After two exceptionally strong years in the markets, 2025 has started with significant volatility.

Rapid policy changes and social media enthusiasm from US President Donald Trump have sent shockwaves globally, leading to a stock selloff as markets adjust to a fast-evolving landscape.

For South Africans, a prevalent theme in recent years has been the allure of offshore investments, especially with US tech stocks providing considerable returns for global equities.

So, what implications does the Trump-induced volatility have for the offshore investment discussion, particularly for South Africans whose retirement savings are at stake?

While all retirement savings products will be influenced by these profound shifts, those investing in living annuities, which provide income from their portfolios, may need to be especially vigilant. This is due to the fact that living annuities can exceed the 45% offshore exposure limit, and some retirees might have a significant portion of their investments abroad.

But first, what’s happening in the markets?

The surge of volatility has been chiefly driven by escalating US trade tensions and erratic tariff policies from the new Trump administration.

On ‘Liberation Day,’ sweeping tariffs were introduced, indicating a shift from globalization to unilateral protectionism and setting US tariff levels at their highest since the 1930s. These developments risk undermining global trade relationships, likely slowing growth, increasing inflation, and ultimately affecting corporate earnings.

Are you unsure if your retirement plan can withstand unexpected market fluctuations? Consult with a 10X Investment Consultant at no cost and with no obligation to determine if your retirement plans are on the right path.

The ensuing volatility led to a 20% selloff in the S&P 500 from its peak, causing a widespread decline in global equities.

Throughout April, US equities recovered nearly 10% following the initial downturn due to further announcements from Trump, illustrating the extreme market fluctuations we are currently witnessing and expect to continue seeing.

Offshore investing for retirement amidst the current climate

If you’re contributing to a retirement annuity, watching your pension savings in a preservation fund, or drawing income from a living annuity, rest assured that your investments have been affected in some way by the described market movements.

Each of these retirement investment products invests your funds in underlying portfolios with varying mixtures of ‘growth’ assets like equities, which are susceptible to volatility such as we’re observing now, as well as more ‘defensive’ assets like bonds that typically yield steadier, albeit lower, returns.

Have your retirement investments been influenced by ongoing market volatility? If so, you can request a free cost comparison report to discover if your money could perform better with 10X.

As noted, retirement annuities and preservation funds are limited to 45% offshore exposure per Regulation 28 of the Pension Funds Act. Conversely, living annuities are not bound by these offshore limits under Regulation 28. Regardless, the offshore investment narrative remains vital for South Africans saving for retirement and drawing income.

Until recently, the offshore narrative could be summarized as ‘maximize your money out of South Africa and preferably into global equities,’ driven by political uncertainty and a depreciating rand alongside soaring US equities (especially tech stocks). However, it’s time to rethink some of that narrative.

Markets have their own form of gravity. When asset classes (like global equities, mainly composed of US equities, especially the ‘Magnificent Seven’ tech stocks) become excessively detached from their long-term averages—either upwards or downwards—a reversion tends to happen over time.

Consider a pendulum: regardless of whether it swings toward prosperity or adversity, it’s likely to swing back the other way at some point.

Keep in mind: asset classes tend to provide returns that vary significantly from their long-term averages over periods extending as long as a decade.

For example, international equities yielded 11% above inflation over the last decade, significantly exceeding their long-term average of 6.5%. Yet, in the preceding decade, that asset class provided only 3% above inflation.

This pattern persists across various asset classes and timelines. What excels in one decade frequently lags in the next, and vice versa.

The issue with global equities: current perceptions vs. expected future performance diverge.

The correlation between current company valuations and future returns is not merely theoretical; it’s backed by substantial data.

Investors who purchased US equities at the peak of the dot-com bubble in December 1999 faced negative real returns over the subsequent decade. In contrast, those who invested at the bottom of the Global Financial Crisis in March 2009 enjoyed real returns averaging about 15% annually over the following decade.

This creates a marked disconnect between what has recently performed well (drawing investor interest and capital) and what is likely to generate robust future returns (which often gets overshadowed precisely when it should be emphasized).

When stocks shine, this usually leads to high valuations, complicating the ability to maintain prior returns. It’s that pendulum again.

What does this mean for your retirement investments? Essentially, tread cautiously when capitalizing solely on current trends. Instead, consider what has the potential for long-term growth (as saving for retirement and retirement itself is inherently a long-term endeavor).

We may not have predicted tariffs, but we planned for volatility.

Over the past six to nine months, we positioned the 10X Your Future Fund with potential volatility in mind. Simply put, we reduced our exposure to premium US equities, as the long-term return outlook (due to valuation concerns and the mean reversion principles mentioned earlier) appears bleak.

The portfolio emphasizes defensive assets such as bonds and cash, due to their attractive real (after inflation) returns.

This cautious positioning has enabled our flagship portfolio to preserve capital and achieve superior performance compared to other high-equity portfolios this year. We take pride in the Your Future Fund’s capability to assist South Africans in realizing their desired futures.

Being Regulation 28 compliant, the Your Future Fund is accessible to anyone with a retirement investment, including retirement annuities or preservation funds. Additionally, living annuity clients, who face no offshore limits, are also encouraged to invest.

As always, long-term thinking prevails (across days, months, and years).

Long-term investing is often challenging; however, panic rarely serves one’s interests. With a long-term perspective, weathering market cycles without making impulsive decisions is crucial. If your goal is sustained long-term growth, periods of volatility like the current situation and those experienced in 2022, 2020, and 2018 are merely part of the journey.

Despite the current market uncertainty, 10X’s funds have been meticulously structured with your future in mind, balancing risk and reward to help you achieve your financial objectives.

Our disciplined long-term approach, aiming to deliver inflation plus 5.5% in the Your Future Fund over five years, has proven effective in this environment.

We are here to support you every step of the way, dedicated to managing your portfolio with precision and care as we navigate these turbulent times together.

If you wish to discuss how 10X can enhance your retirement savings, please reach out.

The information provided here is for informational purposes only. It is not intended to be, nor does it constitute, financial, tax, legal, investment, or other advice. 10X Investments is a registered Financial Service Provider # 28250 and S13B Pension Fund Administrator # 24/444. 10X Fund Managers (RF) (Pty) Ltd is an approved manager of collective investment schemes in securities per Section 42 of the Collective Investments Schemes Control Act, 45 of 2002. Past performance does not guarantee future results.

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