Markets Gyrate as Russian Forces Up the Ante

As Russia’s war of conquest intensifies, stocks opened lower Tuesday and the usual refuge investments gained.

A huge follow-on Russian force is nearing Ukraine’s capital, Kyiv, in an evident bid to turn around Moscow’s bogged-down invasion of the country. Military analysts say that the Russians originally figured they could take over Ukraine in two days with a blitzkrieg attack. But the Ukrainians’ tenacious resistance has thwarted a quick victory. So, the Russian military is bringing in reinforcements and stepping up its assault, launching rocket bombardments on residential areas of Kharkiv, Ukraine’s second-largest city.

In the U.S., stocks opened lower, with the S&P 500 down 0.33%. Meanwhile, gold advanced 1.27% and Bitcoin, which sometimes is used as a refuge investment, jumped 8.6%.

In the meantime, the benchmark 10-year Treasury’s yield fell to 1.75%, as investors bid up the price of U.S. government bonds (price moves in the opposite direction of yields). As of Friday, the 10-year yield topped 2%. And oil, which may see its supply crimped due to the war, topped $100 per barrel amid the scarcity fears.

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With big returns come big expenses. That’s what seems to be the case for pensions across the country, as they are forced to increase their payouts to beneficiaries due to inflation. While the past year has been a record breaker for pension fund returns, inflation will be claiming its fair share of the gains as well.

For CalPERS members, those who retired between 2006 and 2014 will receive the biggest increase at 4.7%. This will be the largest cost-of-living increase for beneficiaries in the past 32 years, dating to 1990.

While the Bureau of Labor Statistics has estimated the Consumer Price Index to have increased by 7% over 2021, CalPERS is not using the 7% to calculate its increased payments. Instead, it uses an average of each month’s numbers.

CalSTRS similarly also has built in inflation protection, thanks to a California law that requires public pensions to do so. However, CalSTRS’ method of calculating this payment is slightly different. The fund gives quarterly supplement payments to those whose annual benefit falls below 85% of their original benefit. This year’s inflation numbers will likely increase the number of supplemental payments that CalSTRS in forced to provide.

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New York City Employees’ Retirement, the country’s fourth-largest pension fund, also ties its cost-of-living adjustments to inflation. However, the pension has the yearly adjustment amount capped at 3%, meaning it won’t take as much of a hit.

The Teachers’ Retirement System of Texas, also among the top 10 largest pension funds in the country, was required by the Texas legislature to give a one-time supplemental payment of up to $2,400 i to make up for the increased cost of living.