Share markets have experienced a fall in value to start the 2022 year. Both global and Australian equities (shares) are down more than 6% in January.
A key driver of this market correction appears to be linked to an environment of rising inflation and the potential for a rise in interest rates
In addition, concerns around tensions between Russia and Ukraine are weighing on markets, along with ongoing risks on the evolving COVID situation which continues to pose a range of challenges around the world.
It is worthwhile noting this fall in January follows a period of very strong returns for share markets. Even including the recent correction, global equities have returned around 15% over the last 12 months.
It is normal for markets to go up and down. Typically, share markets will experience falls of at least 10% and rallies of at least 20% over the course of a year. It can be unsettling for a fall of 6% to happen in a single month, as we have just seen, but it is not abnormal.
Shares are volatile and will invariably experience periods of negative returns, but over the long-term are expected to produce positive growth. Conversely, more ‘defensive’ or lower risk alternatives, such as cash or bonds, currently provide little return potential – cash is yielding around 0% and government bonds yield less than 2%.
Superannuation portfolios are made up of a range of different investment types and most include at least some shares, some cash and some bonds, along with other investments like property and infrastructure. As shares go up and down in value, the value of your super will change as well. This will depend on how much exposure to shares your superannuation account has.
Because your super is a long-term investment it is important to focus on the long-term performance and not pay too much attention to movements, either up or down, over a few days or even weeks. After all, market volatility is normal, and for most people who are not likely to access their super for many years you will experience many market ups and downs.
However, everyone’s situation is different. If you think now is the right time to look at your investment strategy, get in touch. We can guide you through our range of investment options and our in-house financial advisers can help you identify your own personal investment strategy matched to your circumstances and long-term goals. This service is provided as part of the administration fee so there is no additional cost to you.
You can always view the latest performance for all Mercy Super’s investment options on our website here.