What We’re Watching This Week
Are Insurance Companies at Risk?
Strategy Activity Update
Looking Ahead
What We’re Watching This Week
Consumer confidence inches up. According to a closely watched survey of consumer confidence, Americans are feeling a bit more upbeat about the direction of the economy—largely as a result of the robust job market. Higher consumer optimism has historically led to increased spending on goods and services, which could create a gentle tailwind for some companies and their stock prices.
Housing bounces back. Is this the end of the housing slump? Data shows pending home sales increased for the third straight month in February. Lower home prices have helped—nationwide, prices fell for seven consecutive months through January. This, along with the recent decline in mortgage rates, is good news for house hunters who’ve seen house values go down as higher interest rates put a chill on the housing sector. The supply of existing homes for sale remains tight, however, which might set a floor on how much lower prices could go in certain markets.
Banking crisis ripples. In the wake of the mini banking crisis, questions remain about lending standards and how the situation will influence inflation. Partner and Wealth Advisor Steve Johnson talks through the aftermath of the Silicon Valley Bank (SVB) collapse and what it means for you. Click here to watch now and read below for more, including how insurance companies may (or may not) be rocked by the wake.
Are Insurance Companies at Risk?
It’s natural to wonder whether the banking crisis could spill over into other segments of the financial sector, and we’ve fielded questions from clients about insurance companies and annuity providers.
The short answer is that the banking crisis appears to be largely contained, and we’re not seeing signs that liquidity will become an issue beyond the initial small subset of specialized regional banks and some of their partners.
Insurance companies—because they are not structured like retail lenders—are less susceptible to the risks that we saw with SVB and its ilk (like a bank run by depositors). Even with tighter credit conditions and an economic slowdown, insurers are more insulated due to lower liquidity needs and a relatively favorable interest-rate backdrop now versus the past decade.
For their part, annuities are structurally different than insurers—but the takeaway is the same. The risk of default on your annuities is low, especially with highly rated insurance companies, and we are not seeing similar signs of cracks that could lead to collapse in this area.
It’s true that some insurance stocks have been dragged down a bit by sympathy selling, but not as much as bank stocks. And our active stock portfolios are underweight financials, which lowers your exposure to this recent event and the fallout.
As always, your advisor is available to talk about what’s going on in banking and how market developments may affect your financial goals.
Strategy Activity Update
Please see below for a summary of the trades we executed over the week through Thursday and our current tactical strategy allocations.
Dividend Income
No trades
AIQ Tactical Global Growth
No trades
AIQ Tactical Defensive Growth
Sell Cash
Buy iShares Core S&P 500 ETF (IVV)
AIQ Tactical Multi-Asset Income
Sell Invesco Senior Loan ETF (BKLN)
Buy Vanguard Intermediate-Term Corporate Bond ETF (VCIT)
AIQ Tactical High Income
No trades
Looking Ahead
Tomorrow, we’ll get a look at the personal consumption expenditures price index (PCE), the Fed’s preferred measure of inflation. Next week brings key reads on manufacturing, construction spending, factory orders, job openings, the service sector, consumer credit and the job market, including the March unemployment rate. We’ll be here to break it all down for you.
If you’d like to learn more about our tactical or fundamental strategies, please contact Steve Johnson at 844-587-7393 or info@advisercapital.com.
Please note: This update was prepared on Thursday, March 30, 2023 prior to the market’s close.
This material is distributed for informational purposes only. The investment ideas and opinions contained herein should not be viewed as recommendations or personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.
Purchases and sales of securities listed above represent all securities bought and sold in each strategy during the period stated. Each strategy’s portfolio generally includes more holdings in addition to the transactions listed above and in some cases the securities listed above may only represent a small portion of the particular strategy’s complete portfolio. Further, the securities listed above are not selected for listing based on their investment performance; thus it should not be assumed that any of the securities listed above were profitable or will be profitable, nor should it be assumed that future recommendations will be profitable. Clients and prospective clients should only make judgements about a strategy’s performance after reviewing the strategy’s composite performance information. There is no assurance that each security listed above will remain in the strategy’s portfolio by the time you have received or read this email. Securities are listed for informational purposes and are not intended as recommendations. Existing investor accounts may not participate in all transactions listed above due to each account’s particular circumstances.
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