Global equity markets produced strong returns in December. The value of the Australian Dollar rose against all major foreign currencies, decreasing overseas investment returns when measured in Australian dollar terms. Australian and international fixed interest markets posted positive returns reflecting falling bond yields over longer maturities.

The Board of the Reserve Bank of Australia (RBA) met on 5 December to discuss global and domestic economies and markets, and to review their monetary policy settings. The RBA left the cash rate target unchanged at 4.35%, stating in the minutes: “… inflation had continued to decline but remained high. Wages growth had reached 4 per cent a little sooner than had been expected but the staff judged that wages growth was unlikely to rise much further. Output growth had continued below trend and the labour market was tight but easing gradually. Members agreed that financial stability considerations were not a constraint on monetary policy at the current meeting”. There is no RBA meeting in January 2024.

All four major global central banks, the United States Federal Reserve (Fed), the European Central Bank (ECB), the Bank of England (BoE) and the Bank of Japan (BoJ) met in December and (similarly to the RBA) maintained their cash rate target positions at 5.5%, 4.5%, 5.25% and -0.1% respectively. All major central banks stressed their commitment to returning inflation to their respective targets.

In the run up to the 2024 US presidential election, polls continue to suggest it’s highly likely be a 2020 rematch between incumbent Joe Biden and former president Donald Trump. In December, the Colorado Supreme Court ruled that former president Trump would not be on the ballot for the 2024 Republican primary election as it found Trump was in violation of a section of the US Constitution, known as the “insurrection clause”, for his involvement in the 6 January 2021 attack on Capitol Hill. Maine followed suit in late December and the issue has been expedited to the Federal Supreme Court to determine whether Trump can appear on all state primary ballots.

Equities

Major developed foreign equity markets rose in December with developed markets (excluding Australia) returning 3.9% on a currency-hedged basis (and 1.8% unhedged in Australian dollar terms, reflecting the rise in the value of the Australian dollar). The best performing major foreign equity market was the US stock market (S&P 500 Index) returning 4.5% (in local currency terms) in December.

The Australian stock market (S&P/ASX 200 Index) outperformed all its global peers, returning 7.3% for the month, with all 11 industry sectors experiencing positive returns. Real Estate, Health Care and Materials were the top performing sectors with returns of 10.0%, 9.1% and 8.8% respectively. The worst performing sector was Utilities, which returned 1.4%.

From a foreign developed market perspective, 10 out of 11 sectors produced positive returns for the month. The standout performer was Industrials, returning 6.4%, whilst the sole negative performing sector was Energy, which fell 0.8%.

Bonds

The Australian government bond yield curve flattened in December, with 2-year yields falling (0.40%) and 10-year yields falling further (0.46%) to finish the month at 3.71% and 3.96% respectively. Australian fixed interest returns for December were 2.7% (Bloomberg AusBond Composite Index).

Over December, major developed global government bond yields broadly fell, particularly over longer terms, leading to an increase in the Bloomberg Global Aggregate Index (Hedged) of 3.0%. Notably the 10-year UK government bond yield fell 0.64% from 4.18% to 3.54%.

Currencies

The Australian Dollar was mixed against other major foreign currencies. The Australian Dollar increased by 3.1% against the US Dollar and 2.3% against the British Pound, whilst it fell 1.9% against the Japanese Yen and 0.7% against the Swiss Franc. The Australian Dollar finished the month at 0.6812 US Dollars, up 2.1 US cents over the month.

Commodities

Commodity prices were volatile over the month of December, and the S&P GSCI Commodities Index ended the month down 3.6%. The price of WTI oil and Brent oil fell 5.7% and 7.0% respectively. Notably the price of sugar fell 21.0% over the month. Of the precious metals, the price of gold rose 1.3% and the price of silver fell 5.8% in December.

 

Performance of key markets over relevant time periods to 31 December 2023:

Asset class	Index	Month* (% change)	FYTD* (% change)	Prior 12m* (% change)
Australian Shares	S&P/ASX 200 Acc. Index	7.3%	7.6%	12.4%
International Shares	MSCI World Ex Aust Unhedged A$	1.8%	4.9%	23.2%
International Shares	MSCI World Ex Aust Hedged A$	3.9%	6.1%	21.7%
US Shares	S&P 500 Index	4.5%	8.0%	26.3%
UK Shares	FTSE 100 Index	3.9%	4.5%	7.9%
Japanese Shares	Nikkei 225 Index	0.1%	1.8%	31.0%
Australian Listed Property	S&P/ASX 200 A-REIT Index	11.5%	13.1%	17.6%
Australian Fixed Interest	Bloomberg AusBond Composite Index	2.7%	3.5%	5.1%
Australian Cash	Bloomberg AusBond Bank Bill Index	0.4%	2.1%	3.9%
Currency	AUD/USD	3.1%	2.2%	0.0%

Percentage changes in returns are for periods over the month of December (Month), financial year to 31 December 2023 (FYTD) and the prior 12 months, to 31 December 2023 (Prior 12m). Past performance is not a reliable indicator of future performance.