The rollercoaster ride of global markets has taken another sharp turn, with the US stock market volatility shaking the superannuation funds of Australians. With uncertainty in the air, financial experts weigh in on what investors should do next.
So, what does this mean for everyday Australians, and is now the time to make changes to your super strategy?
The recent plunge on Wall Street, following US President Donald Trump’s comments on Fox News, saying, ‘Look, we’re going to have disruption, but we’re OK with that,’ has sent shockwaves across the globe, including the Australian Securities Exchange (ASX). He did not dismiss the chance that his tariff policies might push the US economy into a recession and drive up inflation.
The Nasdaq Composite index suffered its worst day since September 2022, and high-profile companies like Tesla saw their shares tumble dramatically.
This turmoil has not spared the superannuation balances of countless Australians, with more than $49 billion wiped of the ASX 200 in a single trading session.
Kirby Rappell, executive director of SuperRatings, advises a measured response: ‘Be alert, don’t be alarmed.’
Despite the unsettling headlines, it’s important to maintain perspective. Superannuation is a long-term investment, and while monthly returns have dipped into the negative, the overall performance for the financial year remains in the green, with funds delivering around a 7 per cent return so far.
However, with the Australian market closely following its US counterpart, nearly half of Australia’s $4.2 trillion superannuation pool, which is invested in international assets, is feeling the pinch. The US market is a significant part of this investment, and exposure to its volatility is inevitable. Super funds must navigate these choppy waters with strategic management of US exposure to maintain their long-term objectives.
For individual investors, particularly those nearing retirement, the current market conditions can be disconcerting. Graham Cooke, head of consumer research at Finder, suggests that those concerned about their superannuation’s vulnerability might consider adjusting their investment mix to a lower-risk profile.
He says this can often be done with just a few clicks within your super account, allowing you to tailor your investments to your risk appetite. However, it’s worth noting that ‘if the market does start to recover, then you’ll recover slower.’
The global economic turmoil was ‘definitely reason to be concerned,’ says Cooke, especially for those who remember the impact of the Global Financial Crisis (GFC) on retirees. With the NAB’s Super Insights Report 2023 indicating that offshore allocation of investment portfolios is at 47.8 per cent, the trend towards international diversification continues.
As the country faces these uncertain times, it’s essential to focus on the long-term and avoid knee-jerk reactions to short-term market movements. While the current volatility is unsettling, history has shown that markets do recover over time.
For those over 50, it’s particularly important to review your superannuation strategy with a financial advisor. Ensure that your investment mix aligns with your retirement goals and risk tolerance. Consider whether you have the right balance between growth and stability, and whether now might be the time to adjust your portfolio in anticipation of further market shifts.
Remember, superannuation is not just about the numbers on a statement; it’s about securing a comfortable and sustainable retirement. By staying informed, seeking professional advice, and making considered decisions, you can protect your retirement savings from the ripple effects of the US market chaos.
We invite you, our YourLifeChoices readers, to share your experiences and strategies for managing superannuation investments during these volatile times. How have you adjusted your approach to safeguard your retirement funds? Join the conversation in the comments below.
Also read: Australia – like everyone else – fails to win exemption from Trump’s tariffs on aluminium and steel
I keep hearing Super is a long-term investment. When your 77 that doesn’t mean much.