Managing risk in turbulent times

From trade tariffs to rising political tension and military activities in the Middle East, the US is keeping the world on its toes. And when the world’s largest economy shifts and pivots, markets everywhere feel it, including here in Australia. 

We’ve heard from members who are concerned about political instability. Concerned about civil unrest. Concerned about where their retirement savings are invested, and what it would mean if the US entered a more volatile chapter. 

Money flows through systems shaped by politics, policy and power. At Future Super, we believe where money flows matters - but we also believe in managing our members’ money responsibly and safely. Especially in moments like this. So let’s talk about what’s happening, and how we manage it. 

Why the US matters to global markets 

The US is still the largest economy in the world. It makes up roughly 60% of global share markets by value, depending on the index used. US Treasury bonds are widely treated as the global ‘risk-free’ benchmark, and the US dollar remains the world’s dominant reserve currency. 

That means decisions made in Washington – whether on trade, immigration, taxation or spending – don’t stay in Washington. They can ripple across the world.  

Over the past year, global markets have navigated: 

• Ongoing trade tensions and tariff policy shifts 

• Elevated US government debt levels (now above 100% of GDP, according to US Treasury and Congressional Budget Office data) 

• Volatility in Treasury yields, which influence borrowing costs globally 

• Inflation that has moderated from post-pandemic highs, but remains closely watched by the Federal Reserve 

• Deep political polarisation and widespread protests in some cities 

Each of these factors can move markets. Together, they increase uncertainty. And markets hate uncertainty.  

Are investors worried? 

There are a few risks that investors – including large institutional investors – are watching closely. 

1. Bond market volatility 
US Treasury bonds underpin pricing across global financial markets. If confidence in US fiscal policy wavers, and investors demand higher yields, borrowing costs rise. That affects everything from mortgage rates to business investment – not just in America, but globally. 

2. Inflation and trade policy 
Tariffs can increase input costs for businesses. If sustained, that can feed into inflation. Central banks may respond with higher interest rates – which can weigh on asset prices in the short term. 

3. Political instability 
The US is experiencing significant social division. Protests linked to immigration enforcement activity, debates around civil liberties, and election-cycle tensions have all contributed to a heightened sense of unpredictability. Some commentators have even speculated about extreme scenarios. 

At the same time, tensions in the Middle East – including renewed instability involving Iran – have added another layer of uncertainty to an already fragile global backdrop. Developments in the region can influence energy supply and trade routes, and when energy markets tighten, oil prices can rise. Higher energy prices can complicate the inflation outlook, particularly in the United States, where inflation remains a key focus for policymakers.  

The path of US interest rates will depend largely on how employment conditions evolve and whether inflation continues to ease. While it’s too early to determine the full economic impact of recent events in the Middle East, this broader backdrop reinforces why diversification matters. When risks emerge across multiple regions at once, portfolios built across asset classes and geographies are better positioned to absorb shocks.  

Portfolio Manager Sam Parkinson is part of the team that keeps a very close eye on market trends and changes that could impact the investments inside Future Super. He points out that markets rise and fall all the time.  

“Even big, unexpected events – whether financial, like a massive sell-off in Treasury bonds or geopolitical, like a civil war – whether they're driven by macroeconomic shifts or geopolitical tilts – they’re not new,” he says.  

“Sometimes referred to as Black Swan events of left tail risk, they don’t happen often but when they do they can be really unsettling for members.” 

These events are rare, but severe and difficult to predict. They make headlines. They can unsettle markets, too. And they can be confronting. But new? Nope. 

In just the past two decades, investment markets have navigated several upheavals: 

• The Global Financial Crisis 

• The COVID-19 pandemic 

• Major geopolitical conflicts 

• The UK’s Brexit vote 

• Trade wars and commodity shocks 

In each case, markets experienced sharp volatility. In each case, long-term diversified investors were able to recover over time. 

That doesn’t mean downturns are comfortable. They’re not. But it does mean that building a portfolio around a single political outcome – or assuming one country’s trajectory determines everything – is not how long-term investing works. 

How this affects your super 

The investment management team behind Future Super constantly monitors potential geopolitical risks, and tailors investment plans to minimise shock. Even so, no investment is immune to market ups and downs. And superannuation is designed to ride them like a surfboard on a point break.   

Superannuation is a long-term investment designed to support you in retirement. That long horizon is important.

Short-term political shocks can: 

• Increase share market volatility 

• Move currency values (including the AUD/USD exchange rate) 

• Shift bond prices 

• Create temporary drawdowns 

Because markets are globally connected, volatility in the US can ripple through Asia, Europe and Australia. Super funds, however, are not built around one country, one policy or one administration. 

How we manage uncertainty 

The role of investment teams like Sam’s includes protecting members’ money during extreme scenarios.  

“The most important thing we do from an investment perspective is not building our options around any single outcome,” he says. “We diversify deliberately across different asset classes, regions, markets, risk segments… And this means we're not exposed to any one market, or a particular scenario, for example conflict in the US.” 

That means portfolios are not dependent on any one market performing well at any given moment. This diversification is paired with active oversight. 

“We don’t use a set and forget approach. As conditions change, whether geopolitical or macroeconomic uncertainty evolves, we actively review and make adjustments to our exposures.” 

This includes tactical asset allocation (adjusting exposures when risk conditions (shift), maintaining liquidity, and using tools that allow flexibility in volatile markets: 

“We use liquid assets, we use derivatives that allow us to shift our market exposure without being forced into rushed or distressed selling.” 

Because Future Super is smaller than ‘big super’ funds, we also have a sizeable advantage. 

While we’re proud of our solid growth over the past decade or so, the fact that we don’t manage hundreds of billions of dollars gives us agility. “We can act quickly,” Sam says, without structural constraints. “That flexibility is particularly important should something like a Black Swan event occur.” 

Should sustainable investors be divesting from US companies? 

Future Super is built on the belief that money is power, and that power should be used positively. In other words, capital should not fund industries that we believe harm people or the planet. We screen out fossil fuel companies. We screen out weapons manufacturers. We screen out tobacco, gambling and nuclear energy companies. This is an immutable tenet of our investment strategy.  

Divesting from fossil fuel companies is a key part of that strategy – but divesting from an entire country is a very different decision. The US is home to thousands of companies, including renewable energy developers, healthcare innovators, technology firms and social infrastructure providers. Many play a critical role in the global transition to a low-carbon economy. 

Our responsibility is to assess investments based on long-term sustainability, risk and alignment with our sustainable investment strategy – not short-term political cycles. 

If we find that an investment no longer meets our screening criteria or is presenting a potential sustainability related risk, we will take action to address the issue – such as additional risk assessments, use of our shareholder rights to address the risk, including through engagement and proxy voting, or divestment. We regularly review our portfolio to ensure compliance with our sustainability screening criteria. But we don’t build portfolios around political sentiment alone. 

Discipline in uncertain times 

It’s okay to feel unsettled by what’s unfolding in parts of the world. Political decisions affect real communities. Immigration policy affects real families. Social unrest reflects real pain. 

As a fund built at the intersection of capitalism and activism, we don’t ignore that. But first and foremost, our role is to look after your retirement savings, and that requires discipline. 

“Unrest in somewhere like the US can feel scary and make big headlines,” Sam says, “but it's important to understand that with these sort of extreme events, markets have always recovered over the long term.” 

Short-term volatility does not automatically translate into long-term loss, especially when portfolios are diversified, actively managed and built with sustainability in mind. 

The world is volatile. It always has been. What’s different today is the speed of information, and the intensity of the headlines. 

Our job is not to predict the next political shock, but to build resilient portfolios that can withstand them. We invest your money to support your retirement – and to help build a future worth retiring into. 

Uncertainty in the US doesn’t change that mission – instead, our decisions are guided by discipline, diversification and a belief that our future is the best investment.  

• Read more about how super behaves during market downturns