Published on 09/11/2016
What does a Trump Whitehouse mean for KiwiSaver and other investments?
Markets hate uncertainty, and President Trump is that personified.
However, markets often over-react in the short term, so we wouldn't be reading too much into any movements right now. We are reminded of other times when some shocked investors regretted making quick decisions. 911 is a case in point, as was the financial crisis.
We can't guarantee what markets will do going forward, but when we set up Simplicity we built in several inherent protections for times like these.
Firstly, we 100% hedge all funds to the NZ dollar. This eliminates the impact of any US dollar weakness, which is likely given the election result. Our funds can't avoid falling share prices, but the impact will be softened because our funds are hedged in this way.
Secondly, we have very diversified funds. Your KiwiSaver savings are invested in 23 different countries, and over 9,000 investments. In times like these, that really helps.
Thirdly, a President Trump probably means global interest rates will go down. We won't go into the (complex) reasons for this in this letter, and rates going down can't be guaranteed. But, if they do, the share markets will be supported by this, and the value of fixed interest investments will actually go up. This will help soften any blow.
There are too many variables to know exactly what will happen, but hedging the currency, diversifying, and having a mixture of shares and fixed interest in every fund helps.
We intend to make no changes to the way we are investing your money, and will keep you posted.
You can see the details of Fund performance in the member website. Please note that there is a two day delay in this data.