Super shocked by shaky market

More Australian super fund holders are shifting to cash investments in a bid to bypass a shaky share market.

After a year of positive returns in the double digits, super returns have begun the year in the red, prompting many retirees, investors and super fund managers to switch to alternative investments in order to mitigate short-term volatility.

Signs of US inflation and higher global interest rates, as well as a potential trade war between the US and China have spooked markets this year.

As a result, many super balances have taken a hit and, as a result, fund managers are allocating more funds towards bonds and cash.

Some money experts are warning self-managed fund holders to shift their retirement savings from shares, or risk losing a significant amount from super.

The possibility of a trade war between the US and China has created a challenge for fund managers trying to calculate where money should go in order to be safe from market volatility.

And while they aren’t exactly running scared, investment strategists certainly have their hands full.

“There’s no indication suggesting we’re going to have a major bear market or global recession or anything like that, so therefore it’s really a case of fine tuning,” said AMP Chief Economist Shane Oliver.

TD Securities senior strategist Mitul Kotecha can usually anticipate major market moves, but with all that’s going on politically and financially, even he concedes the outlook is ‘foggy’.

“There’s clearly a lot more uncertainty, things aren’t as easy to predict as perhaps they would have been [in the past],” said Mr Kotecha.

“If you look at the way things have moved as well, last year there was an expectation of strong US growth – clearly that didn’t happen.

“The [US] dollar weakened for most of last year.”

While many blame Donald Trump for a shaky market, Mr Kotecha disagrees.

“Equity markets rallied significantly over the last year,” he said.

“What had been expected is not what actually occurred in markets, and I think that’s added to this amount of uncertainty.”

And while first-quarter earnings reporting time is upon us, with potentially positive news for shareholders,Mr Kotecha says there could still be grim times ahead for super funds, especially considering the “significant downward pressure” on the global economy which will dampen earnings and returns.

“That’s something that I think markets will still have not yet at least fully anticipated or priced,” he said.

“That is the wild card.”


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