The first half of 2018 has been a rougher ride for investors. Global market returns have been starkly lower and far more volatile, while U.S. interest rates have been on the rise. President Trump's aggressive stance on trade began to negatively impact the market as a trade war with China loomed.
Returns down, volatility up: U.S. equities have managed to stay in the black this year, while EAFE and emerging market equities have been lower. The average value of the VIX index was up 50% over 2017, and has shown much greater variability.
Some help from bond yields: Corporate pension plans have benefited from 2018's rising yields. Higher yields will continue to help plan funded status, but muted equity returns will impede long-term progress.
Out of alts, into equities: Pension plans terminated $4.3 billion in alternatives through June 30, up from $3.7 billion a year earlier. $7.3 billion in U.S. equity searches were issued after $1.5 billion in all of 2017. International equity searches were $19 billion higher than 2017.
Active rebounds? Asset flows into active equity, while still net negative, improved over 2017 and 2016, compared to passive equity. Relative interest in non-U.S. equity grew as asset flows to bond funds waned.
Sources: Bloomberg LP, NISA Investment Advisors LLC, Pensions & Investment Research Center, Morningstar Inc.