Market update: what recent developments may mean for you

In light of recent developments across global markets, including geopolitical tensions in the Middle East and changes in parts of credit markets, some Australians may be feeling uncertain about what this means for their super, pension or investments. These developments can contribute to periods of market volatility and short-term uncertainty. This update provides context on recent developments and why staying focused on long-term investment goals remains important.

Two developments have contributed to recent market volatility: ongoing conflict in the Middle East and changes in parts of credit markets, including private credit.

In recent days, events in the Middle East have increased uncertainty for investors. This has contributed to some turbulence in markets, particularly in areas like energy prices where concerns about potential disruptions to supply can quickly affect pricing. 

These events and their effects are still unfolding, so it’s possible markets may continue to fluctuate as more information becomes available. 

At the same time, there have been a small number of isolated events within parts of private credit. These include a small number of credit events in the US late last year, pressure in some technology and software related borrowers, and a UK insolvency linked to fraud rather than broad market weakness.

It’s important to note these issues have different causes and don’t, on their own, indicate a broad breakdown across private credit markets.

Events like these can increase market attention and lead to short-term volatility. For example, uncertainty in the Middle East can affect energy prices as markets assess the risk of supply disruptions. In recent days, broader equity markets have remained orderly, with moves that have been modest rather than widespread.

History shows this pattern has played out many times before, with markets experiencing short-term volatility around geopolitical events before stabilising as the situation becomes clearer. While this can be unsettling, markets can absorb new information over time, which is why it’s important to avoid kneejerk reactions and keep long-term savings and investment goals in mind.

While market uncertainty can increase volatility in the short term, the effect on global markets has so far been relatively contained. Markets are forward-looking and tend to assess new information as it becomes clearer.

Financial markets have continued to operate in an orderly way, with no signs of widespread disruption across markets. History shows that for events like these to materially affect markets, they typically need to be broad, prolonged and significantly disrupt global economic activity. In many cases, regional conflicts have had limited and temporary effects on global markets unless they escalate significantly.

As global financial markets move up and down, the value and returns of your super and investments may change in the short term.

While this can be concerning, history shows that markets rise over time. That’s why it’s important to avoid kneejerk reactions, keep your long-term savings and investment goals in mind, and carefully consider your options before making any changes to your investment strategy.

Your investments with CFS are typically diversified across a broad mix of asset classes, regions and investment types, which are actively monitored as part of our ongoing investment process.

Read more about staying in the market.

The CFS Investment team is experienced at managing periods of uncertainty and has been putting measures in place to reduce the impact of increased market volatility for some time.

We actively manage portfolios to help reduce risk while remaining positioned to take advantage of opportunities that can emerge during changing market conditions. This includes maintaining diversification across asset classes, regions and sectors, and regularly reviewing investments to ensure they remain appropriate.

Strong investment governance underpins this approach. Decisions are supported by robust risk management processes, ongoing monitoring of investments and regular oversight to ensure portfolios continue to align with their long-term objectives.

This disciplined approach helps ensure portfolios are not reliant on any single market, sector or outcome.

As with any significant market event, it’s generally best to avoid impulse reactions and take a long-term view. Periods of volatility and unsettling headlines are a normal part of investing, and markets have navigated similar events many times before.

However, if you’re concerned about your investment strategy or would like to discuss your personal circumstances, speaking with your financial adviser can help put recent events into context.

If you don’t have an adviser, we offer a range of financial advice options for you starting at zero cost. Find out more

If you have any questions about your super or investments, you can also contact us on 13 13 36, Monday to Friday, 8:30am–6pm (Sydney time).