Tariffs, trade wars, and offshore investment for retirement

After two exceptionally strong years in the markets, 2025 has started with significant volatility. Rapid policy change (and social media exuberance) from President Donald Trump has sent shock waves around the world, triggering a sell-off in stocks as markets adjust to a rapidly changing global landscape. For South Africans, a strong narrative in the last few years has been the attractiveness of investing offshore, with US tech stocks driving outsize returns for global equities.  

So, what does Trump-induced volatility mean for the offshore investment conversation, and most especially for South Africans whose retirement savings is exposed to that volatility? While all retirement savings products will be affected in some way by such titanic shifts, living annuity investors who draw income from their investment might want to pay especially close attention given that living annuities are not capped at 45% offshore exposure and some retirees might have significantly more than that invested offshore.   

But first, from the perspective of the markets, what’s happened?

The primary driver of this volatility has been rising U.S. trade tensions and unpredictable tariff policies from the new Trump administration. On “Liberation Day,” dramatic tariffs were announced marking a shift from globalization to unilateral protectionism and setting U.S. tariff levels at their highest since the 1930s. These measures risk upending global trade relationships, potentially slowing growth, driving up inflation, and ultimately impacting corporate earnings.  

Are you unsure whether your retirement plan can weather unexpected market movements? Chat to a 10X Investment Consultant free of charge and with no obligation, to see whether your retirement plans are on track. 

The resulting volatility led to a 20% sell-off in the S&P 500 from its peak and a broad-based decline in global equities. Over the course of April, we’ve seen U.S. equities rally nearly 10% following the initial decline on the back of more announcements from Trump, illustrating the extreme market swings we are experiencing and can continue to expect.  

Offshore investing for retirement in the current climate

If you’re saving into a retirement annuity, watching your pension savings grow in a preservation fund, or drawing income from a living annuity, your investments will have been affected in some way by the market movements described above. All of those retirement investment products invest your money in underlying funds with different mixes of ‘growth’ assets like equities, which carry the risk of volatility like we are seeing now, and more ‘defensive’ assets such as bonds, that typically produce more stable although usually lower returns.   

Have your retirement investments been affected by current market volatility? If you, so can get a free cost comparison report to see whether your money could be doing better with 10X. 

As mentioned previously, retirement annuities and preservation funds are limited to 45% offshore exposure following regulation 28 of the Pension Funds Act. Living annuities, on the other hand, are not limited at all. Either way, the offshore investment narrative is an important one for South Africans saving for and drawing an income in retirement.  

Until recently, that offshore narrative might have been summarised as ‘get as much money out of South Africa as you can, and preferably into global equities,’ driven by political instability and a weakening Rand on the one hand, and high-flying US equities (read: tech stocks) on the other. But now, at least some of that narrative needs to be re-examined.  

Markets have their own version of gravity. When asset classes (such as global equities, made up of 70% US equities, and specifically, the ‘Magnificent 7’ tech stocks) stretch too far from their long-term averages – either to the upside or downside – they tend to revert back over time. Think about a pendulum: whether it swings to good times or bad, chances are it’s going to swing back the other way at some point. 

Consider this reality: asset classes frequently deliver returns that diverge significantly from their long-term averages over periods as long as a decade. International equities, for example, delivered 11% more than inflation over the past decade – substantially higher than its long-term average of 6.5%. But in the preceding decade, that asset class only delivered 3% more than inflation. This pattern repeats across asset classes and time periods. What performs exceptionally well over one decade often struggles in the next, and vice versa. 

The trouble with global equities: how they’re viewed now and how they’re likely to perform in future are two different things

The relationship between the current valuations of companies and future returns isn't just theoretical – it's backed by hard data. When investors bought US equities at the peak of the dot-com bubble in December 1999, they experienced negative real returns for the subsequent decade. Conversely, those who invested at the bottom of the Global Financial Crisis in March 2009 enjoyed real returns of approximately 15% per annum for the following ten years. 

This creates a profound disconnect between what has recently performed well (which attracts investor attention and capital) and what is likely to perform well going forward (which often receives less attention precisely when it should receive more). When stocks perform well, this often leads to expensive valuations which in turn make it difficult to sustain the previous levels of return. It’s that pendulum again.  

What does this mean for your retirement investments? Simply that you should be wary of betting the house on what’s hot right now. Rather, consider what is likely to perform in the long term (because saving for retirement, and retirement itself, is a long-term game).  

We didn’t know tariffs were coming, but we design for volatility

In the last six to nine months, we positioned the 10X Your Future Fund with this kind of volatility in mind. In layman’s terms, we decreased our exposure to expensive US equities, as long-term return expectations (due to the valuation question and mean reversion principles mentioned above) are low. The portfolio has a higher allocation to defensive assets like bonds and cash given the attractive real (after inflation) return on offer from these asset classes.  

This more cautious positioning has helped our flagship portfolio preserve capital and achieve strong performance relative to its peer group of other high equity portfolios this year. We’re justifiably proud of the Your Future Fund’s ability to help South Africans achieve the futures they want. 

As it is regulation 28 compliant, The Your Future Fund is available to anyone who has a retirement investment product such a retirement annuity or preservation fund. Having no offshore limit, living annuity clients are also obviously able to invest. 

As always, long term thinking will carry the day (and the months, and the years)

Long-term investing isn't always easy, but panic never serves you. Looking to the long term, it means weathering market cycles without making hasty decisions. If your goal is higher long-term growth, periods of volatility like we are currently experiencing and like those experienced in 2022, 2020, and 2018 are part of the journey. Even though the current market remains uncertain, 10X’s funds have been carefully structured with your future in mind, balancing risk and return to help you achieve your financial goals.  

Our disciplined long-term approach, anchored on delivering inflation plus 5.5% in the Your Future Fund over five years, has been validated in this environment. We’re here with you every step of the way, committed to managing your portfolio with care and precision as we navigate these turbulent times together. If you’d like to talk more about what 10X can do for your retirement savings, just get in touch.