US Pensions Will Ride Stock Rally to Reach 12% Gains, S&P Says

This year’s outperformance adds to the estimated pension returns of 16% to 17% in fiscal 2024.

(Bloomberg) -- US public retirement funds will outperform typical investment expectations as they profit from strong stock returns, S&P Global Ratings said in a recent report.

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Analysts expect pensions to generate returns of 11% to 12% for the fiscal year that ended in June, driven by steep jumps in stock prices. These gains would be in spite of a dip that occurred in April, when the S&P 500 shed more than $5.4 trillion in two trading sessions after investors reacted to President Donald Trump’s tariff plans.

This year’s outperformance adds to the estimated pension returns of 16% to 17% in fiscal 2024. There is usually a one-year delay between the measurement of pensions to reporting, S&P said. Managers typically plan for returns of at least 7% to maintain funded ratios, according to the report.

The ratings firms also increased its discount rate guideline to 6.5% from 6% on expectations that the market rally will continue, powered by productivity-enhancing technologies such as artificial intelligence, as well as private equity returns.

“Should US public pension plans continue to exceed expectations, with technological growth persisting as new technologies mature, and the Fed’s rates stabilize, we could see market gains and improved funding for these plans,” analysts led by Todd Kanaster wrote.

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