On 3rd April, the US President Trump announced new trade tariffs. This included a ‘universal baseline’ tariff of 10% imposed on imports from all countries, including New Zealand, as well as additional ‘reciprocal’ tariffs on imports from around 60 countries with which the US has significant trade deficits. These ‘reciprocal’ tariffs are intended to match (at roughly half the rate) the duties those countries currently impose on US goods.
If maintained, these tariffs are expected to increase the cost of imported goods for American consumers and businesses, potentially leading to inflation in the US and a slowdown in global economic growth. Financial markets have largely priced-in the short-term impact of tariffs, as reflected by the recent pullback. For Kiwis, this has translated into a decrease in the value of their investments, including KiwiSaver. However, it’s still too early to determine the long-term impact. Remember, market volatility is a normal part of investing. If you are in the right KiwiSaver fund for your personal situation, the best course of action is usually to stay the course and remain invested.
For those with a long-term goal of accumulating wealth, the current pullback could be seen an opportunity to buy high-quality assets at a discount. Ultimately, if history is our guide to the future, this pullback will likely go down as another bout of short-term volatility in the longer-term picture.
While short-term volatility can be unnerving as it is happening, it always passes and financial markets typically resume their journey upwards, often with a strong initial rebound. Changing investment strategy amidst a pullback is not advisable, as doing so would lock-in any unrealised losses and increase the chance of missing out on any strong initial rebound when the dust settles.
If you’re concerned about your KiwiSaver or considering a change to your investment strategy, feel free to contact National Capital or your KiwiSaver adviser to review your options and make informed decisions.
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