Annuities Are Always in Vogue

From a financial industry perspective, the first quarter of 2012 was a reason to celebrate.

The stock market had its best first quarter in 14 years, with the Dow Jones Industrial Average up 8 percent and the S&P 500 up 12 percent‑the best start since the bull market of the 1990s. The NASDAQ composite index, made up of technology stocks, had an even more remarkable run, up 19 percent for the year, its best start since 1991.

The trigger for this amazing quarter actually happened very early in the year. On January 3, the Dow rose 180 points. Later that month, the Federal Reserve said it would keep benchmark interest rates near zero for almost three more years. That news sent stocks to their highest levels since May 2011. It soon became the best January for stocks since 1997 and the momentum continued in quick succession, with the stock market passing two milestones in the process:

Milestone 1. On February 28, the Dow rose above 13,000 for the first time since May 2008, four months before the financial crisis hit that September.
Milestone 2. Two weeks later, it was the NASDAQ’s turn, as it crossed 3,000 for the first time since the dot-com era a dozen years earlier.
A final impressive note from the first quarter can be found in the market’s steady performance. The gap between the daily high and low for the S&P averaged only about 0.9 percentage points‑three times smaller than early last fall when volatility was the norm.

So what does this mean for you and your clients?

It’s likely that many clients will want to take advantage of the current market environment, but as we know, people have short memories and would be wise not to forget not-so-long-ago events. Along those lines, a key point can be gleaned from one of the highlights above‑the Dow rising above 13,000 for the first time since May 2008, only four months before the financial crisis destroyed a large number of retirement portfolios. As that proves, change in the financial industry can happen quickly, so as financial professionals, it’s our responsibility to remind our clients of recent history and help them understand that their retirement savings should have some level of built-in protection.

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