The top 25 state and local pension funds alone have seen the value of their public equities investments drop by a total of nearly a quarter of a trillion dollars in 2025, with roughly $169 billion of those losses coming during the four trading days that followed the Trump administration's April 2 announcement on global tariffs, a think tank said Wednesday.
However, U.S. stocks shot
By contrast, however, based on the fact that more than 75 countries had contacted U.S. representatives to negotiate and have not retaliated, "I have authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately," Trump said in the post.
If the current market turmoil leads to a recession, pension funds should prepare for cash flow challenges, according to an issue brief released Wednesday by Equable Institute, an independent non-profit research organization focused on public sector retirement systems.
"There really are two things that bond investors will probably pay attention to," Equable Institute Executive Director Anthony Randazzo said in an interview Wednesday when asked how the pension fund losses and tariffs might impact municipal bond investors.
"One is to the degree that these investment losses lead to increases in required pension contribution rates over the next few years, that's going to put pressure on state and local budgets," Randazzo said.
Even if the economy doesn't go into a recession, if pension funds take significant losses and can't recover from them in the near term, that will mean that state and local governments will need to increase their contributions to pension funds, he said.
"And those contribution-rate increases will hit municipalities all across the country," Randazzo said. "That will squeeze their budgets."
The second thing municipal bond investors will likely be watching for is the impact on state and local revenues if a recession does occur, he said. If the trade policy does lead to a recession, that could restrict state and local government revenues at a time when they need to increase pension fund contributions to address funding issues arising from investment losses, Randazzo said.
"There could be this double effect where pension funds are losing money in their investments and then they're not getting the contribution rate increases that they need or municipalities are putting the contributions necessary into their pension funds, but it's otherwise restricting their budgets," Randazzo said.
Public pension and other retirement benefit liabilities for municipal issuers emerged as a major theme in the muni market over the past 15 years, with many states undertaking multiple rounds of reform in the wake of projections that their plans would be become a financial albatross without some combination of reduced benefits for new hires, increased contribution rates, and changes to the assumed rate of return.
Heading into 2025, state and local pension funds overall were "fragile," with just an average 80.2% funded ratio and $1.37 trillion in pension debt, according to the issue brief. The total funded status data reflects the 245 state and local plans tracked by Equable Institute.
