It seems apt to start off the year with some good news - after all, it’s that time to start afresh, make some good ol’ resolutions and generally feel optimistic about things! In keeping with this theme, financial markets finished 2023 on a largely positive note. This was mainly due to ongoing signs that inflation is slowing globally. The US Federal Reserve (aka the Fed) indicated in their December meeting that “encouraging inflation data” could put an end to their rate hike cycle, even signalling potential rate cuts to come throughout 2024. This update was relevant given it means that rate cuts may come earlier than previously anticipated. 

The US-led sentiment boosted both share and bond markets around the world. The US share market ended December with the S&P 500 up just over 4.5% (after an even stronger November result of almost 9%). New Zealand’s share market wasn’t too far behind the US, posting 3.9% growth for the month. The Australian market was even stronger than the US and NZ, returning 7.1% in December. The less bright spot in global markets proved to be China, whose share market declined by 1.8% off the back of concerns that economic growth there has stalled as well as the property sector being in decline.

Following on from November’s welcome turnaround in global bond markets (which represent what we refer to as “fixed income” assets), December saw another promising month. Bond yields both in the US market and here in NZ have continued to decline, with the benchmark 10-year US government bond finishing December below 4% (the first time it’s done so since July). The 10-year NZ government bond dropped over 0.5%, closing at 4.3%. These results translated into continued strong fund returns in December after the record growth seen in November - something that will likely be a welcome update for many investors.

You can check out our latest KiwiSaver funds performance here, and our latest Investment funds performance here.

All in all, December brought a welcome finale to what has been a volatile and at times challenging year - especially in the face of an ongoing cost of living crisis (thanks, ‘sticky inflation’). Just to briefly touch on the full calendar-year market results, the US S&P 500 finished 2023 up almost 25% (with other US indexes such as the Nasdaq and Dow Jones also showing double-digit growth). NZ’s sharemarket didn’t show such bullish performance, ending the calendar year just over 2.5% up. As for 2024, we remain cautiously positive that things are looking up on a number of fronts - but we're keeping an eye on geopolitical developments (Gaza, Ukraine and Taiwan) that may sidetrack the markets. As always, it can be handy to remember that it’s not about timing the market but time in the market - we’re here for the long-term!

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