Market volatility – what you need to know

Market volatility has dominated the news cycle in early 2025, and although market fluctuations are a normal part of long-term investing, we appreciate it is difficult to watch your retirement savings take a dip. It is important to understand what market volatility is, and what you should, and more importantly, should not do.

What is market volatility?

Market volatility refers to the ups and downs in the value of investment assets over a given period. The value of any asset – be it shares, property, bonds, or commodities like gold – can fluctuate over the short-term. These fluctuations are commonly referred to as ‘up markets’ and ‘down markets’. Markets move in cycles, and history shows that after periods of decline, they tend to recover over time.  No one can predict exactly when markets will rebound, and changing your investment strategy based on short-term movements can significantly impact long-term returns.

What’s been happening?

The fluctuations evident in the first quarter of 2025 have been driven by a mix of events, including:

• Uncertainty around the proposed US Tariffs, raising concerns about potential retaliation and fears of a broader trade war;
• US technology leadership challenged by China;
• Commentary from central banks affecting investor sentiment; and
• Global events including conflicts in Ukraine and the Middle East and their regional repercussions.

Despite the dominant headlines, it hasn’t been all bad news for the markets in 2025 so far. Notably, shares outside the US have performed well year to date (25 March 2025) with eurozone shares^[1] up 8% while Chinese tech shares listed in Hong Kong^[2] up 32%. It is also worth noting that the defensive assets in your portfolio have provided a cushion against the share market volatility, with New Zealand Cash^[3] and Global Bonds^[4] delivering positive returns year to date.

What should you do?

Short-term fluctuations can be unsettling, but they are a normal part of long-term investing.  To achieve higher expected long-term returns from the share market, investors must accept a certain level of volatility, especially when compared to the lower returns of traditional savings accounts.

We caution against making impulsive decisions based on media headlines. If you are concerned about the current market fluctuations, we recommend talking to a financial adviser before making decisions that may impact the long-term potential of your retirement savings.

Remember, being invested in a diversified portfolio can help you grow your super. Your Employee Retirement Plan Trustee Board and the investment consulting team are highly experienced and well-equipped to navigate market downturns. We focus on diversification across various asset classes and geographic regions to mitigate risk.  As always, we are here to support your retirement goals, contact our Helpline on 0508 4 TEACH (0508 4 83224).

^[1] STOXX Europe 600 Index.

^[2] Hang Seng TECHIndex.

^[3] S&P NZX 90-Day Bank Bill Index

^[4] Bloomberg Barclays Global Aggregate Index (NZD Hedged).