The Australian share market had a stellar month in December, with the All-Ordinaries index gaining by 8.1% for the month (closing the year at 7,829.50 points). For the 2022 calendar year the All-Ordinaries index (excluding dividends) gained by 8.4%.
The Reserve Bank of Australia (RBA) kept the official Cash Rate on hold in December at 4.35% per annum. The RBA Cash Rate increased by 1.25% in the 2023 calendar year, proving wrong my prediction from a year ago that interest rates would stabilise in 2023!
The Australian Dollar was stronger in December gaining by 3.3% for the month, with 1 Australian Dollar buying 68.26 United States cents as at the end of December.
Global share market returns were generally strong in December, with the United States Dow Jones Index gaining by 4.8%, the London FTSE gaining by 3.7%, the Japan Nikkei 225 falling by 0.1%, and the Hong Kong Hang Seng Index flat for the month.
The chart below shows the annual calendar year price return in the All-Ordinaries index from 2010 to 2023.
Source: Yahoo Finance, Apex Partners
As noted in the above chart, the positive year in 2023 follows a negative year in 2022 - with investment market volatility a key feature in recent times. Hopefully the recent wave of geopolitical events will wane, and global inflation can continue to trend down to provide some stability for investment markets.
While my prediction from a year ago that interest rates would stabilise was clearly wrong, I do expect this to be the case in 2024. Indeed, most market commentators (and myself included) expect the RBA to cut rates at some stage in late 2024.
While perhaps we are yet to see the full impact of rapidly rising interest rates on the economy (and the potential for mortgage stress for those with large mortgages), it must be said that the Australian economy (and housing market) is proving to be remarkably resilient in the face of headwinds from higher borrowing costs. Ultimately, I think that this is something that investors ought to be thankful for.
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