An almost 9 per cent surge on Wall Street in the wake of the US election and a $US3 trillion flow of funds into global stocks has put a glow on the face of most Australians, hopeful they'll see a significant jump in the value of their superannuation balances for the December half-year.
But there has been an equally painful flipside that could take the shine off those returns.
After a 30-year bull run, there has been a rout on global bond markets since Donald Trump was declared President elect, with close to $US3 trillion flowing out of bonds across the globe.
As an investment vehicle, government bonds usually slip below the radar despite their size and influence on everything from interest rates to shares and property.
Think of the world's stock markets and add 20 per cent — that's the $US82 trillion bond market.
"It's much more dynamic and it's much more fascinating," superannuation ratings group Rainmaker chief researcher Alex Dunnin said.
For almost three decades, interest rates have been falling, driven lower by declining fuel prices, lower inflation as a result of cheaper Chinese manufactured goods and increased global competition.
That has seen bond prices on a seemingly relentless march north that only accelerated after the Global Financial Crisis when central banks flooded the world with cheap cash via the financial alchemy known as Quantitative Easing.
Governments, including the US, UK, European Union and Japan, issued vast amounts of new government bonds and then ordered their central banks to snap them up on the secondary market.
Major investors jumped aboard the trade, accumulating vast war-chests of government bonds, driving prices higher and yields, or interest rates, lower.
"Serious investors trade bonds like we trade shares, so they're actively in their moving those things every day," Mr Dunnin said.
Donald Trump's win, however, and his promise to spend big on infrastructure, has changed perceptions. Now there is a concern that inflation once again may grab hold as the US economy strengthens, prompting investors to dump government bonds.
"There's this sense that the population has spoken and that there's a need to switch away from monetary policy to fiscal policy," UBS Australia's head of fixed income Anne Anderson said.
Higher inflation means higher interest rates, and that means lower bond prices. Savvy investors began abandoning bonds in the election aftermath which quickly snowballed.
Super funds caught holding global bonds will have to account for those losses in the December quarter. Some of Australia's best performing funds in recent years have been heavily exposed to global bonds although many would have reduced their holdings as the rout gathered pace in November.
"They're not going to be smashed but they are going to be re-strategising and fast," Mr Dunnin said.
Longer term, the impact of rising interest rates is likely to have greater ramifications for super funds on their property and infrastructure investments.
"If interest rates go up, normally the value of those assets would decline and they tend to be more long term investments, so less liquid," Ms Anderson said.
Whether rates keep rising depends on whether Donald Trump backs his words with actions.
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