The FTSE 100 fell just over 5% last month. However, Aviva (LSE:AV) shares underperformed significantly, falling 12% during March. With full-year results and other large news impacting the stock during this period, my focus isn’t only on what happened, but also what it means for the future direction of the share price.
Short-term wobble
To begin with, there’s the simple reality that investor sentiment soured for most companies. Rising geopolitical tensions and surging oil prices rattled investors and pushed up inflation expectations. In such an environment, even high-quality insurers like Aviva rarely escape unscathed.
There was also the knock-on impact that falling stock prices aren’t great for Aviva’s asset management business. If people are worried about the market in general, there’s a risk they’ll pull money out of Avivia’s management and instead sit in cash. This would then negatively impact fees generated from assets under management (AUM) for the company further down the line. This hasn’t materialised yet, but some investors clearly have that on their minds.
With regards to the latest results, there’s the argument that expectations had simply run ahead of reality. Aviva actually delivered a very strong set of 2025 results. Operating profit jumped 25%, and the company hit its 2026 targets a full year early. Yet the share price still fell.
I think this is because investors had already factored much of that good news into their expectations. When a stock has had a strong run and starts to look fully valued, even excellent results can trigger selling to bank profits rather than buying.
The outlook from here
Despite the sell-off, the underlying business still looks in good shape. For a start, Aviva’s executing well. It’s delivering consistent profit growth and generating strong cash. That’s not the profile of a struggling business. In fact, management’s now targeting around 11% annualised earnings growth over the medium term, suggesting there’s still momentum in the core operations.
There’s also the income angle. After recent share price weakness, the dividend yield has climbed to 6.52%, well above the FTSE 100 average. For long-term investors, that combination of yield plus steady growth can be very attractive, especially in a volatile market. The share price is up 7% in the past year.
We should also note the strategic positioning. Aviva has spent years simplifying the business and focusing on core markets like the UK. If it continues to execute (particularly with integration benefits from the Direct Line deal) there’s a good chance of earnings increasing.
Despite all this positivity about potentially buying the March dip, the most obvious risk is the macro backdrop. If inflation rises and interest rates increase, consumer demand for insurance and savings products could weaken. This is a concern going forward, but I still believe the upbeat outlook could make the stock one for investors to consider.
