What does a ‘slow motion sell-down’ mean for our superannuation?

The Australian share market is now close to what financial market participants call a “technical correction”.

That is, a fall in the benchmark S&P/ASX200 of 10 per cent or more from its all-time high.

The index reached that high last month, closing at 8,555.

About 12:30pm AEDT it was 7,765 index points.

Veteran stockbroker Marcus Padley said the market was not panicking, but nor had it found a bottom or floor yet.

“I don’t think it’s looking particularly precipitous,” he told the ABC.

“The VIX index,” he says, which is recognised as the benchmark gauge of financial market fear, “that spikes when something precipitous is going on”.

“At the moment it has crept higher, so this looks like a slow motion sell-down,” Mr Padley added.

Putting aside tariff and US economic concerns, Mr Padley said a key catalyst for this share market sell-off was the corporate reporting season in America and Australia, as well as China’s threat to America’s artificial intelligence dominance.

“It’s been caused by Deep Seek and the Nvidia [earnings results], and the end of the [corporate reporting] season, and a news void that we’ve gotten into,” he said.

“That has been a catalyst for a loss of sentiment after a two-year bull market.”

Bear market possible

So, when does the market stop falling?

“Not sure,” Mr Padley responded.

“It really depends on the US, it depends on big tech, and big tech has been overpriced.”

Analysts look at the price to earnings multiples for stocks as a key gauge of whether they are valued fairly in the market.

It’s a ratio that compares the price of a stock to the company’s profits per share.

The so-called “magnificent 7” in the US: Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla have an average P/E of about 32.7 times (excluding Tesla).

“The P/E should probably, based on broader market averages, be around 25 times,” Mr Padley said.

“So, you can see if we got into a bear market, we could see it 10 per cent lower than this.” 

A bear market is a lengthy sell-down in the share market, taking the index 20 per cent or lower from its peak.

That seems to be a possibility according to some market participants.

Financial markets commentator Danielle Ecuyer from FN Arena said the selling on global financial markets, including Australia, was “absolutely relentless”.

“Predominantly it relates to the potential for growing trade wars across the world thanks to the tariff policy from the new Trump administration,” Ms Ecuyer said.

“And clearly uncertainty. Just uncertainty about where the world is heading, Australia’s exposure to China, because we don’t have a huge trade exposure to the US.

“And investors, clearly at the moment, they don’t like uncertainty, it feels very risk-off, and they’re just taking profits.

“Plus, there’s uncertainty around whether the US economy is going to slow.”

Influence on superannuation

Millions of Australians have superannuation, with total savings balances currently worth about $4 trillion.

So, what influence could the local and US share market have on those superannuation account balances?

Many analysts, such as AMP’s chief economist Shane Oliver, are sanguine, given the recent strong run-up in investment returns.

“Superannuation funds have had two very good years in terms of returns, and so it’s par for the course that you do go through bouts of volatility every so often,” he told The Business earlier this week.

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Kirby Rappell from SuperRatings sought to remind savers that superannuation is a long-term investment.

“You can be alert, but you don’t need to be alarmed,” he told The Business.

“If you think about the GFC, during COVID … these blips happen. The key thing is about being able to hold your nerve.”

However, market analysts warn that the short-term volatility is likely to continue.

“The key thing will be, as it always is, earnings growth for the companies here in Australia,” Ms Ecuyer said.

“And quite frankly the February reporting season wasn’t fabulous.

“So for our market to buck the trend we’d have to see the earnings outlook not deteriorating and the problem for some companies is that they’re actually seeing their exposure to the US, and their North American earnings, starting to come under pressure.

“I guess if investors have gone into this period – when markets were at very high, elevated valuations – and they’re extremely overweight equities, then clearly they’ve put themselves at risk of a short-term correction, or more in markets.”

On the lookout for black swan

Marcus Padley warned investors to be wary of the potential for a black swan event, or news that sparks a major, sudden sell-down in stocks globally.

“We saw some remarkable volume in some exchange-traded funds called SNAS or Short-NASDAQ.

“That happened just before the DeepSeek moment.”

Earlier this year an update from Chinese tech company Deep Seek presented global markets with an alternative artificial intelligence investment to Nvidia.

“So, certainly, there are hedge funds who are out to make money in any circumstance, who take large bets on outcomes that nobody else is aware of,” Mr Padley said.

“If they do know something, it’s not apparent to the rest of us.

“[But] I don’t see that sort of pre-collapse volume in SNAS or other bearish ETFs at the moment.”

Chris Brycki is the CEO of investment firm Stockspot.

His firm invests on behalf of mainly younger Australians looking to build their wealth.

While not offering any investment advice, he said younger Australians should take a proactive interest in the share market now.

“I think for young people in Australia the share market is just a great opportunity to build wealth without needing to invest in property, which most people can’t anyway,” he argued.

“You don’t want all your eggs in one basket and just owning Australian shares, or just a few tech companies, you want to own some government bonds as well, because that’s an asset that does well when there’s a recession.

“And if you have a few balancing assets in your portfolio, it can really smooth the bumps in periods like we’re seeing now.”

As for older Australians in or approaching retirement?

“There are a few moving parts, but I think the people that have a diversified and well-balanced portfolio – they don’t really need to lose any sleep,” Mr Brycki added.