What's happening with global markets?
Financial markets are currently experiencing volatility due to a combination of factors, including new tariffs on goods, recent economic reports, and comments from central banks. These are impacting investor confidence and contributing to market fluctuations.
Investors are growing increasingly nervous due to the White House's shifting stance on tariffs on US imports, causing volatility in global markets. Although tariffs have been discussed before, the continuous changes in the US position are causing uncertainty in the market.
So, why do tariffs matter?
Let’s start by breaking down how tariffs can impact the market. When a country puts tariffs on goods from another country, those imported goods become more expensive to buy, meaning higher costs for business and consumers.
But what really affects the market is the uncertainty that tariffs create. They can lead to trade wars, and when that happens, it creates huge business and investor uncertainty.
History teaches us that unfortunately there are no winners in a trade war. In the past, especially in 1929, policies that tried to protect local industries by limiting imports actually made the situation worse. Since then, the global economy has been built on the principle of comparative advantage, where countries specialise in producing goods and services in which they are most efficient.
How is the market reacting?
Global markets responded negatively to Trump's initial announcement, perceiving it as a significant escalation in trade tensions. This situation continues to exert a dominant influence on the global markets.
The prevailing concern is the potential for stagflation, a challenging scenario characterised by the combination of rising prices and slowing economic growth. This presents significant difficulties for both consumers and policymakers.
Will markets rebound?
Market fluctuations are a normal part of investing. History has shown that markets recover and grow over time, even after significant drops such as the 2020 Covid-19 pandemic, world wars, and global recessions. Although the current market volatility may be unsettling, it's important to remember that markets typically recover and grow in the long run.
What should you do?
Market fluctuations are normal. If your goals and investment timeframe remain the same, you probably don't need to adjust your KiwiSaver investments
If you're worried, it's best to talk to an adviser before changing your investments. They can help you understand how any changes might affect you and can assess the best approach by reviewing your risk profile and investment timeframe. If you have any concerns or queries, we are here to help.
How can Aurora help?
If you have any questions about the market situation and want to check whether you're still in the right investment option, our KiwiSaver advisers are here to help. Please contact your adviser or our Client Care Team at hello@aurora.co.nz or by phone at 0800 242 023.
DISCLAIMER
This information is provided in a general nature only and should not be construed as or relied on as financial advice. This is not a recommendation to invest in a particular financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any investment decisions.
Past performance is not a reliable indicator of future performance. The value of your investment may go up and down.