(New York)

The term “hybrid annuity” gets thrown around in casual conversation all the time, unfortunately including in sales pitches to clients. However, one would be better off calling it what it is—a fixed index annuity. “Hybrid annuity” gives a false sense of the product, lending the impression that there is full principal protection AND unlimited upside. The reality, of course is that while principal protection full exists, there is quite limited upside that is constrained by the annuity contract.

FINSUM: A contractually limited 4% max annual upside via an option contract on an index is not unlimited upside.

(New York)

Goldman Sachs issued a bleak revision of its earlier estimate for the looming second quarter recession. When the pandemic first struck, Goldman called for a 9% decline. It then proceeded to increase that forecast to 20% as the lockdowns began. Now it has reissued guidance, calling for a 34% decline in GDP and a rise in the unemployment rate to 15%.

FINSUM: This is a profound forecast and speaks to the scale of the pending downturn. The good thing, though, is that Goldman thinks there will be a 19% recovery in Q3.

(Washington)

Speaking from the White House, President Trump issued a grave warning yesterday. Alongside Dr. Fauci, the team said that they expected between 100,000 and 240,000 deaths in the US from Coronavirus. The announcement took the media world by storm and appears to have also impacted markets, as futures have been down considerably since the speech. The president’s tone was a marked departure from his previous outlook, with Trump saying Americans needed to prepare for a “very, very painful two weeks”.

FINSUM: Those are big shocking numbers, and the grimness of Trump’s tone added even more gravity to the situation.

(New York)

In what comes as a very important announcement right now, Goldman Sachs argues that the stock market has not bottomed, and that it will take three things happening for the nadir to arrive. In order for markets to reach a bottom and start to sustainably rise, Goldman says case numbers must start to fall, there must be evidence that Fed and Congressional efforts are sufficient to support the economy, and investor sentiment and market positioning must bottom out (which has not even close to happened yet, according to GS). Goldman expects the S&P 500 to finish the year at 3,000.

FINSUM: We agree with the first two points (about case numbers and stimulus), but the third argument about positioning seems circular to us, as it relies on the markets getting worse before getting better.

(New York)

Income investors have been frightened by the extent to which the current Coronavirus downturn is going to cause an economic downturn and thus a big cut to dividends. The only good news on this front recently has been that companies are suspending buybacks before dividends. In assessing the damage, Goldman Sachs says overall dividend payouts are going to be slashed by 25% this year. That figure includes a 38% fall for the next nine months added to the 9% rise in dividends in the first quarter.

FINSUM: This is big, but it would be far from catastrophic levels.