It’s no secret 2022 has been a year of inflation, interest rate increases, and stock/bond market volatility. We’ve seen everything from a 40-year high increase in the CPI, the highest mortgage rates in almost two decades, and the worst start to the 60/40 portfolio ever.
In fact, according to Bank of America’s data, $22 Trillion has been lost in the financial markets this year, with risk assets hit especially hard. As we turn the page to 2023, it’s crucial to understand where we’ve been and, more importantly, where we are going.
In the Fed’s attempt to subdue stubborn 40-year high inflation, rising interest rates significantly increased borrowing costs while also increasing rates on interest-sensitive savings products. One of the biggest benefactors of these rate increases was fixed annuities. In fact, LIMRA reported Q3 22 non-variable annuity sales climbing 75% year over year to $56 billion.
Seeing their investment and retirement accounts decimated, certain savvy clients took the opportunity to de-risk a portion of their portfolio prior to what most believe will be a rocky, recessionary year in 2023.
Not only helping prevent future stock/bond losses but also locking in some of the highest annuity rates we’ve seen since the run-up to the 2008/2009 Great Recession.
Recently BlackRock, the largest asset manager in the world, released their 2023 Global Outlook and stated, “equity valuations don’t yet reflect the damage ahead, in our view. We find that earnings expectations don’t yet price in even a mild recession.” BlackRock was joined by other major investment banks, Goldman Sachs, Bank of America, and Citi calling for a recession in 2023 with a negative outlook on equities. Citi bank forecasts “rolling country-level recessions during the coming year” and is “expecting new lows for equities in 2023.”
It’s not all doom and gloom.
There have been some positive developments recently. The US Consumer Price Index has fallen over the last five months after peaking at 9% over the summer. The most recent November 22 CPI data came in at 7.1%, the lowest since December 2021.
Due to the pullback in inflation readings, the Fed has tipped its hat to a slowdown in rate hikes with the potential to stop the increases in 2023. As a result, 30-year fixed mortgage rates have pulled back from over 7% down into the mid to high 6% range, offering some relief on the borrowing side.
The 10-year treasury, a popular benchmark to gauge interest-sensitive products, peaked in mid-October at around 4.23%. Since then, the 10-year has dropped to about 3.5%, causing a reduction in yield on insurance companies’ investments and, in turn, lower benefits to annuity purchasers.
The good news is annuities, especially Fixed Indexed Annuities, are repriced less frequently than mortgages, fixed-rate annuities, and SPIA’s.
While we’ve already seen a noticeable decrease in borrowing rates and some fixed annuities, most insurance companies have yet to reprice their FIAs at the new lower rates. While nothing is guaranteed, we expect FIA rates to stay strong throughout the rest of 2022, with the likelihood of a meaningful reduction early in 2023.
Many of us remember rushing to our mortgage broker back in 2020 to refinance debt at some of the lowest interest rates we may ever see in our lifetime.
We’re seeing a similar situation today where clients are flocking to their insurance agents and financial advisors to lock in, what many believe, could be peak annuity rates heading into what major investment banks predict will be a tremulous year.
With still a few weeks left in December, our advisors are having one of their best annuity submit months!
Don’t pass up this opportunity, and please let LifePro help you get the word out to your clients and prospects. We have a ton of free, turn-key content available to you through our hundreds of Money Script Monday episodes and outside resources such as the Alliance for Lifetime Income.
As a partner with LifePro, you have access to a custom, branded Money Script Monday page for each episode that is unique to you and your business.
As we wind down 2022, it’s essential to stay active and continue to market so we can help ensure a strong finish to the year and set us up for success as we head into 2023.
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Give your Field Support Representative (FSR) a call at (888)- LIFEPRO, and they will walk you through these concepts, including the latest annuity rates, and how we can help grow your business!
Advisory Services offered through LifePro Asset Management, LLC Registration does not imply a certain level of skill or training. The information presented here is not specific to any individual's personal circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials.
Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Fixed Index Annuities are designed to meet long-term needs for retirement income, and they provide guarantees against the loss of principal and credited interest, and offer the reassurance of a death benefit for your beneficiaries. Income benefit riders may be offered either built-in or for an additional cost. Although external indexes may affect contract values, a market downturn cannot reduce your credited interest or principal. The contract does not directly participate in any stock, bond, or investments. You are not buying any bonds, shares of stocks, or shares of an index. The market index value does not include the dividends paid on the stocks underlying a stock index. These stock dividends are also not reflected in the interest credited to your contract. Before any decisions are made regarding your client’s financial situation, your client’s individual circumstances and objectives should be discussed. There are many factors to consider.
The views expressed herein reflect the views of LifePro as of 12/14/2022. These views may change as conditions change. The views expressed herein are not intended and should not be construed as investment advice and they do not address any individual’s specific situation. For Agent/Advisor Distribution Only - 2640508 - 121422