Market volatility and super – March 2026 quarterly update

Asset classes

Recent investment performance shifted away from the dominance of a small number of global mega-cap tech stocks. Instead, the energy, materials and utilities sectors outperformed during the March quarter, broadly benefiting from rising commodity prices, inflation uncertainty and geopolitical tensions.

The Australian shares portfolio outperformed its benchmark for the quarter, delivering positive returns despite the overall Australian share market falling. Performance was largely supported by active positions in the energy and materials sectors. Our long-term active security selection approach had the portfolio well positioned to outperform, with key positions in the mining, financials and communications sectors benefiting from the increased uncertainty caused by geopolitical events.

International shares experienced more of an impact from the Middle East conflict during the quarter. Some sectors, like energy, materials and utilities, responded positively to the geopolitical situation, while others like consumer discretionary, IT and communication services were heavily impacted.

Tech stocks had one of their weakest relative return starts to a calendar year in decades. The group of companies known as the Magnificent 7 – which includes Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia and Tesla – collectively lagged the rest of the S&P 500 by about 10% during the quarter.

Unlisted asset returns have been led by private equity and private credit, which delivered strong performance for the quarter and financial year to 31 March 2026.

Infrastructure investments in seaports, airports, toll roads and energy generation continued to perform well during the quarter, especially in assets with inflation-linked revenue structures.

Many property investments in the portfolio had an uplift in performance, as market conditions rewarded investments with stable cash flows and attractive income yields.

Markets have been pricing in the potential implications of higher interest rates on global growth. The Reserve Bank of Australia raised the cash rate in February and March and the Federal Reserve in the US appears to have paused its easing cycle for now.

As a result, fixed income yields have risen recently. This put pressure on the fixed income asset class, which delivered slightly lower returns over the quarter.

Investment outlook

While there is still a lot of uncertainty, we continue to anticipate that the broad economic impacts of the Middle East conflict will be temporary. While global supply chains have been affected, we don’t expect these impacts to be as lasting as other recent shocks, like during COVID-19 or Russia’s invasion of Ukraine.

However, we recognise the possibility of a deteriorating outcome, which could bring a greater risk of economic shock. Accordingly, our investment team has been carefully monitoring a range of outcomes.

As an active investor, we continue to adapt to changing conditions, managing risk and investing in attractive opportunities to grow members’ super. Market volatility can lead to the mispricing of assets and market drawdowns can create buying opportunities for long-term investors like us.

While current geopolitical and economic headwinds are front of mind, our investment team continues to consider the outlook for growth, inflation, monetary policy and fiscal policy over the next three to five years.

Our medium to longer-term view is for ongoing moderate economic growth, supported by technological productivity gains and continued investment from the private and public sectors.

We continue to view a modest overweight to listed equities, diversified across regions and sectors, as appropriate for the near and medium-term. Asset class valuations remain slightly elevated relative to historical and fair value. That increases the importance of identifying investments with above average medium to long-term earnings growth to drive relative performance.

The risks of switching

It’s important to remember that super is a long-term investment, even for many people in retirement. While changes in your balance can be worrying, market fluctuations are a normal part of investing.

Making decisions based on short-term considerations could leave you worse off in the long run. This includes activities like switching investment options, which can have a significant impact on how much super you’ll have in the future.

It’s often said, what matters is ‘time in the markets, not timing the markets.’ History has shown that staying invested over the long term is often the best way to compound wealth, because trying to identify turning points in the market can be notoriously difficult.

Importantly, members who make the decision to switch investment options, when markets are falling, later have to make a second decision, as to when to switch back.