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Navigating Market Volatility Amid US-Iran Tensions
As global tensions escalate following US airstrikes on Iranian nuclear facilities, Australians are cautioned against panic over potential downturns in superannuation balances. Recent military actions have sparked volatility in the stock market, with immediate impacts observed on the Australian Securities Exchange (ASX), where the ASX 200 fell 44.30 points or 0.52%, translating to a $25 billion loss by midday.
Market Reactions and Long-term Strategies
Investors are advised to remain calm, as market strategist Jessica Amir from MooMoo Australia advises taking a long-term perspective. In her conversation with Yahoo Finance, Amir indicated that now is not the time for knee-jerk reactions, noting, "Sometimes, the best thing to do is nothing, because markets always recover." She urged super fund members to refrain from selling their assets during this period of volatility, stating that such actions could lead to regrettable decisions.
Amir explained that the late June and early July period is significant for super funds, as many adjust their investment portfolios for tax minimisation ahead of the financial year-end. This often includes selling off poorly performing stocks, intensifying market fluctuations concurrently with geopolitical unrest.
Historical Market Behaviour During Conflicts
While conflicts tend to generate uncertainty, history has shown that stock markets can rebound from significant sell-offs. Amir indicated that the Australian market typically performs well in July as investment managers reinvest in stocks they anticipate will deliver strong earnings. Additionally, possible interest rate cuts may further stimulate consumer spending, contributing positively to stock market activity.
Financial advisor Alex Jamieson also commented on historical market resilience, reminding investors that certain sectors can thrive despite turmoil. He cited examples such as World War II, when US industrial production surged, and the initial uncertainties of the Gulf War in 1990, which gave way to market recovery as military action commenced.
Industry Implications and Consumer Effects
The current geopolitical climate has broader implications beyond stock market volatility. The potential for oil price hikes is significant, particularly if the Strait of Hormuz faces disruption—a crucial route through which around 20 million barrels of oil pass daily. Current Brent crude prices hover in the high-$70s range, with predictions suggesting they could exceed $100 per barrel.
Amir highlights that these increases at the petrol pump will also impact consumers beyond just fuel costs, affecting freight charges and leading to higher prices in supermarkets. "Even if you’re driving an electric vehicle, much of Australia’s energy supply is derived from fossil fuels, meaning higher costs will ultimately be passed down to consumers," she noted.
Conclusion
As the situation in the Middle East evolves, it’s essential for Australian investors and super fund members to remain informed and patient. While immediate downturns may be concerning, historical trends suggest that markets tend to recover over time. By adopting a long-term investment strategy, individuals can navigate the fluctuating landscape more effectively while being mindful of the broader economic impacts of geopolitical events.
