Market volatility – what you need to know

Market volatility has dominated the news 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, fixed interest, or commodities like gold – fluctuates. 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 adversely 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 being 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 generally performed well year-to-date (25 March 2025). It is also worth noting that the defensive assets in your portfolio, such as fixed interest and cash, have provided a cushion against share market weakness.

What should you do?

Short-term fluctuations can be unsettling, but they are a normal part of long-term investing. To achieve the higher expected long-term returns from, say, shares and fixed interest, investors must accept a certain level of volatility.

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.  As always, we are here to support your retirement goals. You can reach out to us by emailing nzfire.super@mercer.com or by calling 0800 MY Super (0800 69 78737).