Global equity markets were volatile in the first quarter, with leadership shifting from Growth to Value and from U.S. to International, a big reversal from the last two years. Fixed income markets were positive, with the strongest results in investment grade bonds.
After two years of the Magnificent 7’s1 outsized earnings growth leading U.S. equity market returns, concerns over AI capex sustainability and earnings potential have led to a reduction in concentration and a decline in the market. Conversely, international markets had strong performance in the first quarter, as European equities benefited from increased government spending, emerging markets were bolstered by China’s AI advances and the U.S. dollar weakened. Large-cap stocks (S&P 500 Index) were down -4.27% in the quarter, and small-cap stocks (Russell 2000 Index) were down -9.48% in the quarter. International developed stocks (MSCI EAFE Index) were up +6.86% for the quarter, and emerging market equities (MSCI EM Index) were up +2.93% for the quarter.
Fixed-income returns were positive during the quarter led by high quality bonds and emerging market debt. The U.S. 10-year Treasury yield fluctuated during the quarter but ended at 4.23%. Performance for the Barclays Government Credit Index, a proxy for the broad U.S. fixed-income market, was up +2.70% in the quarter; high-yield bonds were up +1.00% in the quarter; and emerging market debt was up +3.28% in the quarter.
The Stable Value Fund continues to be a positive performer, with returns up +0.60% for the quarter.
The Bond Fund was up +2.36% for the quarter leaning toward higher quality bonds.
The Sustainable Balanced Fund, which has allocations to both sustainability-focused equity and fixed-income managers, was down -1.03% for the quarter.
The Target Annuitization Date (TAD) Funds, which have allocations to the Bond Fund as well as to the Equity Fund (and in a few of the TAD Funds, the Stable Value Fund), had performance between -0.98% and +0.56% for the quarter.
The Equity Fund was down -1.95% for the quarter, mainly due to detraction from the U.S.
The Global Sustainability Index Fund (GSIF) was also negative, with a return of -3.80% for the quarter.
The Basic Annuity essentially has been protected from interest rate volatilities since 2016. As a result, the funded status (our assets to the present future value of all our promises to annuitants) remains healthy. There was a 2% increase in benefit payouts beginning in 2025.
In the Participating Annuity, the funded status (our assets compared to our future promises to our annuitants) improved in 2024. Given the improvement, there was a 6.5% increase beginning in 2025.
Increases were also instituted for the pre-2007 Equity and Balanced Benefit Annuities based on 2024 performance.
1. Magnificent 7 includes: Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, Tesla
As a retirement investor, you should focus always on the appropriate asset allocation, or mix among stocks, bonds, and cash/stable value investments, and your long-term retirement objectives. It is rarely wise to react to shorter-term market movements. The easiest way to avoid that is to invest in the Target Annuitization (TAD) Fund nearest to your retirement date. These funds are more focused on growth early in your career, and become more conservative as retirement approaches, by owning fewer equities and more bonds and stable value investments.
Our capable and responsive Member Services staff is available to assist you. Please contact the Pension Boards at 1.800.642.6543 with questions about fund information, performance, strategy, and approach.
As a benefit of your PBUCC Lifetime Retirement Income Plan, Fidelity Retirement Planners can help you see if you are on track for retirement and help you choose the investments in your account. Calls are unlimited and confidential. Call via Pension Boards Members Services and ask to speak with a Fidelity Retirement Planner at 1.800.642.6543, from 8:00 a.m. to 9:00 p.m., Monday-Friday.