The year ending 30th June 2023 finished with a strong recovery from the lows of September 2022. The top 500 companies in the US (S&P 500) rallied 8.3% for the quarter and 23.7% since the lows of September 2022. In Australia, the rally was more modest, with the index of the top 200 companies (ASX 200) rising 1.0% and 11.3% respectively over the same periods.
Financial markets continue to be focused on inflation. The reason for this is that inflation data feeds directly into interest rate policy. Broadly speaking, if inflation is above the expectations of Central Banks or is not falling fast enough to acceptable levels, interest rates are likely to remain high or rise further. Pleasingly US inflation dropped to 3.6% (year-on-year) in August 2023, from a high of 9.1% in June 2022. US monetary policy remains tight with the 11th consecutive rate hike in July bringing the federal fund rate to 5.5%. Australia’s inflation is following a similar pattern with a half-year lag behind the US, having fallen to 6% in the second quarter of 2023 from its high of 7.8% in forth quarter of 2022. The RBA has kept rates steady at 4.1% since early June.
Read more here: Paradigm Group Market Commentary: 2023 and expectations for 2024
