As of September 22, 2025, U.S. pension funds and households are holding record-high proportions of equities, signaling a dramatic shift in investment strategy and raising questions about sustainability. Defined contribution (DC) plans, now comprising about 80% of U.S. pensions, are leading this trend, holding nearly 70% of assets in equities. This marks a significant departure from the earlier dominance of defined benefit (DB) plans, which were more bond-focused.
Households also have a record 45.4% of financial assets in stocks. This shift is partly attributed to the long-term outperformance of equities over bonds—recently, the S&P 500 posted a one-year return near 16% versus just over 3% for bonds.
Despite concerns about high valuations and the potential for market corrections, optimism persists due to factors like the AI-driven growth outlook. Analysts, such as those at Deutsche Bank, have even increased their S&P 500 forecasts. However, the heavy tilt toward equities may pose risks, especially for retirees who might face market downturns close to retirement.
Still, with bonds no longer seen as “risk-free” due to inflation and fiscal concerns, equities remain the dominant choice for long-term growth.
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