Insurance Multi-Asset Outlook —Strong but slowing growth: A tale of two narratives

cobblestone crossroads

Tim Antonelli, CFA, FRM, SCR, Multi-Asset Strategist, Wellington Management

Danny Cook, CFA, Investment Strategy Analyst, Wellington Management

It’s hard to believe we are already into the fourth quarter of 2021. Planning for the next fiscal year has begun in earnest, with insurers across the globe considering the optimal positioning of their investment portfolios heading into yet another year end of heightened uncertainty that could spill over into 2022. As always, we believe that a laser-like focus on fundamentals, while leaving “no stone unturned” in the search for opportunities, should serve as the proverbial guiding light for insurers and other asset allocators.

The path of the COVID-19 pandemic, ongoing for a year and a half now as of this writing, remains key to the global economic outlook, and what we’ve learned about it since last quarter isn’t particularly promising: Additional variants of the virus are possible (and potentially more transmissible and virulent), vaccine-induced “protection” from it could wane over time, and a significant percentage of the global population remains unvaccinated.

This sobering new reality is reflected in reduced economic activity, the resurgence of growth stocks over their value counterparts, and a return to record lows for long-maturity yields in recent months (see Figure 1 in full white paper link below). On a more positive note, global growth is still relatively strong overall, most economies are unlikely to go back into “lockdown” mode, and monetary and fiscal stimuli remain largely supportive. All of this leaves markets caught between two hard-to-reconcile narratives: The pace of economic growth seems poised to slow, but the level of growth is likely to remain above par for the foreseeable future.

Against this somewhat conflicted backdrop, we continue to maintain a pro-risk investment stance, generally favoring equities over high-yield credit for insurers’ surplus investments in the public markets. But relative to last quarter, our optimism is tempered to some degree by a subtle downgrade to our macro and policy outlook — including the potential for…

Wellington Management
Wellington Management

Insurers have been building investment partnerships with Wellington since 1975. With $150 bn assets under management as of Sept 30, 2021, our goals since then have remained evergreen – to exceed the investment objectives and service expectations of our clients. As an integral part of Wellington’s global investment platform, our dedicated Financial Reserves team offers a breadth and depth of resources and experience to serve our insurance clients as a go-to thought partner, risk manager, and trusted advisor for complex investment challenges. The new decade we have just entered looks more treacherous from a risk perspective than anyone could have imagined. Our collaborative strategic and proactive risk management approach helps our clients to be well-prepared.

Rich Coffman
Americas
rmcoffman@wellington.com
+1 617 951 5311

Max Davies, CFA
APAC
mdavies@wellington.com
+852 2846 6011

Sarah Marschok
Americas
smmarschok@wellington.com
+1 617 790 7170

Bob Sharma, CFA
EMEA
bssharma@wellington.com
+44 20 7126 6068

www.wellington.com/en

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