Superannuation warning after $25 billion ASX bloodbath as US-Iran tensions escalate

Yahoo

4 hours ago

Australians are being warned not to panic if their superannuation balance goes down as tensions between the US and Iran escalate. American stealth bombers attacked a series of nuclear sites in the Middle Eastern country over the weekend.
Outbreaks like this can cause volatility on the share market and see investors sell off their assets. This was seen on Monday after the opening bell, with the ASX 200 falling 44.30 points or 0.52 per cent.
It ended up being a $25 billion drop by lunchtime, according to IG market analyst Tony Sycamore, and the futures markets in the US are predicting similar drops when they open tonight. With Aussie super accounts heavily invested in the Australian and US markets, some might see their balances drop sharply over the coming days as a result of this market movement.
But Jessica Amir, MooMoo Australia market strategist, told Yahoo Finance it's best to ride out this storm and not move your money around as a knee-jerk reaction
$3,000 superannuation boost coming for Aussie parents from July 1
Centrelink payment alert for 58,000 Aussies in caravans
Couple's side hustle amid double redundancy secures $13 million fortune
"Just take a big-picture approach. Cop it on the chin and suck it up," she said.
"Sometimes, the best thing to do is nothing, because markets always recover.
"If you were to sell right now, you might be pretty foolish, perhaps even dumb."
She added this also comes at a time when many Australian super funds are readjusting their investments before July 1."It's usually every quarter, but the biggest one is the end of financial year because it's all about tax minimisation," Amir said.
"And tax loss selling is something that we see, which is basically when a super fund might look to sell the stocks that have done badly during the financial year and claim them as a tax write off against stocks that have gone up over the year."
When you add that with what's happening in Iran, as well as the potential for the US central bank to drop interest rates next month, you get a lot of sharemarket volatility.
Amir told Yahoo Finance July is typically the best month on the Australian share market.
"Investment managers chuck all their money back into the share market [in July], and they're getting ready for the new financial year, and so they're buying those stocks that they think will be growing their earnings," she said.
"Also interest rates are expected to be cut, which benefits consumer spending on stocks."
While sharemarkets aren't the biggest fans of war, historically there have been big swings in the other direction following large sell-offs.
"After every pullback, the Aussie market and the US market have always recovered," Amir said.
"You could buy into those stocks, or even just the entire market, during the pullback and hold it for six to nine months, and you'll probably be a lot wealthier."
Financial advisor Alex Jamieson, founder of AJ Financial Planning, echoed this sentiment.
"History tells us that markets can respond in surprising ways and certain sectors can thrive," he said.
'During World War II, US industrial production surged and equity markets steadily rose after the initial shock.
'In the wake of the Gulf War in 1990, markets initially fell on uncertainty but rebounded strongly once military action commenced and oil supplies stabilised.'
Even with the Russian-Ukrainian war, oil, gas, defence and agricultural companies soared while tech stocks suffered.
"While conflict creates volatility, it also fuels certain parts of the economy,' he added.
'For super fund members, this means your balance could actually benefit if your fund is exposed to the right areas, such as energy, commodities, infrastructure and defence.'
While markets might recover from the volatility caused by what's happening in the Middle East, it might have a much bigger, long lasting impact on everyday costs.
The US has asked China to prevent Iran from closing the Strait of Hormuz, which is a naval passageway connecting the Persian Gulf with the Arabian Sea and the rest of the world's oceans.
Roughly 20 million barrels of oil flowed through that route every day in 2024, according to the Energy Information Administration.
Closing or narrowing that Strait could see oil prices jump considerably.
The industry standard Brent price per barrel is already in the high US$70s and there are fears it could spike as high as more than US$100 per barrel.
Amir said this could materialise soon at Aussie petrol stations.
"It means we're paying higher prices when we fill up," she told Yahoo Finance.
"Even if you're filling up your Tesla or your BYD or whatever, much of Australia's energy grid is actually actually powered by fossil fuels, so everything will be passed back to the consumer."
She added that higher petrol prices means more expensive freight costs and that could result in supermarkets jacking up their prices to cover these increased expenses.Sign in to access your portfolio