For investors, watching so many forces moving at once and volatile numbers, there can be a strong temptation to “do something”.

Before reacting, a good understanding of what’s driving market movements is useful to assess the short and medium term. More importantly, it helps to work out how your long term strategy fits in.

Energy markets have felt the most immediate effect of the conflict. Iran is at the centre of one of the world’s most strategically important regions for oil and gas production.

As tensions escalated, markets quickly priced in the risk of supply disruptions, particularly through critical shipping routes in the Middle East. That alone has been enough to push oil and gas prices sharply higher.

History shows that energy markets tend to react first and fastest during geopolitical crises.ⁱ

Even when physical supply is not immediately interrupted, uncertainty itself drives speculative buying. Higher energy prices then feed into almost every corner of the global economy: transport, manufacturing, agriculture and ultimately household budgets.ⁱⁱ

Global share markets responded quickly to the crisis with sharp drops after the first bombs in Iran.

Share prices have fallen and recovered several times since the conflict began, often related to US President Trump’s announcements. But, in both Australia and the US, the markets were down more than eight per cent by the end of March. Technology stocks have fallen particularly hard.

The conflict has come at a time when the global economy was already fragile. Before March, analysts were debating whether the US economy would manage a “soft landing” or slip into recession as higher interest rates worked their way through the system.

Adding an energy price shock into the mix increases the risk that higher costs slow spending and investment. Rising fuel prices act like a tax on consumers and businesses. Money spent at the petrol station is money not spent elsewhere in the economy. As a result, concerns about slowing economic growth have been quick to re‑emerge.

In Australia too, there’s increasing talk of recession – as much as a 30 per cent chance within the next 12 months, according to AMP.ⁱⁱⁱ

However, Treasurer Jim Chalmers disagrees saying that, while the economy is expected to take a “sizeable hit”, a recession is not expected.^iv

The immediate effects

Market volatility is likely to continue with sharp price swings as the markets react to either good or bad news coming out of the Middle East.

For households, the most visible impact is likely to be at the pump and in their power bills. Widespread price rises here are likely to affect consumer confidence and spending patterns.

So-called “safe-haven” assets such as cash, government bonds and some currencies often benefit during uncertain times as investors look to defend their portfolios, however bond yields have experienced volatility as investors assess the evolving situation in the Middle East.

Gold was also once on the list of safe havens.  But, during the most recent crisis, its value has plunged nearly 15 per cent during the month. Nonetheless the price remains high – up by almost 300 per cent over the past decade.^v

While there’ll be plenty of market “noise” ahead, it’s important to remember that short‑term market reactions may be driven as much by emotion as by fundamentals. Fear, uncertainty and rapid shifts in sentiment often exaggerate price moves in the early stages of a crisis.

Looking further ahead

Looking beyond the immediate panic, the medium term (the next six to 18 months) will depend on how the world adapts to the energy prices shock.

Continued high oil prices can have several effects:

• Inflation pressures may linger. Energy price rises affect almost every sector of the economy. However, some sectors may perform better including commodities, energy companies and defensive assets such as infrastructure, healthcare, utilities and consumer staples.
• Economic growth may soften. Higher input costs squeeze businesses and reduce consumer spending power. Over time, this can weigh on economic growth and corporate earnings.
• Structural change can accelerate. Energy shocks often act as catalysts, encouraging investment in alternative energy sources, efficiency improvements and supply chain diversification. While disruptive, this can create long‑term opportunities in certain sectors and regions.

It is also worth remembering that energy shocks don’t last forever. Markets adapt, alternative supply routes emerge and prices eventually reflect new realities. The timing is uncertain, but history suggests that economies and markets are more resilient than they often appear in the heat of the moment.

Strategy over fear

Perhaps the most important thing to remember right now is that your financial plan was built for times like this.

Sound financial planning anticipates that markets will be periodically disrupted by wars, pandemics, financial crises and recessions.

Diversification is your first line of defence. A portfolio spread across various asset classes doesn’t eliminate volatility but it means that no single event can derail your entire financial position.

Ensuring your investment mix reflects your time horizon (the length of time you expect to hold an investment) and capacity for loss is your second.

The discipline required in moments of market stress is to distinguish between short-term fear and long-term strategy. Fear says: sell everything and wait for calm. Strategy says: stay invested, stay diversified and if anything has changed, let’s talk about it properly.

If the events of last month have raised questions for you, we’re here to help you navigate with confidence. Please give us a call.

i The Impact of Geopolitical Events on Oil Prices | Gulf News

ii Sheltering From Oil Shocks | IEA

iii Fuel surcharges are adding to consumers’ financial stress | ABC News

iv Chalmers says there is no ‘expectation’ of a recession | The Guardian

v Gold is meant to be a ‘safe haven’. Why is it crashing? | The Conversation

The post The Iran war and markets: Keeping perspective amid uncertainty appeared first on Pinnacle Financial Planning.

Finding the balance between driving growth and safeguarding capital takes a disciplined approach to portfolio construction but it could help your wealth to endure, despite the ups and downs of the market and the impact of inflation on your purchasing power.

Many investors equate balance with diversification alone. But balance means understanding how each investment or exposure contributes to the twin goals of growth and protection and whether the portfolio is robust enough to withstand challenging times.

There’s no one-size-fits-all answer. Depending on age and stage in life, some investors are chasing aggressive growth while others want capital preservation. The key is to ask:

• What am I earning and why? (High returns usually mean higher risk – are you comfortable with that?)

• How will the portfolio behave when it matters most? (Will it cushion losses or make them worse?)

• What investment decisions will I regret if inflation persists (for say, the next five years) or markets tank?

A US study of almost a century of data confirmed that portfolios handle downturns better and recover faster if they combine growth assets with true diversifiers, including a mix of low-correlated investments and defensive assets.ⁱ

Low-correlated investments are assets that don’t move in the same direction as equities, helping to reduce overall portfolio volatility. Their correlation to stocks is low or even negative. Examples include government bonds, gold, some hedge fund strategies and commodities.

Defensive assets are expected to hold their value or outperform during market downturns. They’re chosen for stability and capital protection. Examples include cash, high-quality bonds, defensive equities (such as utilities, healthcare) and infrastructure.

The ‘cost’ of growth

Growth typically comes from listed equities, private equity, venture capital, real assets and exposures to big, long-term trends that may cut across multiple sectors. For example, healthcare innovation, energy transition or AI.

The catch? Growth invariably means volatility. If the markets dive you could feel pressure to sell at the worst time.

Defensive equities may help provide some balance. They’re shares in companies that tend to provide stable earnings and dividends regardless of whether the economy is booming or in a recession. They have strong cash flow because they sell needs rather than wants, such as power, food and medicine, and they have the ability to raise prices to cover rising costs without losing customers.

While portfolio protection starts with bonds and cash, some would say they’re not enough today and a broader range of assets may be more beneficial.

Bonds, for example, have lost a little of their shine as the chief risk stabiliser after a crazy five years or so. The rollercoaster ride of historic low interest rates during the Covid era to the great reset from about May 2022 when the RBA’s (and the US Federal Reserve) rate hikes began. Both stocks and bonds crashed. Today, bond investors are enjoying a ‘rare sweet spot’ with yields well above the pandemic lows.ⁱⁱ

Because yields are higher, bonds now provide a significant income buffer. If bond prices fall slightly, the high interest payments can offset that loss. If rates stay the same or fall, investors lock in those higher yields.

Since most economists believe the hiking cycle is over or nearing the end, there is a chance that as central banks eventually cut rates, bond prices will rise, giving investors both high income and capital gains.

Other strategies

Other protective strategies may include buying bonds that mature at different intervals, such as every year for five years. Known as a bond ladder, this strategy means a portion of your money becomes available every year and it may provide some interest rate protection.

Physical investments, or real assets, such as real estate, infrastructure, commodities, natural resources and equipment can act as a hedge against inflation. When the cost-of-living increases, the value of physical assets tends to rise as well.

Alternatively, you could consider floating rate exposure or inflation-linked bonds (known as Treasury Indexed Bonds or TIBs in Australia and Treasury Inflation-Protected Securities or TIPS in the US).

Floating-rate bonds adjust interest payments as rates change, while TIBs increase principal and interest when inflation rises, providing a hedge against rising prices.

TIBs offer further protection with a built-in deflation floor that protects your original investment if prices fall.

Currency is the silent player

If you invest globally, currency matters. So, foreign exchange planning should be an intentional decision rather than a portfolio by-product.

The Australian dollar often falls when global markets panic so unhedged overseas assets can act as a shock absorber.ⁱⁱⁱ

But full exposure can swing returns wildly. On the other hand, a partial hedging policy, for example, hedging some developed-market bond exposures, may balance volatility and opportunity.

Finally, protection is a liquidity plan. For families using trusts, SMSFs or investment companies, keep enough cash or short-term assets to cover 12–24 months of cash needs (tax, capital calls, distributions). That’s real protection.

Please give us a call to check your portfolio meets your current needs for growth and protection.

i It Was the Worst of Times: Diversification During a Century of Drawdowns

ii A terrific environment for bonds | Vanguard Australia FAS

iii Drivers of the Australian Dollar Exchange Rate | Explainer | Education | RBA

The post Protect and grow wealth in uncertain times appeared first on Pinnacle Financial Planning.

No matter what you want your retirement to look like though, here are some steps that will help you work out how much you need and if you’re on track.

1. Decide on the retirement you want
2. Work out how much super to aim for
3. Check how your super balance is tracking
4. Think about whether you need financial advice

1. Decide on the retirement you want

To get an idea of how much you might spend in retirement, you can check the following:

• The Association of Super Funds of Australia (ASFA) publishes a Retirement Standard, updated quarterly. It estimates how much you might spend in retirement, based on either a comfortable or a modest standard of living.
• Super Consumers Australia estimate low, medium and high levels of spending in retirement, based on Australian Bureau of Statistics data on retiree spending.

Both ASFA and Super Consumers Australia also estimate the amount you should be aiming to have in your super account (or saved somewhere else) when you retire, to support your retirement spending.

What’s a ‘comfortable’ retirement?

A comfortable retirement, according to ASFA, is about more than covering the basics. It means you enjoy a good standard of living and have money for:

• annual domestic trips and one overseas trip every seven years
• regular hobbies and social outings
• occasional restaurant and takeaway meals
• top level private health cover and unexpected medical costs beyond what Medicare covers
• a reliable car, petrol and maintenance
• home maintenance and appliance updates
• utilities like power, water, gas and council rates
• internet, phone, computer, and streaming services.

2. Work out how much super you should aim for

ASFA suggests what your super balance should be at age 67 for either a modest or comfortable retirement. It takes into account Age Pension, where applicable, and assumes you own your home outright unless noted.

Super Consumers Australia estimates your savings target at age 65. It takes into account the Age Pension, where applicable, and assumes you own your home outright.

It’s important to say that these amounts are guides, not strict targets, as everyone’s situation is different.

3. Check how your super balance is tracking

How do real superannuation balances compare to the estimates above? The Australian Prudential Regulation Authority (APRA) tracks average super balances across age groups.

These are averages only. Some people will have more, others less. How does your super balance compare to your age group above?

Make a note to check your super at least once a year. Here’s a list of things to keep an eye on. If you don’t understand any details about your super account, call your super fund and ask questions.

4. Get financial advice if you need it

Planning for your retirement can be complex. Think about getting personalised advice from us can help you plan ahead.

Knowing how much super you need to retire, how your balance compares to others your age, and whether you’re on track for the retirement you want, is an important first part of planning your future.

Ready to plan?

Now you know what you’re aiming for, use the Moneysmart retirement planner to estimate:

• how much money you’ll have to spend each year once you retire
• how fees, investment options and contributions will affect your retirement income

You can also use the planner to test out different scenarios and work out how to grow your super.

Use the retirement planner

For a more detailed idea of how much super you will have at retirement, contact us today.

Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/plan-for-your-retirement/retirement-planner
Important note: This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.  Past performance is not a reliable guide to future returns.
Important
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The post How much super should I have appeared first on Pinnacle Financial Planning.

You may be at a point in your life where you’re thinking about retiring. This could mean you’re reducing your work hours or stopping work completely.

There are many things to consider about life in retirement. Some of these things could include:

• where you want to live when you retire
• if you want to travel overseas or around Australia
• if you want to keep your car
• if you’d like to join a social group
• if you’d like to do volunteer work
• if you’d like to start your own business.

Where to live when you retire

Where you want to live when you retire depends on things like:

• whether you own your home
• the costs of any major housing renovations or maintenance
• your health
• your connection to family and the community.

Travel when you retire

If you’re planning to travel when you retire, you might want to think about:

• where you want to travel
• how often you want to travel
• how long you want to travel for
• the costs involved.

For some people, retirement means less travel. If you have a car but will be driving less, you may want to consider whether you’ll keep your car. Some things to think about include the:

• costs of running your car
• ease and cost of public transport in your area
• community transport services in your area.

Start your own business

You may decide to start your own business. There are many things to consider:

• what’s involved in starting and running a business
• whether you have a valid business idea
• whether you have the necessary skills
• whether self-employment is right for you.

There are programs to help people start and run successful small businesses.

Plan for your retirement

Good planning can increase your financial security in retirement.

Once you’ve worked out how you want to live, consider setting up a suitable financial strategy. Ideally, your strategy should provide things like:

• regular income to meet your regular expenses
• access to long-term capital growth
• a cash reserve to cover emergencies
• a balance between risk and return.

We can help you create a strategy that is unique to you and will help you reach your goals.

Source: Services Australia

The post Thinking about retirement appeared first on Pinnacle Financial Planning.

The post How ‘investment procrastination’ could be hurting your wealth appeared first on Pinnacle Financial Planning.

The post New increased super contribution caps appeared first on Pinnacle Financial Planning.

The post Sustainable investing on the rise appeared first on Pinnacle Financial Planning.

The post CYBER SECURITY appeared first on Pinnacle Financial Planning.

The post Mortgage vs super appeared first on Pinnacle Financial Planning.

The post Flood Relief Assistance appeared first on Pinnacle Financial Planning.