(New York)

Even advisors who use fixed index annuities frequently may not be aware that under the new SECURE Act, the products have gotten some preferential new tax treatment. In particular, clients can now rollover 401ks, 401bs, IRA, or pension payment into a fixed index annuity tax-free. This obviously comes in addition to the fact that FIAs are tax deferred to begin with.

FINSUM: This seems like a very useful addition to the FIA universe provided by the Secure Act. Advisors should be aware.

(Houston)

Generally speaking, when oil prices fall it is considered good for the economy as it unleashes excess consumer spending. This is what happened in the last big drop in 2014-2015. However, this time around, there are likely to be no winners from the drop. Because the huge fall in prices is coming at a time of significantly reduced economic demand because of the coronavirus, it is hard to imagine that much excess economic activity will be created to account for the drop in oil-related industries.

FINSUM: Supply and demand are tumbling simultaneously across the economy (not just in oil), so it does not seem this will be a net positive like it has been in the past.

(New York)

Markets are in a very rough place right now, with benchmark indexes approaching bear market territory on Monday. Energy and travel have been the epicenter of losses, but every sector s getting hit badly. With that in mind, what is the best sector to invest in right now? The answer may be—somewhat surprisingly—financials, and XLF in particular. Whereas the S&P 500 as a whole was in the 99th percentile of valuations historically before the big fall, financials were only in the 60-70% range. Now with the big tumble in prices, financials are in the bottom 1% of their ten-year valuation range.

FINSUM: So rates and yields are super low, which obviously hurts banks’ net interest margin and has led to financial stocks getting pummeled. However, they are so cheap that this is a very good long-term entry point.

(New York)

In what comes as a very important sign for the wider US economy, lower rates and yields are apparently not flowing through to mortgages in the way that many expected. One of the bright economic spots in the big market volatility recently has been the hope that much lower rates would stimulate more housing demand. Mortgages rates have actually risen by 20 bp since March 5th despite the huge fall in Treasury yields. Even since mid-February (when the market was peaking), mortgage rates have only dropped 15 bp to 3.35% for a 30-year fixed.

FINSUM: This is very important because it takes a 75 bp fall for a typical homeowner to save money on a refinancing. We are not even close to that yet, so hard to see any economic boost coming.

(Washington)

The “mini Super Tuesday” results are in from yesterday’s six primaries, and Joe Biden has taken an even more commanding lead. The biggest prize he won yesterday was Michigan, giving him a very strong lead heading into next week’s primaries, which includes Florida. He is almost untouchable at the point, but a win in Florida—which is forecasted—would make his advantage insurmountable.

FINSUM: Two thoughts here. Firstly, Sanders is the most successful non-winning candidate ever. He changed the party and galvanized the center, which ultimately led to his losing, but transformed the vision of the party. Secondly, Biden is more dangerous for Trump. He has the right middle-of-the-road policies and demeanor to attract moderates and those whose eyes might be wavering from the president.

(San Francisco)

The market is in a brutal position, everyone knows that. Peak losses hit 19% yesterday, just a hair off a bear market. The reality, though, is that some sectors are thoroughly in a bear market, including the biggest growth driver of them all—tech. The S&P info tech sector is down 20%, while Microsoft is down 20% and Apple 19%. Amazon and Facebook are both down 17%. IBM, Cisco, and older-guard tech companies are getting slaughtered down to the 25%+ range.

FINSUM: Some of these are smart to stay away from, but others could be good buying opportunities. For instance, social media companies are more exposed to consumer spending declines (and resultant advertising declines) that B2B tech companies offering cloud and other software infrastructure that is hard to cut from budgets.

(New York)

Any advisor even remotely familiar with annuities will know that while the two share the nomenclature of being “annuities”, fixed and variable annuities are very different. Fixed annuities protect principal and give limited upside, all with the design of trying to outperform CDs. Variable annuities do not protect principal, but offer much more flexibility and choice in allocation and give good upside. They do have fairly stringent rules during the accumulation phase, but that can lead to good income in the payout phase. In terms of the current market, there are two ways to look at it, and the proper investment depends on the age and position of the client. If the client is younger and wants capital appreciation, then the current market may offer a good entry point for a variable annuity. If someone is nearing retirement, locking in principal protection is likely crucial, so fixed annuities would be preferable.

FINSUM: The reality is that a lot of clients are going to be liking the security of principal protection in the current environment (which makes some sense), so those are probably going to be the most apposite for the current market.

(New York)

The bond market responded in a big way to President’s Trump’s hints at stimulus today with yields rising sharply. Markets have been hoping central banks may step in to support the economy, and Trump himself has made some bold hints about what may be in store. In particular, the President is favoring a potentially major tax cut to help support the economy. More specifically, Trump is focusing on payroll tax cuts among other options. However, some news outlets say the administration is far from enacting specific policies.

FINSUM: Our bet is Trump will try to unleash a big tax cut combined with other stimulus measures. He knows he needs to keep the economy afloat to get re-elected, so support measures seem very likely.

(New York)

Markets are off to their worst start in recent memory. With oil having plunged 30% earlier in the day, US markets opened to a very abrupt 7% decline. The sharp plunge triggered an automatic market halt of 15 minutes. At the time of writing, the Dow is down 6.37% and the S&P 500 is down 6.19%. US Bond yields plunged too, with the 10-year Treasury at one point having a 0.43% yield. Janus Henderson summarized the markets best, saying “In just over two weeks, investor sentiment has swung from complacency to panic … What started as a virus-driven de-risking has now mutated into a broad-based, multi-asset capitulation”.

FINSUM: It is looking ever more like global central banks are going to have to step in with coordinated stimulus. That said, a virus is a unique kind of panic that cannot be instantly resolved. A recession now appears more likely than not.

(New York)

Imagine retiring this month. The Dow’s recent bottom means it was 18%+ off its peak. That is a really rough time to be entering the late stages of a career or early stages of retirement. One option for those worried about protecting income is a fixed index annuity. The insurance product guarantees full principal and is designed to offer upside as well. The idea is to have their yields outperform the market, but at the same time offer full downside protection.

FINSUM: Fixed index annuities are probably going to see a big rise in popularity this year given how poorly the stock market is doing. Worth consideration.