Selected Market Indicators for Periods to 31 December 2023

In 2023, global stocks and bonds had a strong end to the year, with prices rising throughout the final month. This was mainly due to the US Federal Reserve indicating that borrowing costs would be reduced in 2024. Inflation rates in the US, UK, and Eurozone all decreased, with US core inflation reaching a two-year low of 4%, while UK and Eurozone inflation dropped to levels last seen in 2021. Major central banks kept interest rates unchanged in December, and the US market is now pricing in rate cuts for 2024.

Despite concerns about high interest rates, bank failures, and recessionary fears, investors in 2023 generally saw positive returns as global financial markets performed better than expected. The S&P 500 had a return of over 26%, global equities returned more than 23%, and global bonds were up 6.6%. The only major asset class that experienced a loss in 2023 was commodities, with the Bloomberg Commodity Index falling by 8.2%, largely due to a 10.4% decrease in the price of WTI Crude Oil.

In Australasia, the Australian stock market (S&P/ASX 200) had a strong finish to 2023, with a 7.3% increase in value (in Australian dollars). This was driven by a broad-based rally led by mining stocks. The New Zealand stock market (S&P/NZX 50) also saw gains, but they were more modest, with a 4.0% return for the month. Over the course of the year, the Australian share market returned 12.4%, while the New Zealand share market returned 3.5%.

In New Zealand, the bond market performed well in December, with a 2.8% increase in value. The yield on a 10-year New Zealand Government bond fell by over 50 basis points to 4.38% during the month, although it remains relatively high compared to other developed countries. Cash had a monthly increase of 0.5% and a yearly increase of 5.4%.

The New Zealand dollar (NZD) strengthened this month, gaining 1.6% in December on a trade-weighted basis. Notably, the NZD appreciated 2.5% against the US dollar. Despite heavy fluctuations at times during the year, the NZD/USD ended 2023 with a 0.1% gain. Against the Australian dollar (AUD) and Euro (EUR), the NZD fell by -0.5% and -3.3% respectively in 2023.

This information has been prepared by Mercer (N.Z.) Limited for general information only. The information does not take into account your personal objectives, financial situation or needs.

24 January 2024