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Retirement Planning > Saving for Retirement

Plan Sponsors Expect Recession, Negative S&P Returns in 2020

By Michael S. Fischer

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Four in five defined benefit plan sponsors in a poll conducted March 9 said there was at least a 50% chance of a recession because of the COVID-19 pandemic, NEPC reported Tuesday.

Sixty-seven percent of respondents said negative interest rates in the U.S. were unlikely, giving such an occurrence only a 25% chance. Nineteen percent put the chance of negative rates at 50% or more, and 14% said there was no chance.

Sixty-three percent of plan sponsors said they expected negative returns from the S&P 500 in 2020, and 15% anticipated a loss of more than 10% for the year. Only 37% of respondents expected positive returns.

“The rapid spread of the new coronavirus has rattled markets and shaken corporate pensions who are trying to determine the true economic and market impacts of this pandemic,” Brad Smith, a partner and member of NEPC’s corporate practice group, said in a statement.

“While this is a new landscape of uncertainty, NEPC is counseling corporate pensions and all investors to mitigate risk by staying diversified, rebalancing towards targets, and having a clear plan of action.”

And indeed a majority of investors said they were staying the course. Fifty-two percent of survey participants said the market was too volatile for action. Of those making adjustments, 31% said they were rebalancing to targets, and 7% were raising cash.

Respondents to the survey conducted by NEPC’s corporate defined benefit group represented a diverse array of corporations and not-for-profit health care organizations. Fifty-three percent had an asset size of less than $1 billion, and 47% had an asset size greater than $1 billion.

NEPC noted that larger plans were likelier to have a negative view of the economy. One-third of these respondents said the chance of a recession owing to COVID-19 was greater than 75%, compared with 24% of smaller plans that held the same view.

This difference in perception applied to markets, as well. Forty-seven percent of bigger plans expected positive returns from the S&P 500, compared with only 28% of smaller plans.

Michael S. Fischer

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