Navigating Tariffs, Trade Disputes, and Offshore Investments in Retirement Planning

Following two exceptionally robust years in the markets, 2025 has started with considerable volatility.

Swift policy changes and social media fervor from US President Donald Trump have generated global ripples, leading to a stock selloff as markets adjust to a rapidly-changing landscape.

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

So, what are the ramifications of Trump-induced volatility for the offshore investment conversation, particularly for South Africans whose retirement savings are at stake?

While all retirement savings vehicles will feel the effects of such significant shifts, those investing in living annuities, who draw income from their portfolios, should be especially vigilant, given that living annuities can exceed the 45% offshore exposure limit, and some retirees may have a considerable amount invested overseas.

But first, what’s transpiring in the markets?

The wave of volatility has largely been propelled by escalating US trade tensions and erratic tariff policies from the new Trump administration.

On ‘Liberation Day’, sweeping tariffs were introduced, indicating a move away from globalization towards unilateral protectionism, establishing US tariff levels at their peak since the 1930s. These shifts threaten to destabilize global trade relations, likely hampering growth, raising inflation, and ultimately impacting corporate earnings.

Are you uncertain if your retirement plan can weather unexpected market fluctuations? Connect with a 10X Investment Consultant at no cost and with no obligation to assess if your retirement strategy is on track.

The resulting volatility caused a 20% selloff in the S&P 500 from its peak, triggering a widespread decline in global equities.

Throughout April, US equities bounced back nearly 10% following the initial drop due to further announcements from Trump, exemplifying the extreme market fluctuations we are currently witnessing and can expect to continue seeing.

Offshore investing for retirement amid the current climate

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

Each of these retirement investment products allocates your funds into underlying portfolios with varying blends of ‘growth’ assets like equities, which are vulnerable to volatility such as we are currently experiencing, alongside more ‘defensive’ assets like bonds that generally provide steadier, albeit lower, returns.

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

It’s worth noting that retirement annuities and preservation funds are capped at 45% offshore exposure per Regulation 28 of the Pension Funds Act. Conversely, living annuities are not restricted by these offshore limits under Regulation 28. Regardless, the offshore investment dialogue 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, preferably into global equities,’ driven by political uncertainty and a declining rand amidst soaring US equities (particularly tech stocks). However, it’s time to reassess some aspects of that narrative.

Markets exhibit their own form of gravity. When asset classes (like global equities, primarily composed of US equities, particularly the ‘Magnificent Seven’ tech stocks) become excessively detached from their long-term averages—whether upwards or downwards—a reversion typically ensues over time.

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

Consider this: asset classes often yield returns that fluctuate significantly from their long-term averages over periods extending as long as a decade.

For example, international equities provided an 11% return above inflation over the last decade, considerably surpassing their long-term average of 6.5%. Yet, in the previous decade, that asset class offered merely 3% above inflation.

This trend is evident across various asset classes and timelines. What excels in one decade often lags in the next, and vice versa.

The challenge with global equities: current perceptions versus likely future performance often diverge.

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

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

This highlights a significant disconnect between what has recently outperformed (captivating investor interest and capital) and what is likely to yield strong future returns (which often gets eclipsed right when it should be emphasized).

When stocks shine, it typically leads to elevated valuations, complicating efforts to sustain previous return levels. The pendulum swings again.

What does this imply for your retirement investments? Essentially, exercise caution in solely capitalizing on current trends. Instead, consider what possesses the potential for long-term growth (as saving for retirement and retirement itself is a long-term endeavor).

We might not have foreseen tariffs, but we planned for volatility.

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

The portfolio is now aligned with a greater emphasis on defensive assets such as bonds and cash, thanks to their attractive real (after inflation) returns.

This cautious positioning has allowed 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, can certainly invest as well.

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

Long-term investing can often be challenging; however, panic rarely serves one’s interests. Maintaining a long-term perspective and weathering market cycles without making impulsive decisions is essential. If your goal is sustained long-term growth, periods of volatility like the current situation and those faced in 2022, 2020, and 2018 are simply parts 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, aimed at delivering inflation plus 5.5% in the Your Future Fund over five years, has proved effective in this environment.

We are here to support you every step of the way, dedicated to managing your portfolio with accuracy 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 here is provided for informative 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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