By Johara Farhadieh
   Chief Investment Officer (CIO)

 

 

Hello! As you have likely heard by now, global financial markets over the past several days have experienced significant volatility and uncertainty. We have heard from numerous customers and key stakeholders who are understandably curious how these events have impacted their investments with Wespath. With that in mind, I wanted to share a few thoughts on the recent market movements, our perspectives on the situation, the resources available to you as Wespath investors and, most importantly, a reminder on the enduring principles of long-term investing.

What Happened?

Many major global stock markets, including here in the U.S., experienced a pronounced and widespread decline between Thursday, April 3 and Monday, April 7. This was primarily driven by concerns surrounding the Trump administration’s newly announced and implemented sweeping tariffs on imports. These tariffs are anticipated to have a substantial impact on global trade. Investors are concerned they could reignite inflationary pressures within the U.S. economy and potentially hinder economic growth to the point of triggering a recession.

These new tariffs also raised anxieties about retaliatory measures from key trading partners, such as China. Reciprocal tariffs and the potential formation of more regional alliances working to counteract the U.S. tariffs introduce new unknowns to the global economy. These factors could escalate global trade tensions and negatively impact worldwide economic activity.

Tariffs were a part of the first Trump administration’s economic agenda and have continued to be a major theme in the early days of this second administration. We have already seen investors react to the implementation and subsequent pause of tariffs on Canada and Mexico in the first quarter. However, the market’s swift reaction to last week’s announcement indicated that this round of tariffs was perceived as more far-reaching and impactful than initially expected.

On Thursday and Friday, the S&P 500 experienced its most-significant two-day decline since the COVID shock of March 2020. The erratic trading continued on Monday, which saw significant declines in the Chinese stock market and dramatic up-and-down swings in the U.S. At one point on Monday, the S&P swung wildly from down 3% to up 4% based on rumors of a 90-day pause on most tariffs. When the White House denied the rumors, those gains were erased in minutes. All in all, the S&P 500 has re-entered “correction” territory, a technical term indicating a market’s decline of more than 10% since its most recent peak.

What Does This Mean for Wespath’s Investors?

While dramatic declines in the stock market can be uncomfortable, I want to assure you that Wespath anticipates and prepares for market volatility. Market corrections and periods of uncertainty are part of the journey to achieve strong long-term returns. For context, this is the 10th correction of at least 10% since March 2009, the low point of the Global Financial Crisis. We remain committed to our investment process, which involves maintaining a long-term perspective. Below, I am sharing a few more details and resources that may provide further clarity on the market volatility depending on your personal situation.

Participants With Defined Benefit (Pension) Plans

Wespath’s defined benefit plans are well funded, and the assets comprising them are invested heavily in fixed income securities designed to reduce the impact of market fluctuations on the funded status of the plans. This is working as intended, and we have not seen a significant impact from the past week’s news on our defined benefit assets.

Participants With Defined Contribution Plans

The majority of Wespath’s defined contribution participants utilize LifeStage Investment Management (LifeStage) to invest their retirement savings. LifeStage is intentionally designed to adjust one’s investment allocations over time, gradually transitioning from riskier to less risky assets as participants approach retirement. For example, a participant invested in LifeStage in their projected retirement year is on average allocated approximately 50% to fixed income investments, compared to 35% for someone still 20 years from retirement. While market volatility can still be unnerving, this program is designed to help participants prepare for unexpected events, like those we have experienced this week.

If you are using LifeStage and have more specific questions about your personal situation, or if you are self-directing your investments and would like to ensure your investment allocations are aligned with your goals, please consider speaking with an EY financial planner. EY services are available to Wespath participants at no additional cost.¹ EY offers objective, third-party guidance without any sales pressure. They are here to help. You can request a financial planner by calling 1-800-360-2539 business days from 8:00 a.m. to 7:00 p.m., Central time or visit wespath.eynavigate.com.

Plan Sponsors and Organizations

I encourage plan sponsors to share the resources identified above with your participants and connect with your Wespath relationship managers if you need further support. For organizations investing some or all of their non-benefit-related assets with Wespath, I’ve shared more information for institutional investors here.

Staying the Course

I hope this information brings some clarity to what I know is a complex topic. Remember, markets have historically proven their ability to rebound from even the most historic declines (above, we illustrate the market’s rebounds from significant declines in past years). But experiencing the positive impacts of these rebounds requires remaining invested, keeping to your long-term plan and resisting the urge to make reactionary near-term decisions.

To conclude, I want to reiterate my conviction in Wespath’s investment approach and in the Wespath team who is here to support you during these uncertain times. Maintaining a disciplined, long-term focus has always been— and will continue to be— an integral part of our investment process. This process is firmly grounded in policies and procedures that we are sticking to. We have a great team of experienced professionals to guide us, and a strong Board that holds us accountable.