Each month, the National Association for Fixed Annuities (NAFA) and The Index Standard track the performance of the major indexes used inside FIAs. These benchmarks help show how the markets connected to FIAs are behaving, including the S&P 500 alongside risk-managed and multi-asset strategies.
It’s important to remember these results aren’t actual FIA returns. They reflect index performance before the insurer applies your contract’s crediting rules (the caps, spreads, and participation rates). Your credited rate may be lower than the raw index number, but it will never be negative, because your principal is protected from market losses.
While index data shows market potential, your contract’s crediting terms determine what you actually earn. And in a year that’s starting like 2026, that protection is showing its value in real time.
Q1 2026 Performance Snapshot
NAFA’s March data shows a market in transition. One-year returns still reflect last year’s gains, but year-to-date numbers tell a very different story.
Equity Market Context
- S&P 500: -4.6% YTD / +16.3% 1-year
- Nasdaq-100: -6.0% YTD / +23.1% 1-year
- MSCI EAFE Index: -1.9% YTD / +18.2% 1-year
- Russell 2000: +0.6% YTD / +24.1% 1-year
After a strong 2025, equities started 2026 with a meaningful pullback, especially in U.S. large-cap and technology names.
Volatility-Controlled FIA Index Trends
Many of the indexes used inside FIAs, especially those targeting 5% to 12% volatility, held up significantly better than the broad market in Q1. Some posted modest gains while others limited losses to a fraction of what unhedged stock indexes experienced.
This isn’t a coincidence. It’s the direct result of index designs that automatically reduce equity exposure when volatility rises.
S&P 500 vs. Typical FIA Index: Why the Results Look So Different
S&P 500 (Q1 2026)
- Direct exposure to U.S. stocks
- Captured the market’s downturn in full
- One-year return: +16.3%
- YTD return: -4.6%
Typical FIA Volatility-Controlled Index (Q1 2026)
- Exposure adjusted to limit market swings
- Shifted away from stocks as volatility increased
- Many YTD returns ranged from slightly negative to modestly positive
- Smaller drawdowns than direct stock exposure
This difference is the point. FIA indexes are designed to manage risk and smooth returns over time, not to track the stock market dollar-for-dollar.
Performance Snapshot (NAFA, March 2026)
| Index Type | Examples | YTD / 1-Year Return Range | Highlights |
| Equity-Linked | S&P 500 (-4.6% YTD / +16.3% 1Y); Nasdaq-100 (-6.0% / +23.1%); MSCI EAFE (-1.9% / +18.2%); Russell 2000 (+0.6% / +24.1%) | Roughly -8% to +8% YTD; one-year returns range from negative to +37% | U.S. equities pulled back to start 2026 after a strong 2025. Pockets of strength included biotech (Nasdaq Biotechnology +37.6% one-year) and small caps (Russell 2000 +24.1% one-year). |
| Risk-Controlled (5%-12% Vol) | S&P 500 Daily Risk Control 5% TR (-1.2% / +5.3%); S&P 500 Avg Daily Risk Control 10% PR (-3.5% / +7.7%); Bloomberg US Dynamic Balance III ER (-1.6% / +3.5%) | Roughly -8% to +6% YTD | Volatility controls limited downside in Q1 by trimming equity exposure as markets turned. Smaller drawdowns than direct stock indexes. |
| Multi-Asset / Balanced | MSCI MKT MediaStats Multi-Asset (+7.5% / +11.3%); MSCI BofA US Dualcast (+2.9% / +12.8%); S&P Global Diversified 7.5% (+0.1% / +12.5%) | Roughly -10% to +8% YTD | Diversified strategies leaned on bond and alternative exposure to navigate the rocky start. Wide dispersion based on index design. |
| Underperformers | Invesco QQQ Portfolio Plus (-10.4% YTD); Nasdaq Night Owl (-10.1% YTD); SG AI Navigator (-5.8% / -13.1%); Smart Passage SG (+1.2% / -12.8%) | Negative YTD and/or 1-Year | High-volatility, AI-driven, and concentrated growth indexes felt the pullback most acutely. |
Index performance does not represent actual annuity contract performance and does not include caps, participation rates, fees, or rider costs.
Market Context: Why FIA Index Results Look Different Than the Market
A common point of confusion is why FIA-linked indexes don’t fully match the S&P 500 or Nasdaq — in either direction. The Q1 2026 data offers a clear, real-time example.
Built-In Volatility Controls
Most FIA indexes actively adjust exposure to stocks, bonds, or cash based on market conditions. When volatility rises — as it did this quarter — the index shifts away from equities, limiting losses on the way down (and gains on the way up).
Risk Management Comes First
FIA indexes are engineered to smooth returns over time, not to capture full market upside. This design helps protect annuity owners from sharp drawdowns — the kind that can be especially harmful near or during retirement.
Index Returns Are Not Contract Returns
The performance figures shown in NAFA reports:
- Do not include caps or participation rates
- Do not reflect spreads or fees
- Do not account for optional income riders
Your actual annuity performance depends on the specific terms of your contract — not just the index itself.
What This Means for FIA Owners
If you own an FIA, the early-2026 numbers may actually be reassuring. While the broader market dropped to start the year, principal protection means you’re not absorbing those losses.
For many retirees and near-retirees:
- Avoiding losses can be more important than chasing higher gains
- Predictable outcomes help support long-term income planning
- Reduced volatility provides peace of mind during uncertain markets
In strong years like 2025, FIAs may lag traditional investments. But in years that start like 2026 has, that same structure helps preserve the value you’ve already accumulated.
A Real-World Perspective
Consider two hypothetical investors heading into 2026:
- Market Investor: Fully invested in stocks; enjoyed strong 2025 gains — but absorbed every percentage point of the Q1 2026 downturn.
- FIA Owner: Earned a more modest credited rate in 2025 — but principal is intact, and they’re not making up Q1 losses just to get back to even.
Neither approach is inherently right or wrong. The difference comes down to priorities: maximum growth potential versus risk control and income stability.
How To Interpret FIA Index Reports
Each FIA credits interest based on a set of rules that translate index performance into your account growth. Here’s a quick refresher:
| Term | Meaning | Example |
|---|---|---|
| Cap | The maximum percentage you can earn in a crediting period. | If the cap is 8% and the index rises 10%, you’ll earn 8%. |
| Spread | The amount subtracted before interest is credited. | With a 2% spread, a 6% index return yields 4%. |
| Participation Rate | The percentage of index gain you receive. | A 70% participation rate on a 10% index gain = 7% credit. |
When market volatility rises, insurers often adjust participation rates to maintain balance. Reports like NAFA’s give a helpful snapshot of how indexes are performing, but it’s your annuity’s crediting terms that tell the real story. Over time, FIAs are built for consistency, not short-term spikes.
Stephen Kates, CFP®Principal Financial Analyst for Annuity.orgStephen Kates, CFP® is a personal finance expert specializing in financial planning and education. He serves as the Principal Financial Analyst for Annuity.org, where he delves into industry trends to support consumers and financial advisors on wealth management, annuities, retirement planning, and investing.
What To Do Next
The March 2026 FIA report is a useful reminder of why fixed index annuities exist in the first place. Equity-linked indexes captured market volatility in full this quarter. Volatility-controlled and multi-asset options softened the blow.
If you already own a fixed index annuity, this is a good moment to review your crediting terms and confirm the protection features are aligned with your goals. If you’re considering one, the current environment shows exactly why investors near retirement value the principal protection FIAs provide.
