Australian superannuation funds have been significantly impacted by recent volatility in US stock markets. As fears of a potential recession grow and concerns over tariff wars intensify, these global market shifts have left their mark on the retirement savings of Australians.
According to News, while the situation has sparked concern, experts emphasize the importance of long-term thinking. With a mix of international exposure and domestic factors, the road ahead for super funds may be challenging, but steady navigation could yield positive outcomes over time.
Impact of US market turmoil on superannuation funds
In recent weeks, the US stock market has seen sharp declines, driven largely by President Donald Trump’s escalating tariff policies and growing recession fears.
Wall Street’s plummeting performance, including a notable drop in major tech stocks like Tesla and Apple, has reverberated across global markets, including Australia. As President Trump remarked during a recent interview,
“Look, we’re going to have disruption, but we’re OK with that,”
further stressing that
“you can’t really watch the stock market.”
The Australian share market followed Wall Street’s downward trajectory, with more than $49 billion wiped off the ASX 200 during trading on a particularly volatile day.
A look at Australian super fund performance
The impact of these global shifts has been reflected in Australian superannuation fund returns. In February, the median balanced super option saw a decline of 0.8%, with the median growth option dropping by 1.2%.
Despite these declines, Australian superannuation funds are still on track to achieve a positive return for the full financial year, with a 7% return reported for the year so far.
The median capital stable option fared slightly better, delivering a modest positive return of 0.1%. On the pension side, the median balanced pension option fell by an estimated 0.9%, and the median growth pension option by 1.4%, while the capital stable pension option saw a small increase of 0.1%.
The importance of international market exposure
Nearly half of Australia’s superannuation pool, amounting to $4.2 trillion, is invested in international markets, with a significant portion tied to the US stock market. This global exposure, while contributing to recent losses, remains a crucial element of the long-term success of super funds.
“Increasingly as super funds get bigger we are exposed to more international markets, there’s really no way to avoid it,” said Kirby Rappell, executive director of SuperRatings.
It’s actually really important to the long-term objectives of super that people are exposed to international markets. The US is a huge market, it’s very hard to avoid and you probably wouldn’t want to.
Despite the short-term volatility, experts suggest this exposure to international markets is essential for long-term financial growth, as it helps mitigate risks in domestic markets.
It’s up to each fund to stay ahead of the trends — who could benefit potentially and who’s probably a little more exposed – Rappell explained.
Guidance for superannuation members
Experts urge Australians to focus on long-term investment strategies and to “drown out the noise” of short-term market fluctuations. As Rappell noted,
I think this is probably the first time we’ve seen volatility re-emerge for a while and so no doubt people will be noticing that.
He added,
The level of ups and downs we’ve been seeing for a while has actually been very low, so this is probably going to back to the longer-term trend where we do see a bit of movement. It gets back to where people’s focus needs to be in superannuation — don’t focus on the day-to-day, month-to-month but get long-term settings right and drown out the noise.
In light of the current market uncertainty, Graham Cooke, head of consumer research at Finder, suggested that those worried about the market’s movements could consider adjusting their superannuation profiles to lower-risk settings.
It’s usually just a case of a couple of clicks within your super account,
he said.
You can say I want 50 per cent in medium risk, 25 per cent in high risk and 25 per cent in low risk. You can decide to weight your super as per your appetite. The only issue with that is if the market does start to recover, then you’ll recover slower.
Managing risk in uncertain times
For those nearing retirement, the current turmoil may be particularly concerning. “For anyone coming to the age of retirement now I think it would definitely be a concern,” Cooke said. “They’d be looking for Trump to reverse course.”
Despite this, experts agree that moving out of higher-risk investments in response to market drops could negatively affect long-term growth. “Typically, if there’s no exposure to the US, you’d be seeing a worse outcome,” Rappell explained.
The global economic turmoil is also impacting large Australian super funds, which continue to grapple with the challenges of investing substantial incoming capital without amplifying concentration risk. As John Bennett from NAB’s Super Insights Report 2023 noted,
“The continued internationalisation of investment portfolios and the ongoing challenge for large funds in deploying incoming capital to the domestic market without amplifying concentration risk” remains a key challenge.
