Have we been Trumped?
With Donald Trump introducing a swath of trade tariffs the markets have not responded kindly. This has flowed through to your investments such as Kiwisaver and other investments that are influenced by market reactions.
At the time of writing the S&P 500 (the index of largest companies in America) was down -12.27%, the Nasdaq (the tech dominated index) down -14.25%, the FTSE (UK top 100 companies) down – 11.27%. These are significant declines in a short space of time. If you are an investor you may be concerned and that’s understandable.
Bonds and infrastructure assets (those mostly correlated to interest rate movements) are better placed with some positive returns.
If you’re new to investing then this may be even more traumatic. However, we have been here before. Events like this happen more regularly than you think as illustrated by this graphic below, courtesy of Booster. The yellow lines represent significant economic or geopolitical events. The green and red lines represent total returns in a calendar year. The blue line represents the total return of a $1 invested since 1900. There are two things that stand out from this graph. Firstly, there a more green lines than red lines. Secondly, the direction of the blue line. Apart from a period in 1930s and the 00s where the blue line plateaued, it mostly moves up.
What should you do?
If you have concerns, rather than act, we’d encourage you to talk to your adviser. Their role is to guide you through times like this.
The business community will navigate through these times and find new ways to manufacture and sell their goods, if governments don’t respond in kind to Trumps tariffs. In some cases, resolutions will be found quickly, others may take some time.
For some of you that invest regularly, like make regular contributions to you Kiwisaver or investment, this is an opportunity. You will be buying units in your Kiwisaver funds at a discount. Which means you’ll be buying more units. When the markets turn, that means your returns will be even larger.
It’s important to stay focused on your goals rather than the markets. If these have changed since you last spoke to an adviser then we’d encourage you to get in touch.
Disclaimer: This newsletter is meant to be informative and engaging, hopefully not a cure for insomnia. Please don’t take this as personalised financial advice. Discuss your situation with an Advisor. This is where I need to say past returns are no guarantee of future returns.
