Cindy Beaulieu
Despite market whiplash due to the uncertainty over tariff and economic policy, insurance investors should be patient with the macroeconomic environment, says Cindy Beaulieu, Conning Asset Management’s CIO for North America.
“What we’re really guiding our clients on is to focus really on your strategic initiatives, be as close to them as you possibly can be, be opportunistic as spreads start to move in the right direction to take advantage of that, and in the meantime, don’t lose sight of the fact that the yields that we were able to achieve in the market today are significantly higher than they were a couple of years ago,” Beaulieu tells CIO. “You are, as you’re investing through this turmoil, continuing to build income portfolios that will pay out in the long run.”
Beaulieu says the firm is cautious about the fact that markets may seem a little too optimistic during the recent rebound from April lows.
“That was our view coming in here: That there was too much euphoria, animal spirits, driving valuations so much higher,” she says.
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The S&P 500 has rebounded about 17% from early April lows, following market expectations that trade deals will come and Saturday’s announcement that tariffs on China, which had been 145%, will be lowered to 30% for 90 days, pending trade negotiations.
“You’ve got potential deals on tariffs that could be positive, risk that the China situation stays drawn out and negative—that is certainly not factored into current market valuation,” Beaulieu said prior to the announcement of tariffs on China being lowered.
“You need to be very patient in this market,” Beaulieu says of insurers. “We do not think that you are getting paid to take extraordinary risks. So if your strategy, based on your capital position, suggests that you should be up in higher-quality credit, that you should have a duration of seven to eight years, stay true to both of those.”
She also remains skeptical of the spreads available on lower-rated bonds.
“Don’t try to stretch for the high-yield BB deals right now, because you’re not getting paid enough,” Beaulieu says. “Don’t move down the capital structure in some of the structured parts of the market, because similarly, while spreads have widened there, the risks are more significant to those structures, so avoid some of those for now. … Stay true to your strategy, and valuations will come. If the Chinese tariffs do play out to a negative, the spreads have to widen much more than they have so far, so there will be opportunities in the fixed-income market to take advantage of that, and that’s something insurers should be doing.”
Something closer to a best-case scenario would still work out well for those who maintained their strategy throughout, she says.
“In the meantime, if … we end up in a pro-growth market, then that’s just going to be better for all the existing positions in a portfolio, and you continue to pick your spots through that as well,” Beaulieu says.
Flight From U.S. Assets?
American assets had underperformed investments from most other geographies in the first quarter of 025, a result of uncertainty around policy. During the quarter, the S&P 500 Index fell 4.6%, while the iShares MSCI China Index gained 15.68% and the MSCI Europe Index gained 10.60%.
Treasurys also sold off during the rollout of tariff policies, with some suggesting rising yields and a sharp stock selloff during April prompted the administration of President Donald Trump to pause some tariff plans.
“We certainly understand why there was a bit of panic selling … in the markets a couple weeks ago,” Beaulieu says, adding that U.S. assets have no alternative due to the quality of the U.S. economy and its real lack of a comparable replacement. “It’s the best house in a tough neighborhood. There is nowhere else you can go to get the transparency, the liquidity and the potential for strong outcomes that outweigh the downside … in any other economy right now than in the U.S., even for all of our faults and even for all of the uncertainty in the moment.”
“The U.S. does remain an important part of global portfolios [and] global central bank holdings,” Beaulieu concludes. “We do not expect that is going to significantly change anytime in the future, because there’s simply no replacement.”
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