Quarterly newsletter, December 2023

The Santa rally and a record November

The Australian equities market has remained volatile during the first 6-months of the Financial Year (FY24). From the 1st of July to the 31st of December 2023, the S&P/ASX200 rose 4.76%, finishing the Calendar Year (CY23) at a 12-month high. At its trough, the index was down over 6.5% during the 6 months.

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Over November and December 2023, the market experienced a significant “Santa Rally” which was supported by news that interest rates in the US had peaked and that the Federal Reserve would execute multiple rate cuts in Calendar Year 2024 (CY24). In addition to this, the retail sector performed strongly. According to ABS data, November 2023 was the strongest month of retail sales ever recorded (i.e., 2.0% higher than October 2023 and 2.2% higher than November 2022). This was due to the timing of Black Friday and Cyber Monday which started earlier and lasted longer than previous periods.

The local monthly inflation indicator rose slightly to 4.3% in the 12 months to November, down from 4.9% in October (and down from its 8.4% peak last year). This is the second month in a row that inflation has fallen more than expected. Unfortunately, we are still experiencing uncomfortably high prices in housing, electricity, and gas.

We expect that interest rates in Australia have likely peaked, with economists now forecasting either one more rate rise in February or an extended pause at 4.35%.

Whilst the Australian economy remains resilient, we note that the chance of a recession remains relatively high in the short term. AMP’s Chief Economist, Shane Oliver, recently stated that the risk of a recession sits at approximately 40%. The massive influx of immigration over the past 12-months has prevented a technical recession, however, has exacerbated the per capita recession Australia is currently experiencing. Given the persistent pressure on households we expect short to medium term volatility to continue across all markets. We remain optimistic that equities grind higher through CY24.

Returns for the 2024 Financial Year (6 months)

  • All Ordinaries: 7829.5, up 428 points or +5.78%
  • Listed Property Accumulation Index 66126, up 7239.10 or 12.29%
  • 90 Day Bank Bills 4.36%, up 0.23%
  • AUD vs U.S. Dollar 68.3c, up 1.68c or 2.5%
  • UK FTSE 100, 7733.20 points, up 202 points or 2.68%
  • Dow Jones Industrial Avg, 37689.54 points, up 3340 points or 9.72%

Guardian Investments Pty Ltd ABN 18 608 506 261 is a Corporate Authorised Representative of Guardian Associates Pty Ltd AFSL 238281. This page reproduces commentary published in December 2023 and is general advice only. It has not been tailored to your objectives, financial situation or needs, and the figures were current at the time of writing. Past performance is not a reliable guide to future returns. Seek personal financial advice before acting on it.