Why Your Super Balance Dropped And What To Do Next

Your super balance drops, the headlines scream “trade war”, and suddenly every choice feels like it carries a penalty. We get it. That’s why we slow the noise down and explain what’s actually driving the share market swings, from Trump tariffs and uncertainty to the way investors price worst-case outcomes when there’s no clear playbook. We also unpack why markets were already a bit fragile after a strong run, and how crowded “everyone owns it” trades can snap when sentiment turns. 

We dig into the idea of US exceptionalism, why so much global capital piled into American shares, and what it means when that story gets questioned. We talk recession risk in plain terms, including what history suggests share markets can do in a US recession versus a global recession, and why the US dollar can be a useful signal for everyday investors watching global risk appetite shift. 

Then we get practical: we walk through a simple portfolio stress test so you can benchmark your superannuation or investment portfolio against what you should reasonably expect from a balanced fund or a growth-heavy option. We cover what to look for if your result is worse than the market, how to upgrade from persistent underperformers into higher quality shares, and how to rebalance by trimming defensive stocks that have held up well. If you’re close to retirement, we explain why a cash buffer and liquidity plan can stop panic decisions and help you ride out volatility while still funding your life, especially now that cash can earn a decent return. 

Subscribe for more clear investing guidance, share this with a mate who’s checking their super daily, and leave a review with your biggest question about markets right now.

DISCLAIMER: This podcast contains general financial information only. That means the information does not take into account your objectives, financial situation, or needs. Because of that, you should consider if the information is appropriate to you and your needs, before acting on it. If you’re confused about what that means or what your needs are, you should always consult a licensed and trusted financial planner. Unfortunately, we cannot guarantee the accuracy of the information in this podcast, including any financial, taxation, and/or legal information. Remember, past performance is not a reliable indicator of future performance. The Rask Group is NOT a qualified tax accountant, financial (tax) adviser, or financial adviser. Access The Rask Group's Financial Services Guide (FSG): https://www.rask.com.au/fsg

Transcript

Welcome And Quick Disclaimer

SPEAKER_01 0:00

The Talk Investing Podcast and blog discusses investment advice from our previous podcasts and radio shows by Remo Greco and Marco Melado. Learn all things around retirement and investing.

SPEAKER_02 0:18

On the ABC Listen app, your smart speaker.

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And on your radio.

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This is ABC Radio Melbourne and Victoria.

SPEAKER_00 0:26

With Lisa Leon.

Why Tariffs Spooked The Market

SPEAKER_00 0:36

On the money.

SPEAKER_03 0:37

Whether it was through your super balance or maybe you've got an investment portfolio, you might have checked it this week and got a rude shock. We want to know what's happening. What should we be doing right now? We have share market specialist Remo Greco joining you for On the Money. Anything we share here is general in nature. It doesn't take into account your personal circumstances, financial situations, or needs. Good morning, Remo.

SPEAKER_00 1:01

Good morning, Lisa.

SPEAKER_03 1:02

So scary times. What was happening? Why was the market fluctuating so much with the the announcements?

SPEAKER_00 1:12

Well, I think we haven't really seen this sort of an issue, a man-made issue for share markets ever, I think. And where there's no sort of rule book. And so we've talked about this a a lot, and that is that the way investors work is if you don't know about how something may unfold, you try to estimate the worst-case scenario, price that in, and then work your way backwards as information changes, right? So the numbers that we saw in share market losses over the last few weeks, we need to put it into context. Markets had already been a little bit fragile from about mid-February. And so the economy, U.S. economy was looking a bit soft anyway. We had a really good run for two years. Like markets have been fantastic for two years. So already we talk a lot about two other issues that we that you raised your eyebrow last time was positioning and sentiment. So already the markets had heavy positioning, i.e., everyone was all in. We were in. Everyone owned Tesla, everyone owned Apple, we were in there, and we were happy. And it was 5 to 12 and the champagne was flowing. And so sentiment was bullish and everyone had moved with their sentiment. How you feel, you actually laid your bets. Soon as you get a bit of choppy water, that unwinds. And so the way that unwinds normally is it might just deflate the balloon very slowly in an orderly manner. But when you have a man-made issue like these tariffs, which we haven't had before, like we've been through COVID, didn't have that before. You know, GFC hadn't had that before. We've had lots of volatility, but the reason for it was difficult to assess. So markets said, what can tariffs do? What maybe we could see is that people don't want to trade with each other anymore. A trade war means less activity, less activity means lower growth. And they go, yeah, and the economy was already soft to begin with, so would that tip the U.S. economy into recession? A lot of economists last week said we are already forecasting a recession in the United States in the second half of this year. I was really alarmed by that. So I said, okay, what happens in a U.S. recession to share markets? The market is very efficient. What we know is if the U.S. goes into recession, U.S. shares tend to fall about 25 percent in total, right? If the U.S. and Australia go into recession together, that really means a global recession. The share markets end up down about 35 to 40 percent. Okay. So what happened the last three or four weeks? The U.S. market was down about 20 percent.

SPEAKER_03 3:52

And you are saying that there's a sentiment, and that might be your retail investors who might be sort of blowing in the wind a little bit, but are you saying that the bigger investors, because of the forecast of a possible U.S. recession, they were trying to hedge their bets by getting out so that they could buy low later?

SPEAKER_00 4:10

Well, there's that. Remember, a lot of the really big end of town may use leverage to play their bets, and that's often what hedge funds do, and big private offices and that may say, listen, U.S. exceptionalism, we've heard this term a lot.

SPEAKER_03 4:24

That's why tell us what that is.

SPEAKER_00 4:26

U.S. exceptionalism is is that the the U.S. economy has the ability to be really dynamic, entrepreneurial, and what happens? You get companies like Netflix and Amazon, and these come out and become dominant players, sort of the size of businesses we've never seen before. They all emanate out of the U.S., a lot of it out of Silicon Valley, and that's because they have something special called U.S. exceptionalism. Like, okay, terrific. That's a good line. We like to use these lines. But what it meant was for the last ten years or so, U.S. capitalism, for want of a better term, did really, really well. And therefore people said, why would I invest in a place like sleepy Germany or Japan when everything is happening in sexy U.S.? U.S. shares have had a fantastic run. So that just attracted more and more capital. So the ship was leaning towards one side until it didn't. And what triggered it? Trump came along and said, we're going to change the world order, and all of a sudden U.S. exceptionalism came into doubt. Along with that, if you remember, we talked about the deep seek AI problem out of China, where all of a sudden the Chinese said, Okay, America, you think you've got AI wrapped up and it's all about you. This is what we've found. And that sort of deflated that part of the exceptionalism story to the point where people said, Well, we've been investing in the U.S. for ten years. It's been really good, we're all in, we've got nothing more to buy, and all of a sudden things may not look as rosy. And that sort of lurched investors to say, let's moderate our bet. How do we know this? We talk a lot about this currencies. The U.S. dollar has been murdered. This is a really, really good tell, even for novices like us, that when the currency goes down, that generally means people don't want to buy your currency.

SPEAKER_03 6:20

We are going to talk about what we can do, what can you do?

Stress Test Your Super With Benchmarks

SPEAKER_03 6:24

We are talking about the Trump tariffs and your financial future. You're with Lisa Leong and you're with Remo Greco, our share market specialist, and you're listening to 774 ABC Radio Melbourne. If you had looked at your super balance, you might have got quite a shock. So what do we do?

SPEAKER_00 6:41

So the issue here really is that, like we said, you don't need to be an expert on tariffs, but you do need to have some inspection of your portfolio as a bit of a litmus test about what's going on. So these are the things to think about. You've had a bit of a road test, okay? A stress test. A stress test, a road test. So you really want to know how your portfolio went over the last, say, two months. 14th of February was the top of the share market in Australia. So there's your date.

SPEAKER_03 7:09

Let's say it lost quite a lot, which many people saw, and it was very frightening. So what does that tell us? What can we learn from that?

SPEAKER_00 7:20

Well, that's what the index did. What did your portfolio do? So let's say you're an industry fund, you're in a balanced industry fund, 70 percent of your life savings in that industry fund is exposed to share markets. So if the share market, global market went down 10 percent, you would expect your industry fund to fall 7 percent, which is 70 percent of the total, right? Simple. So let me let me ask this. You've got a benchmark. Even though you didn't consciously think about a benchmark, you've now got something a lie in the sand. If your fund did minus 15, you got a problem. If your fund did minus one, you ain't got a problem. Go and buy some champagne. That's the benchmark that you should start to look at. Now, this is how the world works. It's a relative argument. It's like how I did compared to somebody else. That's how we feel.

SPEAKER_03 8:05

If you weren't in a balanced portfolio, though, you had a growth fund, it was exposed to U.S. and international stocks, then what is your benchmark there?

SPEAKER_00 8:13

So you might say, okay, let's say there's a global indice called the MSCI Global Index, which is most of the shares listed in the world today. And let's say you were ultra aggressive on your industry fund. So you had 100 percent of your life savings in shares and growth assets. If the market went down 10 percent, your balance in your superfund should have gone down 10 percent. Now let's say the super fund you have had most of those shares in the United States, not globally, but in the U.S. Why? U.S. exceptionalism. Everything was going great. I want to buy more Tesla. Those stocks fell 40 or 50 percent. So if you looked at your balance and you said, hmm, world share markets are down 10 percent, but my balance is down 15, I wonder why. Is he a bad manager? Maybe not. Is he got a lot of exposure to the US? Maybe yes. Your job is to find out why it happened and whether you're comfortable with that or not, okay, and then work out what happens if it goes on next time. So this is your job to do the little bit of investigative work. It's not that difficult. So the issue now is, example, uh yesterday morning UniSuper, which is the fifth largest super fund in Australia, came out and said, hmm, we're gonna reduce our exposure to U.S. shares because U.S. exceptionalism looks like there's a bit of doubt. Um, we want to just take a bit of less risk. So you might be a member of that fund and you go, no, no, no, no, I want to be I believe U.S. exceptionalism. So all of a sudden your balance may not react the way you want it to react. In our job is to find out why certain things happen, explain it, then we've got a chance to work out whether we need to change it or we're happy with our lot.

SPEAKER_03 9:58

Anything else we can do there, Remo, when we're doing this

Upgrade Share Quality And Rebalance

SPEAKER_03 10:01

review?

SPEAKER_00 10:01

Yeah, I think the important part is we've had two and a half really good years in the share market. So if you have shares, you might have it in your self-benaged soup or your own portfolio, and you find out that there's a couple of shares there that are always negative, they're they're just giving you the willies, right? Uh and they haven't really been able to do very much over those two, two and a half years. Maybe the maybe the gods are saying something to you that says, hey, if they can't do well when everything's going well, and now we're about to enter some rocky times, why don't you sell those and buy higher quality shares? Go up the quality ladder? Because that does two things. One is if things get really rocky, quality shares will always do better, they'll survive. Number two is when the market bounces and people start to get hairy-chested about I want to go back in again, they generally buy the quality ones first. Why? Because they're nervous about it. They're not going to go buy high-risk shares, they're going to buy the well-known names. So that's that side of it. What about another thing to think about? Let's say you owned a lot of Telstra shares and Woolworth shares over the last couple of years. They've been okay, they haven't been great, but they've been great over the last three or four weeks. Both of those shares, Sigma, was another one we spoke about, they've all gone up when the markets have been going down. Why? Because they're defensive stocks. You don't stop shopping at Chemist Warehouse, you don't stop shopping at Woolys. So let's say you say, okay, I want to buy some ResMed shares or something that have been really, really expensive, but they're now a bit cheaper, and now I've got a chance to buy it, but I don't have any money to do so. So this is what you do. You sell a bit of those defensive shares that have been up and held their value, recycle that capital into some of the other really good companies that can give you a bit of a lift. If you can manage that, maybe with an advisor, we'll just slowly do that, when the markets start to perform again, you're in some really good, high-performing stocks, your capital goes up. That's what we all try to do. That's the that's the game we play. Trevor Burrus, Jr.

SPEAKER_03 12:01

Remagre, if we're in retirement or close to being retired, what should we

Retirement Planning With A Cash Buffer

SPEAKER_03 12:07

be doing now? Trevor Burrus, Jr.

SPEAKER_00 12:08

Yeah. So I think the issue for that is that you want to take away those human traits which says when things get crook, you make bad decisions. So if you are uncomfortable for whatever reason, you should be building or repositioning your portfolio to have more cash so that if things get really crooked, you've got liquidity. Particularly if you're going into pension phase where you need to draw money from your super account, you should probably have higher levels of cash so that if we do see a global recession and markets fall 30 or 40 percent, yes, it's going to hurt a bit, but you've already got your cash set aside. You can live, you can do what you need to do, and you let the markets just do what they've got to do. This is really important to take away those really bad feelings where you feel trapped to do things which you in the end you know I shouldn't be doing them now. That's just the wrong thing to do. Now the other good thing is, unlike the last twenty years, if you leave money in cash for a bit, you can earn four or five percent. The last twenty years you've earned zero. So you're not being penalized. So think about that. You've really got a bit of a free kick here. It's not such a difficult decision after all.