Are you under age 50? Then you’ve never experienced a sustained period of rising interest rates. Over the last 35 years, interest rates have been permanently falling. For insurance companies this megatrend was a two-edged sword.
Banks, on the other hand, primarily had to contend with declining interest margins.
Now we’re seeing the average rate on 10-year Swiss government bonds increase for the first time in three decades. Does this herald a reversal in interest rates? If so, what are the implications? We believe the consequences are far-reaching. The relative attractiveness of products will fundamentally shift. And the rationale we described above will be turned on its head:
It’s hard to predict precisely what will happen. Particularly when it comes to timing it’s unclear which factor will kick in first. Whatever happens, what’s important now is to keep a close eye on the markets and get in a position to benefit from the upcoming shifts.