Global share markets, including Australia, have fallen heavily in response to Donald Trump’s tariff regime, causing alarm among investors and eroding value from retirement account balances.
Superannuation portfolios typically contain a sizeable allocation to international and domestic shares. So when conditions turn bad for global markets, like now, superannuation balances almost certainly drop.
Australia’s benchmark S&P/ASX 200 is down about 14% from February highs after a major sell-off on Monday as fears of a full-blown trade war and global recession risk escalated.
Here’s what you can do.
Should I be worried about my super?
Super is a long-term investment. The share market dive will weigh on short-term super fund returns, but it follows two years of very strong returns, the AMP chief economist, Shane Oliver, says.
“As most of us have at least some of our wealth in shares via our superannuation, such falls can be depressing, but seen in the context of share market history which often sees periodic sharp falls they are nothing new,” he says.
While the fall in US shares has been rapid – the fourth-fastest two-day fall since the second world war – the total drop is mild when compared to the last 120 years, he says.
Oliver says the key for most investors is to stick to a long-term strategy.
It’s unclear when the current volatility, triggered by deteriorating global trade relations, may calm down. Fund managers are looking for signs of a truce in the tariff tit-for-tat, especially between the US and China, to signal a recovery may be on the cards.
Fund manager Betashares said in an investment note on Monday that it was a challenging time for investors because it was difficult to forecast the outlook with “any level of conviction” given the uncertainty of the tariff unrest.
“We are looking out for any further announcements of escalation or olive branches,” the note said.
Betashares said it was “as important as ever” to have a disciplined approach to investment “which should include the benefits of diversification”.
What if I’m planning on retiring soon?
Falls in the value of superannuation balances are usually of most concern to workers nearing retirement, given they have less time in the market for their accounts to recover.
Angus Kidman, a money spokesperson at the financial comparison website Finder, says people in their 50s and 60s may want to reassess their investment strategies and consider taking less risk.
“Anybody who’s in their 60s, really, they should be very actively involved in what their super strategy is and what their exit is going to be,” he says.
“People in their 50s should be focusing on it more. That’s often when you might think about switching into more of a balanced strategy, where you’ve had a growth strategy previously.”
Investors typically limit risk in their portfolios by allocating more of their money to cash and fixed income, while reducing exposure to more volatile asset classes like equities.
Gold is also seen as a defensive asset class and historical haven during volatile times, although traders did send the price of the precious metal lower on Monday, potentially in a push to raise cash reserves to protect against a wave of margin calls.
I’m a younger worker, what should I do?
Given younger workers won’t have to tap into their retirement savings any time soon, there is generally less urgency in reacting to short-term market movements.
Historically, similar-sized share market plunges, such as the Covid sell-off of 2020 and global financial criss sell-offs in 2008, have turned out to be buying opportunities.
Kidman says market volatility is a reality that younger workers will experience in “several decades throughout their lives”.
“Now is not the time to be panicking,” he says.
“The important thing is to make sure that you’re continuing to use super as a tax-advantaged investment, because it does have a benefit there that almost nothing else has.
“For those younger cohorts, it’s very much more a case of, look, this is part of the ebb and flow of what goes on. But having a consistent strategy while thinking about other things is still going to be the best way to go for most people.”
Is there anything else I should look out for?
Kidman says people should be especially alert for scams.
“When there’s volatility, this is when people tend to fall for scams and other things like that,” he says. “There’s definitely an increased risk of that … because hackers will trade on that kind of vulnerability.”
He also points to last week’s cyber-attacks on several Australian superannuation funds, which the Association of Superannuation Funds of Australia (ASFA) said resulted in a small number of customers losing a combined half a million dollars.
Kidman says an event like this can be “followed by people going into a frenzy of fake text messages and scammers trying to say, ‘Hey, we’ll check that out’”.
“That’s something people need to be aware of,” he says.
“It’s when we’re nervous that we’re more likely to react to those things. So I urge people to really be cautious about that stuff [and] don’t react to text messages or random phone calls that claim they’re from your super fund, or someone who can fix up your investments, because almost every … time, it’s going to be a scam.”
