Brian Parker, Chief Economist
7 April 2025
Over the past week global financial markets have been focused on President Trump’s tariff measures which have proven to be more severe than markets anticipated.
We do not design portfolios based on our own or anyone else’s short-term economic, market or geopolitical forecasts. Nor can we forecast how US tariff and trade policy will evolve. Our focus is on building well-diversified portfolios that deliver the long-term real returns our members need to retire well.
However, we do know that markets tend to overreact and our investment team and our external investment managers do seek to capitalise on opportunities that inevitably emerge during times of crisis and heightened market volatility. At ART, we look for opportunities to acquire quality assets as attractive prices and right now share markets are providing us with opportunities to do exactly that.
The current market turmoil as well as political pressure ahead of mid-term elections may encourage a change of thinking on the part of the US. We also know that at some point, even if the tariff measures remain in place that businesses and households adapt – eventually life, business and the markets move on.
Superannuation is the longest-term investment that any of us will ever have, and market downturns, economic crises, and geopolitical tensions are part and parcel of any long-term investment journey. Every crisis, every downturn, and every recession comes to an end, bar none.
A minimum 10% tariff has been imposed on US imports, including from Australia. However, some 60 countries, including some of the smallest and poorest nations in the developing world have been hit much harder.
Of the largest import suppliers, the tariffs imposed include a 46% tariff on Vietnam, 34% on China, 25% on Korea, 24% on Japan, and 20% on imports from the EU.
America’s trading partners have likely been taken by surprise as well and are taking time to develop their response. China was taken less by surprise and have responded quickly with retaliatory tariffs of 30% on the US, raising the concern of an escalating trade war between the US and China. It appears that the situation has stabilised for now with our investment team closely monitoring the situation.
World share markets had enjoyed a positive start to 2025, but since reaching their highs in February, world share prices have fallen by 14.6%, including 8.2% fall over the past week (to Friday 4th April). At time of writing, around the middle of the day on Monday April 7th, share prices in Australia and Asia have continued to fall sharply.
Emerging share markets have generally outperformed markets in the developed world, posting much smaller declines in aggregate.
European and Australian shares have tended to outperform US shares, particularly US technology shares that been hard hit.
In contrast, government bonds markets have performed well, with yields declining and hence bond prices rising.
Many commentators had assumed that tariff measures would be less severe than what has been imposed. Most believed that tariffs would be used as bargaining tools to force other countries to lower barriers to US trade or to encourage foreign companies to invest in the US. Consequently, it was hoped that any tariffs would be temporary and would be at least partially unwound, which would limit their impact on the US and global economies.
It has become clear that the tariff measures may well be permanent (President Trump has indicated that they are) and given their severity, fears of a US and global recession have increased significantly.
Tariffs raise prices to end customers, raise costs to businesses and adversely impact on economic growth.
In theory, the increase in prices is a “one-off” and hence does not lead to ongoing price inflation. That should mean that there would be no reason for the central bank to raise interest rates. However, on Friday evening, Fed Chairman Powell indicated that if tariffs lead to higher inflation expectations, that could have adverse implications for US monetary policy, potentially requiring either rate cuts to be put on hold, or at worst rates to rise, despite the like negative impact of tariffs on economic growth.
The absolute returns of ART’s diversified portfolios have benefitted from the good performance of sovereign bonds as well as our significant exposure to private assets, including real estate, private equity and infrastructure. These unlisted assets do cushion the impact on returns during periods of share market volatility.
In addition, we have been somewhat cautious on the outlook for share markets – particularly the US market – and modestly overweight sovereign bonds. Nevertheless, we are not immune to the falls in share markets – no super fund with any exposure to shares will be immune.
For most members, the answer to what should you do with your super now may be to do nothing. Trying to time when these challenging periods will begin and end is extremely difficult.
If you have 15, 25, years or more until you retire, you will probably experience many of these periods during your working life. The compensation for accepting this kind of short-term market turmoil is higher long-term returns. Before making any changes, consider speaking with a financial adviser.
If you’re close to retirement or already retired and in our default option or invested in a reasonably conservative portfolio, you may not need to do anything at all in response to the current market volatility.
However, if you feel you may be over-exposed to shares and are very worried about the effect of this downturn on your retirement, you may need to consider moving to a more conservative strategy. There are two key things to remember:
Before making any changes, consider speaking with a financial adviser.
Australian Retirement Trust offers a number of investment options that give exposure to a diversified range of asset classes, including both public market and unlisted investments which members can tailor to their needs.
We will endeavour to keep members as informed as possible, while acknowledging this is a rapidly evolving environment. We would strongly encourage members to seek financial advice before making significant changes to their investment strategy.
If you want more information or advice to decide which investment option or group of options best meets your needs, please speak to your adviser or contact us.
1. Any advice given is provided by representatives of Sunsuper Financial Services Pty Ltd ABN 50 087 154 818, AFSL 227867 (SFS) or QInvest Limited ABN 35 063 511 580, AFSL 238274 (QInvest), both wholly owned by the Trustee as an asset of Australian Retirement Trust. SFS and QInvest are separate legal entities responsible for the financial services they provide. Eligibility conditions apply. Refer to the Financial Service Guide available at art.com.au/fsg for Super Savings and qsuper.com.au/disclosure for QSuper. You can find out more at art.com.au/advice for Super Savings and for QSuper at qsuper.qld.gov.au/advice
