Who would have thought that high interest rates would present a major buying opportunity? (Definitely not your local real estate agent or mortgage broker.) While high rates can make borrowing costlier and slow down housing markets, they also open favorable opportunities in financial products like annuities. In other words, annuities are back and stronger than ever before! There are reasons for that.
First, let’s examine the recent shift in interest rates. The 10-year Treasury yield has surged 708 percent from its low of 0.52 percent on August 2, 2020, reaching around 4.20 percent by the end of July. This dramatic increase resulted from the Federal Reserve’s efforts to control inflation, manage employment, and ensure financial stability. As a result, interest rates have reached a 17-year high, comparable to levels not seen since 2007.
Currently, inflation data and consumer prices show great progress, which is leading the Fed to consider its first rate cut since 2022 in September. Note, while it remains uncertain whether inflation is fully under control, the latest indicators suggest it may soon align with the target of two percent year-over-year. With the writing on the wall, we could be at the tail end of the inflationary cycle.
Due to rates potentially heading lower, now is the best time to act and secure elevated rates for annuities. Why? Insurance companies use the 10-year Treasury yield to price their annuity products, so higher yields mean better rates for consumers. This results in money flowing out from equities and into annuities to capture gains, eliminate future volatility, maximize income, and provide peace of mind.
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