Navigating Tariffs, Trade Disputes, and Offshore Investments for Your Retirement Strategy

After two exceptionally robust years in the markets, 2025 has kicked off with significant volatility.

Swift policy alterations and social media fervor from US President Donald Trump have triggered global repercussions, leading to a stock selloff as markets adjust to a rapidly changing environment.

For South Africans, a prominent theme in recent years has been the allure of offshore investments, especially as US tech stocks have delivered considerable returns for global equities.

So, what consequences does the Trump-induced volatility hold for the offshore investment discussion, particularly for South Africans whose retirement savings may be impacted?

While all retirement savings products will be affected by such dramatic changes, those invested in living annuities, who derive income from their portfolios, should be particularly vigilant, as living annuities can exceed the 45% offshore exposure limit, with some retirees holding a significant amount abroad.

But first, what’s occurring in the markets?

The recent volatility has primarily been fueled by escalating US trade tensions and erratic tariff policies from the new Trump administration.

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

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

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

Throughout April, US equities saw a rebound of nearly 10% following the initial drop due to further announcements from Trump, showcasing the extreme market fluctuations we are presently witnessing and can expect to continue.

Offshore investing for retirement amidst 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 that your investments have been influenced in some capacity by the aforementioned market shifts.

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

Has ongoing market volatility affected your retirement investments? If so, you can request a complimentary cost comparison report to see 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. In contrast, living annuities aren’t restricted by these offshore limits under Regulation 28. Nevertheless, the offshore investment dialogue remains vital for South Africans saving for retirement and generating income.

Until recently, the offshore narrative could be distilled to ‘maximize your investments outside of South Africa and preferably into global equities,’ motivated by political uncertainty and a weakening rand alongside soaring US equities (particularly tech stocks). However, it’s time to reevaluate some of that narrative.

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

Consider a pendulum: no matter whether it swings towards prosperity or adversity, it is likely to swing back the other way eventually.

Keep this in mind: asset classes often yield returns that vary significantly from their long-term averages over periods extending as long as a decade.

For instance, international equities provided an 11% return above inflation over the past decade, far surpassing their long-term average of 6.5%. Yet, in the previous decade, that asset class yielded only 3% above inflation.

This trend holds across different asset classes and timeframes. What thrives in one decade often lags in the next, and vice versa.

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

The correlation between current company valuations and future returns isn’t merely theoretical; it’s backed by solid data.

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

This creates a distinct disconnect between what has recently performed well (attracting investor interest and capital) and what is likely to yield strong future returns (which often gets overshadowed just when it should be highlighted).

When stocks excel, this typically leads to high valuations, complicating the ability to maintain previous return levels. It’s that pendulum once again.

What implications does this hold for your retirement investments? Essentially, approach current trends with caution. Instead, consider what holds potential for long-term growth (as saving for retirement and retirement itself is a long-term endeavor).

We may not have foreseen the tariffs, but we prepared for volatility.

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

The portfolio is now aligned with a stronger focus on defensive assets such as bonds and cash, owing 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 ability to assist South Africans in achieving their desired futures.

Being Regulation 28 compliant, the Your Future Fund is open to anyone with a retirement investment, including retirement annuities or preservation funds. Additionally, living annuity clients, who have no offshore limits, can certainly invest as well.

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 lens, weathering market cycles without impulsive choices is key. 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 parts of the journey.

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

Our disciplined long-term approach, aimed at delivering 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, committed to managing your portfolio with precision and care as we navigate these turbulent times together.

If you would like to discuss how 10X can improve your retirement savings, please reach out.

The content here is provided for informational purposes only. It is not intended to be nor does it constitute financial, tax, legal, investment, or other types of 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 investments 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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