Investing Through Trade Tension: Staying Grounded

Investing Through Trade Tension: Staying Grounded
Published by Beacon Point | Financial Advice for New Zealanders

If you’ve logged into your KiwiSaver account recently and noticed a decline, you’re not alone. Many New Zealanders have seen balances fall in recent months. While market movements are a normal part of investing, the current volatility has a clear external driver.

Developments in US trade policy are ongoing, and they are having an impact on global markets, including those that underpin KiwiSaver portfolios.

What’s Actually Going On?
Since early 2025, the US administration has introduced a series of tariffs on imports. These include a broad 10 percent duty, with higher rates applied to certain regions such as China and the European Union. New Zealand falls within the 10 percent category.

The direct impact on our exports is only part of the story. More broadly, markets are responding to increased uncertainty around global trade. When businesses and investors have less clarity about future conditions, confidence can soften, which in turn affects investment markets.

Recent movements reflect this. Following the April 2025 tariff announcement, major US indices experienced sharp declines, and the NZX also moved lower. Since February 2025, both global and local markets have retraced from their peaks. For KiwiSaver members, this has translated into a noticeable, though not unusual, reduction in balances.

Why Does a US Trade War Affect KiwiSaver?
KiwiSaver balances are invested in financial markets, both locally and globally. As of late 2024, a significant proportion of KiwiSaver funds were allocated to equities.

As a result, when global markets move, KiwiSaver balances move with them. The US market, in particular, plays a central role in most diversified portfolios, meaning developments there tend to have a broad impact.

Who Feels It Most?
The impact varies depending on individual circumstances.

Those approaching retirement may feel the effects more acutely, particularly if they remain heavily exposed to growth assets. With shorter timeframes, there is less opportunity to recover from short-term volatility.

First home buyers may also notice an impact if they were close to a deposit target. Market movements can affect balances in the short term, even where long-term outcomes remain intact.

Differences can also arise between fund types. Passive funds tend to reflect market movements directly, while active managers may have some ability to adjust exposures.

How Should Investors Respond?
Periods like this can prompt understandable concern. However, decisions made in response to short-term market movements often have long-term consequences.

Switching to lower-risk funds after markets have already fallen can lock in losses and reduce exposure to any subsequent recovery. History shows that markets do recover over time, often when sentiment is at its weakest.

What Should New Zealanders Consider?
A more constructive approach is to revisit fundamentals:

• Ensure your fund choice aligns with your timeframe. Longer horizons can generally accommodate more volatility, while shorter horizons may call for a more conservative approach.
• Avoid frequent checking of balances. Constant monitoring can increase the likelihood of reactive decisions.
• Continue contributing where possible. Lower market prices mean contributions are purchasing assets at reduced valuations over time.
• Maintain diversification. Exposure to a mix of asset classes can help manage variability in returns.
• Seek advice if needed. For those nearing key financial milestones, or uncertain about their settings, professional guidance can provide clarity.

What About New Zealand’s Broader Economy?
There are also wider implications. The US is a key export market for New Zealand, and tariffs are expected to have a measurable, though manageable, economic impact.

More broadly, global demand and commodity prices may be affected. Currency movements also play a role, with shifts in the US dollar influencing investment returns for New Zealand investors.

The Bottom Line
Trade tensions are outside our control. What remains within our control is how we respond.

History consistently shows that disciplined, long-term investing is more effective than reacting to short-term uncertainty. Ensuring your strategy remains aligned with your goals and timeframe is the most important step.

At BeaconPoint, we help New Zealanders build investment strategies designed to navigate conditions like these. If recent volatility has raised questions about your KiwiSaver, your investments, or your broader financial plan, we’re available to talk it through.

Get in touch with the team at BeaconPoint.

*This article is for general information purposes only and does not constitute personalised financial advice. Please speak with a qualified financial adviser before making changes to your investments.