Is the US Election Affecting Your KiwiSaver?

If you've been checking your KiwiSaver balance lately and noticed it taking a dip, you’re not alone. Uncertainty surrounding the upcoming US election can cause fluctuations in the market. Let's break down why this happens and why there’s no need to hit the panic button.

The Rollercoaster of Market Reactions

The global market can feel like a rollercoaster, swaying with various influences - political events being one of the biggest. As the US election approaches, investors are understandably on edge. There’s uncertainty about who will win and what their policies will be, which can lead to a sell-off of stocks as traders react to the unpredictability.

In the weeks leading up to the election, investors begin to speculate about potential outcomes. As they try to predict which candidate might bring in favourable economic policies, we see a lot of activity in buying and selling.

This guessing game results in increased volatility, with stock prices fluctuating rapidly as traders adjust their strategies. It’s a natural reaction to political uncertainty, leading to sharp, short-term drops in investment portfolios - like your KiwiSaver fund.

The graph above shows how the American economy has grown over time. One key takeaway is that, regardless of which party was in power, the S&P 500 has almost always trended upward during each president’s term. There appears to be no clear link between economic growth and which party is in power.

*Source: Financial Synergies Wealth Advisers

Why These Fluctuations Are Normal

While it can be frustrating to see your balance decrease, it’s important to remember that these fluctuations are a normal part of investing. During times of political change, many investors choose to pull back until they feel more confident about the future. However, it’s crucial to keep in mind that KiwiSaver is a long-term investment.

Historically, markets have a tendency to rebound after periods of uncertainty. Those who stay invested often see their savings grow over time, despite short-term dips. If you pull your money out during a downturn, you risk missing out on potential gains when the market recovers.

Focus on the Long-Term

As the election approaches and volatility continues, it’s essential to focus on your long-term goals. Think of your KiwiSaver like a marathon rather than a sprint. Short-term dips are just bumps in the road. By staying the course, you’ll position yourself to benefit from the eventual market recovery.

If you’re feeling uneasy about your KiwiSaver or have questions about how these changes might impact your investments, reach out to us. We’re the KiwiSaver experts, here to provide guidance and help you navigate uncertain times.