WA Super News
What's happening with Equity Markets?
What has happened?
Between Friday 2 February and Monday 5 February, a number of global equity market indices dropped by between 2%-5% including a fall of over 1,000 points on the Dow Jones on 5 February. The sell-off has not been limited in geography, as markets from Asia to the US have been impacted too.
Explaining market sell-offs is not an exact science. However, one explanation is that the downturn was triggered at least in part by investors getting nervous about a rise in inflation, due to clear signs of strong wage growth and the continuing prospect of interest rate hikes in the US. Initially, bonds fell on inflation concerns, but have subsequently rallied as investors have sought the relative safety of fixed income.
To put this into context, this decline comes after a very strong start to 2018 and after a number of years of positive returns.
Impact on WA Super’s investments
At WA Super, diversification is our primary tool for managing investment risk. Our diversified options invest across different asset classes and risk factors. Our philosophy is generally to rely less on equities to generate returns and to have a higher allocation to other return-seeking investments (like infrastructure and property) as well as defensive assets like bonds and cash. Our portfolios are designed to provide downside protection to our members by reducing the impact of short term fluctuations in share markets.
What should you do?
While we understand that market uncertainty can be disconcerting, especially if you are approaching or are already in retirement, it’s important to bear in mind that for many, superannuation is a long-term investment. Even if you’ve just retired, you’re likely to need your super to last for another 15 to 20 years. So it makes sense to look at investment returns over more than just a single year or a few months (or days). Often in uncertain and volatile markets, it can be tempting to ‘do something’. However, if you decided to exit share investments after a sharp falls, you will lock in losses and risk not parnticipating in any subsequent market recovery.
If you have further concerns or would like to talk to one of our financial advisers to get advice about your investments or retirement strategy, please contact our Member Services Team on (08) 9480 3500.