1. Clients could swarm on life and annuity products with benefits guarantees like ants on a candy bar that fell under the picnic table.
Sales of products such as non-variable indexed annuities and non-variable indexed universal life insurance policies soar, as clients flocks to arrangements that can protect them against further drops in stock prices but help them share in gains if and when prices go back up.
On May 19, the S&P 500 opened the day near bear market territory; i.e., at a 20% drop from a recent high. On May 18, the S&P 500 experienced a 4% decline—the largest single-day decrease since June 2020. The last time the S&P 500 entered bear market territory was in March 2020, albeit short-lived, as the market turned around and headed into a two-year rally that peaked in early January 2022.
The current equity market losses (and some corporate bond losses) are primarily the result of several factors: 1) earnings reports from large American retailers, including Walmart and Target, show evidence that the continued high inflation rate may be affecting consumer demand; 2) the war in Ukraine has added to inflationary pressures, prompting the Federal Reserve (Fed) to increase interest rates and reduce bond holdings; and 3) recent COVID-19 shutdowns in China have led to a slowdown in the world’s second largest economy.
Author(s): Jennifer Johnson and Michele Wong
Publication Date: 19 May 2022
Publication Site: NAIC Capital Markets Special Report
Historical Fact: Replace American Sugar with Apple or Tesla, and this entire column could be published during the next bear market. Human psychology hasn’t changed in 100 years. Central banks cannot prevent a bear market once optimism has been exhausted.
Pundits, observers, and investors believe the 1920s will be a slow growth decade. High taxes, heavy regulations, wage pressures are the main culprits. (Author note: the consensus in 1921 was incredibly bearish and incorrectly predicted a slow growth decade; the polar opposite consensus circulates today) This editorial cartoon sums up the mood in 1921:
