If war breaks out, this is how much it could cost every Australian
Is it tacky to ask how the war affects your wealth?
Maybe.
When they're blowing up civilians and bunker busting nuclear facilities, watching the share market seems gauche.
The reality is though, Aussies are insulated from a lot of the actual horror. Unless you have
relatives in the Middle East, war comes at us mostly through the media.
One way it does have a direct effect is through the global financial markets. When things
blow up, markets go down. Usually*
before America joined the fray with its B-2 bombers.
Australian markets moved in a whiplash fashion, and markets in other parts of the world moved even more.
Global markets matter a lot to our super balances because our super is increasingly invested
overseas.
We have so much superannuation these days that it simply doesn't fit in the
Australian share market any more. There's $4 trillion in super and the share market has a total
value of $3 trillion.
The big super funds often have more money stashed in foreign markets than in our local
markets.
So when the S&P 500 plunges by 20 per cent - that's America's big stock index, and
it fell that much earlier this year - it shows up in our super. Our super accounts had $44
billion in trading losses.
The $44 billion punch to our super balance works out to almost $3000 per Australian with
super.
Of course, while markets were tumbling, we stashed billions more into super. Over
those three months, we deposited $28 billion net into super. But it still left a hole of $16
billion, as the next chart shows.
This data is from the end of March and it shows the risk inherent in investing in volatile
markets. But volatility goes both ways.
And this is what those asterisks* above are about.
The surprising thing about markets recently is how swiftly they have healed.
Not only has the damage from the tariff imbroglio gone away. But the effect of the Iranian
war has... already washed out?
Stock markets slumped and the oil price rose when Israel and Iran started shooting each
other. But now, with a ceasefire agreed, the Australian stock market is back near its peak,
and the US market — while not yet back to the highs of earlier in the year — is rising.
Oil is back where it began.
The $44 billion lost by the end of March, that $3000 each? It hasn't all been put back. But
quite a bit of it has been restored.
'Investors are looking past fears about tariffs and war in the Middle East to the growth
potential of artificial intelligence, says the Wall Street Journal.
As though the war is boring old news.
I personally have grave fears about this sense of calm. I don't think you upset stability in the
Middle East and get away with it.
I don't expect the Iranian regime gets bombed and just says, oh well.
The thing about conflicts, they sometimes evolve in unexpected ways. Even if the Iranian
regime is totally comfortable with how things have turned out, what about non-state
actors?
Have we all forgotten al-Qaeda and ISIS? The Middle East is complicated, and
Donald Trump just stirred it up.
Anything could happen. A terror attack on America would be a big and very concerning example.
Many other types of surprise event are also possible.
But I am just one guy, while markets represent the wisdom of the crowd. The collective view
is: this is just a blip.
We should all go back to worrying about Apple's revenues and Amazon's growth rate.
Put away your maps; get out your calculators.
Perhaps they will be right. The question is: Do you trust Donald Trump's peace-keeping
ability?
The Vice President of the United States certainly does.
'To the Americans who are worried about this becoming a protracted conflict, I think the
president solved that very quickly,' said Vice President JD Vance.
'Not only did we destroy
the Iranian nuclear program; we did it with zero American casualties. And that's what
happens when you've got strong American leadership.'
There's an awful lot riding on him being right. A lot of lives.
And - less important but more directly pertinent to Australians daily lives – billions of dollars in super.
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