Markets snapped a chain of five consecutive weekly gains last Thursday to close in the red for the Good Friday holiday. More significantly, the S&P 500 gave up its gains for the year on Wednesday, lending a somber note to the proceedings. Some of these losses are attributable to Tuesday’s horrific terror attacks in Brussels but markets continued to suffer from familiar vagaries such as the volatility in oil prices.
Additionally, the Fed recently asserted that the number of rate hikes this year will be fewer than earlier anticipated. However, recent statements from Fed officials have led to questions about the path of interest rates. These factors have combined to create renewed uncertainty over market direction. Property and casualty insurance stocks are good choices in such an environment, which is why it would be a smart move to add them to your portfolio.
Rate Hike Path Unclear
The Federal Open Market Committee (FOMC) shied away from raising rates at its recently concluded policy meeting. The FOMC cited fears about a weakening global economy and the pace of price increases for such a move. However, it did acknowledge that risks to the outlook have diminished.
Meanwhile, several Fed officials made contradictory comments on the issue this week. Atlanta Fed President Dennis Lockhart said that the recent data was evidence of another recent hike, even during the meeting in April. Also, Philadelphia Fed President Patrick Harker said that the Fed might raise interest rates following recent improvements in the U.S. economy.
However, economic data remains mixed in nature. While recent readings on GDP and the labor market have been mostly upbeat, other indicators remain disappointing. This is particularly true for manufacturing as borne out by reports on industrial production, durable orders and the ISM Manufacturing Index, which remains below 50.
Property and Casualty Insurance’s Strengths
Insurance is usually considered a sector which is extremely sensitive to interest rate and changes and gains from a rise in rates. However, there are exceptions which prove that the internal workings of this sector are not as simplistic as they seem at first glance.
