Market movements and your super

With conflict in the Middle East dominating headlines and surging oil prices costing Australians dearly at the pump, global developments have become more complex lately. 

So, what’s driving recent movements, and what could they mean for long-term investments like your super? Let’s take a clear balanced look. 

The US and Israel have initiated a military campaign, striking many targets across Iran. In turn Iran has attacked multiple countries it views as sympathetic to the US. Alongside the risk to persons living in the region, these actions have severely disrupted freight flowing through the Strait of Hormuz. The Strait carries approximately 20% of the world’s energy supply and other critical exports from the region – most of these exports were destined for countries in Asia Pacific.   

So far, the most visible impact for Australians has been felt at the petrol pump, with fuel hitting record prices. The war is pushing up oil prices very quickly because it’s disrupting supply in key regions. Higher fuel prices affect production and transport costs, driving up prices, which drives inflation. This leads to uncertainty in investment markets, which have fallen in response. There is a risk that the Strait remains closed for a long enough time that supply chains shut down, in a similar manner as we experienced during Covid in 2020.  

The effect on investment markets has been broad. Firstly, share markets have moved down significantly reflecting the expectation that shipping disruption has a significant impact on the world economy.  

Secondly, bond yields have been moving as investors seek to predict the next move on interest rates from central banks. As this crisis is likely to have an inflationary impact, the probability that interest rates rise has increased. Lastly all investment markets have been very volatile as investors try to understand the implications of the war, the likely disruption to the world economy, and the flip-flopping of the US government on its objectives for, and self-assessed success in this war with, Iran.   

The US-Israel-Iran conflict is not the only major theme playing out currently.   

Markets continue to adjust to Trump’s trade tariffs, which led to a shuffling of trading partners seeking improved deals. This thematic has impacted the flow of investment capital across the world.  

Just as important is the way artificial intelligence is changing things, as the AI boom moves into a new phase.  After a strong increase in share prices for AI companies seeking to build out vast data centres, that support has waned. Now that AI use-cases are expanding rapidly both winner and loser companies are materialising, and their share price movements hint at the security (or lack) of those companies' competitive advantages. This shift has reduced the value of many Software as a Service (SaaS) companies who are realising that minor competitors can use AI to develop sophisticated software without hiring large developer workforce.  

Over the past two decades alone, investment markets have navigated: 

• The Global Financial Crisis 

• The Covid-19 pandemic 

• Russia’s invasion of Ukraine 

• Trade disputes and commodity shocks 

Each of these events also created uncertainty, causing periods of market volatility. 

And each time, diversified, long-term investors who stayed the course were better positioned when markets stabilised. 

Superannuation is designed with this long-term view in mind. For most members, retirement is years away, or even decades. Over that sort of timeframe, short-term market movements don’t automatically translate into long-term outcomes. 

Our investment approach isn’t built around one country, one political outcome or one short-term headline. Instead, our investment managers focus on: 

Your super is invested across different asset classes, industries and regions. This helps reduce reliance on any single market. 

We continually monitor economic conditions, market trends and global developments. When conditions shift, we review exposures and adjust where appropriate. 

Super is a long-term investment, and our strategy reflects that. However, we are always providing active management and will adjust our investments to ensure our members best financial interests are always served. 

Because markets are globally connected, some ups and downs are inevitable. What matters most is how portfolios are structured to absorb and manage those shocks over time. 

It can be tempting to react when markets dip or headlines intensify. But making investment decisions during periods of heightened emotion can sometimes do more harm than good. 

Before making changes to your super, it’s worth taking a step back and considering: 

• Your long-term retirement goals 

• Your time horizon 

• Your comfort with market ups and downs 

If you’re unsure, this is exactly what our smartCoaches are here for. A conversation can help you understand your options and feel confident about your next step. 

If you have questions about your super or your investment options, we’re here to help.