Market movements and thinking long term

You may have seen some recent headlines around recent falls in share markets in Australia and overseas. While the headlines and numbers being mentioned might have been alarming, they follow a period of very strong share market performance and are minor relative to the market falls seen during the Global Financial Crisis (GFC) and Dot Com Bubble in the early 2000s.

Global economic growth accelerated through 2017 and is currently very strong. Unemployment rates are falling and most expect wages growth and inflation to start picking up as a result. Rising inflation means central banks around the world will look to increase interest rates to more normal levels. They are currently exceptionally low by historical standards. The US Federal Reserve is leading the charge on this front.

Global share markets rose significantly over the two years to late January 2018. The US market hit a record high, experiencing one of the longest periods in many years without a material fall. We believe the market fall beginning late January reflected some concern about rising inflation and interest rates in the US in particular. How central banks respond to rising inflation in the coming year will be very important for global markets. Uncertainty around this will likely drive ongoing market volatility.  

Why is this important? 

Super is a long-term investment and it’s important to focus on your long-term goals and resist the urge to react to short term ups and downs in market movements. The markets move in cycles and the management of the diversified investment options takes this into consideration.

The default options for super and retirement members include a range of investments, some of which are less exposed to short term movements in the share market. You can watch Cbus’ video to learn more about market ups and downs and the importance of investing in a wide range of assets.

If you would like further information we suggest you contact the Cbus Advice Services on 1300 361 784.