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 2026 has now shown both sides of that bargain. The same controls that cushioned the Q1 selloff also sat out most of the recovery that followed.
Year-to-Date Performance Snapshot: Through July 2026
NAFA’s July data shows the rally that began in Q2 carrying through midyear, with both year-to-date and one-year returns now solidly positive across most index categories.
Equity Market Context
- S&P 500: +9.4% YTD / +18.1% 1-year
- Nasdaq-100: +12.0% YTD / +21.8% 1-year
- MSCI EAFE Index: +9.8% YTD / +21.4% 1-year
- Russell 2000: +18.1% YTD / +32.5% 1-year
Equities pulled back to start 2026, then rallied hard through the spring and summer. Small caps led the recovery, with the Russell 2000 up more than 18% for the year.
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. Through July, the same designs did the other thing they do: they stayed defensive while the market climbed.
This isn’t a coincidence, and it isn’t a flaw. It’s the direct result of index designs that automatically reduce equity exposure when volatility rises. The mechanism can’t tell the difference between a decline and the start of a rebound, so it gives up ground on both.
S&P 500 vs. Typical FIA Index: Why the Results Look So Different
S&P 500 (Through July 2026)
- Direct exposure to U.S. stocks
- Absorbed the Q1 downturn in full
- One-year return: +18.1%
- YTD return: +9.4%
Typical FIA Volatility-Controlled Index (Through July 2026)
- Exposure adjusted to limit market swings
- Trimmed stocks in Q1, then was slow to add them back
- Softened the early-year decline
- Participated in only part of the rebound, with many YTD returns landing between flat and +5%
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, July 2026)
| Index Type | Examples | YTD / 1-Year Return Range | Highlights |
| Equity-Linked | S&P 500 (+9.4% YTD / +18.1% 1Y); Nasdaq-100 (+12.0% / +21.8%); MSCI EAFE (+9.8% / +21.4%); Russell 2000 (+18.1% / +32.5%) | Roughly -5% to +19% YTD | Equities recovered strongly after a weak Q1. Standouts included Nasdaq Biotechnology (+44.6% one-year) and small caps (Russell 2000 +32.5% one-year). |
| Risk-Controlled (5%-12% Vol) | S&P 500 Daily Risk Control 5% ER (+1.7% / +4.2%); S&P 500 Avg Daily Risk Control 10% PR (+4.3% / +11.8%); Bloomberg US Dynamic Balance III ER (+2.3% / +4.7%) | Roughly -1% to +6% YTD | Volatility controls stayed defensive through the rebound, trailing the broad market by 5 to 8 points year to date. |
| Multi-Asset / Balanced | MSCI MKT MediaStats Multi-Asset (+6.8% / +10.7%); MSCI BofA US Dualcast (+0.1% / +12.5%); S&P Global Diversified 7.5% (+1.2% / +13.7%) | Roughly -7% to +11% YTD | Wide dispersion by design. Bond and alternative sleeves capped the upside in an equity-led rally. |
| Underperformers | Nasdaq-100 Bitcoin Trends 15% (-7.8% / -10.5%); SG Lead Asset Select Exposure Rotation (-7.0% / -6.1%); Invesco QQQ Portfolio Plus (-6.9% / -2.2%) | Negative YTD and 1-year | Crypto-linked and concentrated rotation strategies stayed negative even as the broad market recovered. |
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 current 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 in Q1, the index shifts away from equities, limiting losses on the way down (and gains on the way up). 2026 delivered both in the same year.
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, 2026 is a useful year to look at honestly. Your principal was protected through the Q1 decline, and your credited rate will likely trail the market’s recovery by a wide margin. That is the trade you bought, working exactly as written.
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, FIAs lag traditional investments. 2025 and now 2026 both illustrate it. In falling years, that same structure preserves what you’ve already accumulated. You don’t get to choose which kind of year arrives next, which is the entire case for deciding in advance how much upside you’re willing to trade away
A Real-World Perspective
Consider two hypothetical investors heading into 2026:
- Market Investor: Fully invested in stocks. Absorbed every percentage point of the Q1 2026 downturn, then recovered all of it and more, finishing July up 9.4% for the year.
- FIA Owner: Gave up nothing in Q1 thanks to principal protection, but captured only a fraction of the rebound, with many volatility-controlled indexes up between flat and 5%.
Neither approach is inherently right or wrong. The difference comes down to priorities: maximum growth potential versus risk control and income stability.
Find Out How Much Growth You Could Lock In
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 July 2026 FIA report is a useful reminder of what fixed index annuities actually do. Equity-linked indexes captured the full round trip this year: down in Q1, then up sharply. Volatility-controlled and multi-asset options softened the fall and muted the recovery.
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.
