Equity markets were down last year, and suffered the worst downward run in five years.
The first half of the year was positive for the structured product industry as everyone thought that the markets were going to recover and investors would benefit from the extra yield resulting from the higher volatility, something that happened in the second half.
Against a backdrop of positive economic growth, most distributors increased their exposure to the US market through structured products, with sales reaching a total US$334 billion outstanding only on products linked to the S&P500 index, according to SRP data.
Nevertheless, with signs of a global economic slowdown, concerns about monetary policy and political dysfunction led to an increase in volatility making December a particularly dreadful month, with the S&P 500 falling 9%.
According to our analysis of 26,410 live structured products, from which 50% had the initial strike during 2018 and were out of the money, 32% of the products are still on track to deliver an annualised average return above 6%, providing that the S&P500 does not decline further.