, after a 6% decline in January. Interest rates and credit spreads both increased during the month which results in negative bond returns.

The rise in market interest rates resulted in decreasing pension liabilities for the month. However, with a lower stock market and higher interest rate environment, pension assets also saw a decrease for the month. Pension funded status remained level or saw slight improvement depending on the plan asset allocation.

Heading into March, the volatility that has defined this year thus far will likely not go away with the Russia-Ukraine conflict still escalating. In addition, Fed Chair Jerome Powell is scheduled to deliver remarks at the central bank’s Federal Open Market Committee (FOMC) meeting mid-March and the expectation is that policymakers will raise interest rates during the meeting.

Discount rates & asset returns

FTSE pension discount rate index last 12 months

Source: FTSE Pension Liability Index

Discount rates continued a strong start to 2022, increasing significantly throughout February, ending the month up about 0.52% higher than rates at year-end 2021 and up about 0.35% from a year ago. Treasury rates ended the month up all along the curve, but especially at the short end, while at the same time credit spreads widened given the uncertainty around global markets. The FTSE pension discount index finished February at 3.35%.

Investment returns (%)

Source: Morningstar

Global equites fell again in February, with US equities falling 2.5% while developed foreign equities decreased 1.8% and emerging markets by 3%. Rising tension between Russia and Ukraine and the eventual Russian invasion, rattled markets and caused commodities and gold to increase. Interest rates rose, causing bonds and especially long treasuries, to post negative returns for the third consecutive month. Credit spreads widened again as investors feared the growing concerns in Ukraine. Gold returned over 6%, while the US dollar rose by 0.2%.

INVESTMENT ADVISOR:  Investment advisory services are provided by River and Mercantile LLC, an investment advisor registered with the US Securities and Exchange Commission.

The information contained in this document is strictly confidential. The information contained herein may not be reproduced, distributed or published by any recipient for any purpose without the prior written consent of River and Mercantile LLC.


The value of investments and any income generated may go down as well as up and is not guaranteed. An investor may not get back the amount originally invested. Past performance is not a guide to future performance. No representation, warranty, or undertaking, express or limited, is given as to the accuracy or completeness of the information or opinions contained in this document by River and Mercantile LLC or any of its partners or employees and no liability is accepted by such persons for the accuracy or completeness of any such information.

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