Shares of banks have fared badly in a climate of negative interest rates. Not so insurance stocks, but investors may need to brace for more turbulence, according to a prominent capital market expert.
Investors shy away from the shares of banks – both Credit Suisse and UBS are close to all-time lows. Their smaller rivals Julius Baer and Vontobel have also tanked as rate indicators are pointing south.
With interest on long-term bonds withering, banks are loosing an important source of income and the flat yield curve is a sure sign of a slowdown of growth or even a recession. Such a scenario tends to come with a bigger need to write off loans.
Shape of Things to Come
The sell-off of financial market titles hasn’t yet reached the insurance industry though. Shares of insurers often remained a welcome escape route for investors seeking to put their money into the wider finance industry. And indeed, while UBS has lost some 35 percent of its value over the past 12 months, Zurich added 16 and Swiss Life 31 percent over the same time period.
And yet, the two industries find themselves in more or less in the same situation. Shareholders of insurers may therefore see their holdings decline in value, according to Manfred Huebner (pictured below), head of Sentix, a capital market platform. The analyst told «Institutional Money» that the valuation of assets of insurers was equally dependent on rates and that the stocks of such companies had shown signs of weakness recently given the decline of long-term yields.
He said that a survey of investor sentiment suggested that while still fairly euphoric, the attitudes among investors were about to turn. An acceleration of the decline in yields tended to be a sign of an imminent correction on the stock market, Huebner said. And such a movement went hand in hand with underperforming insurance stocks.
