Why haven't KiwiSaver warnings proved true?
It was predicted the share market would be in turmoil after the United States attacked Iran's nuclear sites. (File photo)
Photo:
123RF
Warnings of share market turmoil hitting KiwiSaver balances have so far proved too pessimistic.
When the United States
attacked Iran's nuclear sites
at the weekend, it prompted predictions oil prices could soar and financial markets could be shaken.
But so far, the response from both has been muted.
Dean Anderson, founder of Kernel Wealth, said the S&P World Index was now flat year-to-date and had recovered from the April lows.
He said this index served as a good benchmark for the investments held in many balanced through to high growth KiwiSaver funds.
"However, 2025 has been a bumpy ride, with markets tested by a number of significant events. Despite the volatility, markets are back to putting more weight on actual results and economic fundamentals, rather than knee-jerk reactions to every headline.
"The post-US election 'Trump Bump' quickly gave way to a downturn following sweeping tariff announcements, but a rebound has since taken hold, with more measured responses - including recent major geopolitical events in the Middle East.
"Overall, markets seem to be factoring in the fortunate, arguably good luck, in the off-ramps we've seen from major risks, such as Trump's pullback on tariffs and signs that Middle East conflicts may be peaking without escalating into a very serious broader engagement."
Anderson said businesses were zeroing in on what they could control and sectors like technology continued to post solid results.
"There's no denying that the world feels more on edge, with risks that could materialise overnight through a single tweet or unexpected event," Anderson said.
Harry Smith, international equities portfolio manager at Fisher Funds, said it was not uncommon to see a limited response to geopolitical issues.
"Looking at Israel and Iran, Israel is only 0.3 percent of global equity markets in terms of their market capitalisation and Iran doesn't even really feature. So in terms of global markets the region is quite small.
"The US share market, which is around 60 to 70 percent of global share markets in terms of market capitalisation, was up really strongly because the Federal Reserve came out and suggested the central bank might lower interest rates earlier than the market was expecting.
He said a stronger driver of share market performance recently had been the growth of artificial intelligence.
"What's happening in Israel and Iran, as sad as it is, doesn't really impact the earnings of these massive tech companies."
He said
the Ukraine conflict
was more of a concern to markets because Ukraine had a key role as a supplier of agriculture to the world and Russia as a source of natural gas.
"Higher natural gas prices meant high energy prices for Europe and European companies which impacted the consumer spending or earnings of those companies."
If there was more movement in oil prices, such as the closure of the Strait of Hormuz, that would have more of an impact because oil was a significant factor driving things like discretionary spending and costs for business.
"What happened next would depend on how the situation developed," Smith said.
"A lot has happened in the past 24 hours or past 48 hours and a lot can happen in the next 24."
Smith said KiwiSaver members were calmer about market changes than they might have been in the past.
"I quite often wonder whether with Covid and the reaction of global share markets during 2020, whether KiwiSaver holders learned a lot during that period, given there was such a sharp decrease in asset prices then such a rapid increase on the other side.
"The fall and then back up to the peak wasn't much more than 30 to 40 days. I think a lot of people did switch during that time and crystallised their losses."
Anderson said diversified portfolios and long-term strategies had proved to be vital shields against volatility over the long term.
"Protecting retirement savings. Investors should concentrate on controllable factors, maintain a big-picture outlook, and a bit of cautious optimism always helps keep the emotions in check."
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