‘Be alert, not alarmed’: Aussie superannuation funds battered by US stock market turmoil

Superannuation balances have been hammered by the turmoil in US share markets as fears of a recession grow. Here’s one thing you can do.

Australians’ superannuation balances have been hammered by turmoil in US share markets as Donald Trump’s tariff war escalates and recession fears grow.

Wall Street plunged again this week after Mr Trump, in an interview on Fox News on Sunday, refused to rule out the possibility that his tariff policies could tip the US economy into recession and spark inflation.

“Look, we’re going to have disruption, but we’re OK with that,” the President said, stressing that “you can’t really watch the stock market” — which has now seen all of its post-election gains wiped out.

The Nasdaq Composite index posted its worst day since September 2022 on Monday and shares in Elon Musk’s Tesla lost an eye-watering 15 per cent, while other big tech stocks including Apple and Nvidia were also hammered.

“It will be fine long-term,” Mr Musk insisted on X.

The Australian share market followed Wall Street deep into the red, with more than $49 billion wiped of the ASX 200 in trading on Tuesday.

“The key message is be alert, don’t be alarmed,” said Kirby Rappell, executive director of SuperRatings.

Wall Street stocks plummeted on Monday. Picture: Charly Triballeau/AFP

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Data released by superannuation research house on Monday showed monthly returns turned negative for the month of February, the second monthly negative return for the financial year.

Despite the Reserve Bank cutting the cash rate for the first time since November 2020, Australian and international share markets — key drivers of super fund returns — declined in February as Mr Trump’s tariff agenda came into focus.

“The impact of tariffs on China and potential flow-on effects to the Australian economy in particular influenced Australian share expectations, offsetting any potential benefit from the reduction in interest rates,” SuperRatings said.

SuperRatings estimates that the median balanced option fell by 0.8 per cent in February, while the median growth option fell by 1.2 per cent. The median capital stable option delivered a small but positive 0.1 per cent return.

Pension returns tracked accumulation return trends. The median balanced pension option fell by an estimated 0.9 per cent, the median growth pension option by 1.4 per cent, while the median capital stable pension option was up 0.1 per cent.

President Donald Trump would not rule out a recession. Picture: Ben Curtis/AP

While returns fell in February, funds have delivered a roughly 7 per cent return so far this financial year, and Mr Rappell said provided they can “navigate the next few months well”, members are on track for a positive full-year outcome.

With March off to a rocky start and warnings of worse to come, Aussies should brace themselves but learn to “drown out the noise”, according to Mr Rappell.

“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 said.

“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.”

Nearly half of Australia’s $4.2 trillion superannuation pool is invested in international assets, with the US stock market making up a significant chunk.

Mr Rappell said exposure to Wall Street turmoil was unavoidable.

Treasurer Jim Chalmers at Parliament House. Picture: Martin Ollman/NCA NewsWire

“Increasingly as super funds get bigger we are exposed to more international markets, there’s really no way to avoid it,” he said.

“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.”

He added the key would be how funds managed US exposure.

“It’s up to each fund to stay ahead of the trends — who could benefit potentially and who’s probably a little more exposed,” he said. “It comes back to that long-term thinking. But typically if there’s no exposure to the US you’d be seeing a worse outcome.”

Graham Cooke, head of consumer research at comparison website Finder, said Aussies who were worried could consider moving their super into a lower-risk profile.

“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.”

Australians have $4.2 trillion in superannuation. Picture: iStock

Mr Cooke said the global economic turmoil was “definitely reason to be concerned”, noting that many Australians who retired around the time of the GFC felt the hit.

“For anyone coming to the age of retirement now I think it would definitely be a concern,” he said. “They’d be looking for Trump to reverse course.”

NAB’s Super Insights Report 2023 found total offshore allocation of investment portfolios was at 47.8 per cent, led by large funds the majority of which said they intended to increase their international share over the next two years.

John Bennett, NAB executive for markets corporate and institutional sales, said at the time that the findings highlighted “continued internationalisation of investment portfolios and the ongoing challenge for large funds in deploying incoming capital to the domestic market without amplifying concentration risk”.

Total superannuation assets rose 11.5 per cent over the year to reach $4.2 trillion as of December 31, according to the Australian Prudential Regulation Authority (APRA).

Total contributions increased by 14.8 per cent to $198.1 billion. Of this, employer contributions increased 10.8 per cent to $144 billion while member contributions rose 26.7 per cent to $54.1 billion.

Benefit payments increased by 12 per cent to $124.4 billion, with lump sum payments rising by 7.8 per cent to $68.2 billion and pension payments increasing by 17.5 per cent to $56.2 billion.

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