Multiemployer pension news: Q4 2020

Unemployment

Unemployment levels in all industry sectors reported by the Bureau of Labor Statistics have risen year over year from September 2019 to September 2020.

To point out three industries of interest to many sponsors of multiemployer plans, Construction increased from 3.2 percent to 7.1 percent; Transportation and Utilities increased from 3.2 percent to 9.8 percent; and Leisure and Hospitality increased from 4.8 percent to 19.0 percent.

S&P 500® gains credited to six stocks

2020 brought turbulence to the U.S. equity markets.

The pandemic’s impact of dramatic market declines early in the year was followed by substantial recovery as investors began to look past the near-term economic damage.

In fact, the S&P 500® had risen nearly 8.4 percent for the YTD through September 3.  However, much of those gains came from only six mega-cap stocks: Facebook, Apple, Amazon, Netflix, Google and Microsoft (known as FAANGM). Without the returns of those stocks, which make up about 20 percent of the index’s total market cap, the S&P 500® would have lost -0.65 percent YTD through September 3.

It's encouraging that these strong American companies have generated such solid returns so far this year; however, it speaks to the continuing narrowness of stock gains. If sentiment turns sour on these firms, the market could be at risk for a reversal.

Inflation considerations

Inflation has stayed quite low in recent years, but there are some signs that this could be about to change.

That large infusion of cash into the financial system from massive monetary stimulus may push prices up. While the Consumer Price Index (CPI) has remained below 2 percent in recent years, pandemic-related spending on food and consumer discretionary items could push it higher. Meanwhile, prices for gold and silver, both inflation hedges, have risen sharply lately.

Despite all this, it is possible that inflation will remain low in the near term.

As of September 2020, unemployment still sat at above 7.9 percent, and the Federal Reserve has said that more deflationary forces than inflationary ones exist in the economy. The situation bears watching.

Using big data

To provide additional value to clients, Segal has partnered with Club Vita, an organization specializing in big data analytics using information about participants.

This partnership enables Segal to use models that are more predictive, more personalized and more efficient. Better models lead to more secure pension promises.

Club Vita uses information on geographical location and socioeconomic groups to improve understanding of human longevity. By comparing overall projected longevity of a plan to others and to sub-populations within it, Segal can more precisely tailor actuarial assumptions to each client to better predict outcomes for the participants.

Learn more about how we use big data.