How Index-Linked Annuities Buffer Against Market Shocks Like the Coronacrash
"Risk is an arbitrary concept until you experience it. Talking about being punched in the face is different from...actually being punched in the face." – Carl Richards, Certified Financial Planner™ and creator of the Sketch Guy column
Markets shed 40% back in March as efforts to slow the spread of coronavirus drove the economy to a near halt. Though they bounced back remarkably fast, the economic outlook is uncertain, unemployment is high, and volatility is expected to remain until COVID-19 vaccines are widely distributed and are finally bringing the panemic under control.
We're in uncharted waters, and our life rafts may not work the way they used to. After six years of quantitative easing and the hangover from it, bond yields remain paltry. De-risking via higher allocations to fixed income appears to no longer be as effective as it once was.
New Problems, New Solution
In March, the from 2018. This growth may have been inspired by the late 2018 correction when . But it may also hint at a broader appetite due to the secular trend of exceptionally low interest rates, the looming specter of tail risk (rare and terrible market events), and a swell of baby boomer retirees.
