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Market Wrap December 2023

November: Solid rebound

  •  After a poor month for nearly all investments in October, returns during November were exceptional strong.

  • During November, Global Share performance, especially on a hedged basis was great. Global shares gained 4.4% on an unhedged basis, and gained a stellar 8.0% on a hedged basis.

  • For November, the U.S. S&P 500 price index was up 8.9% in local currency. Global shares rocketed in November as traders started to bet on a Goldilocks scenario of inflation falling and central banks lowering interest rates.

  • Australian shares also gained ground over the month, with the broad market index, the S&P/ASX 200 Accumulation Index gaining 5.0%. The best performing styles for the month were Growth and Small Caps. The best performing sector was Health Care returning 11.7%, while the worst performing sectors were Energy and Utilities, down by 7.4% and 6.0% respectively.

  • Fixed income had a very strong month, with Australian Fixed Interest gaining 3.0%, while global fixed interest gained 3.2%.

  • The Australian dollar gained a very solid 4.7% against the U.S. dollar over the month. The most recent rally in the AUD/USD has been driven by elevated commodity prices, positive risk sentiment, and a hawkish RBA, amid a weakening U.S. dollar facing pressure from the Fed's dovish


Inflation cools in both the U.S. & Europe


Globally

  • The annual inflation rate in the U.S. slowed to 3.2% in October 2023 from 3.7% in both September and August, and below market forecasts of 3.3%. Energy costs dropped 4.5% (vs -0.5% in September), with gasoline declining 5.3%, utility (piped) gas service falling 15.8% and fuel oil sinking 21.4%.

  • The inflation rate in the Euro Area declined to 2.4% year-onyear in November 2023, reaching its lowest level since July 2021 and falling below the market consensus of 2.7%.


Locally

  • The monthly Consumer Price Index (CPI) indicator in Australia increased by 4.9% in the year to October 2023, slowing from September’s five-month-high of 5.6%, below forecasts of 5.2%. It was the first decline in annual inflation and the slowest pace since July.

  • As largely expected, the RBA kept the official cash rate at 4.35% at its December meeting.


Major asset class performance



Source: FactSet, Lonsec & Insignia Financial, 30 November 2023


Indices used: Australian Shares: S&P/ASX 200 Accumulation Index, Australian small companies: S&P/ASX Small Ordinaries Accumulation Index, Global shares (hedged): MSCI World ex Australia Net Total Return (in AUD), Global shares (unhedged): MSCI World ex Australia Hedged AUD Net Total Return Index; Global small companies (unhedged): MSCI World Small Cap Net Total Return USD Index (in AUD); Global emerging markets (unhedged): MSCI Emerging Markets EM Net Total Return AUD Index; Global listed property (hedged): FTSE EPRA/NAREIT Developed Index Hedged in AUD Net Total Return; Cash: Bloomberg AusBond Bank Bill Index; Australian fixed income: Bloomberg AusBond Composite 0+ Yr Index; International fixed income: Bloomberg Barclays Global Aggregate Total Return Index Value Hedged AUD


Please note: Past performance is not indicative of future performance.


Currency markets



Source: FactSet & Insignia Financial, 30 November 2023.


All foreign exchange rates are rounded to two decimal places where appropriate.


Please note: Past performance is not indicative of future performance.

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