Farewell fiscal 2023, hello fiscal 2024
The period from late 2021 into much of 2022 saw strong rising official cash rates and widespread worries about an upcoming recession, equities mostly surprised by delivering strong performance in the financial year of 2023. Investors demonstrated remarkable resilience and adaptability as they actively pursued opportunities in the market. However, the year also witnessed a slowdown in global industrial production, leading to a weakening of commodity prices. Notably, the oil price experienced a significant decline of 30 per cent throughout FY23.
The 31.7 per cent increase in the U.S. Nasdaq Index over the six months to June 2023 surprised investors given the intense focus on the Silicon Valley Bank collapse in March 2023. Apple jumped 50 per cent, surpassing a market capitalisation of U.S.$3 trillion, whilst Meta and Tesla both more than doubled.
Attention turned to Artificial Intelligence with Nvidia soaring 190 per cent whilst the Microsoft-backed Chat GPT program became a household name overnight. Given the fear surrounding stubborn high inflationary expectations, rising Central Bank official cash rates and the likelihood of an upcoming recession, the Japanese Nikkei 225 Index, the German DAX 30 and the French CAC 40 also did remarkably well in the June 2023 half-year to record gains of 27.2 per cent, 16.0 per cent and 14.3 per cent, respectively.
In this context, the Australian All Ordinaries Index (+2.5 per cent), the UK FTSE 100 Index (+1.1 per cent), the Shanghai Composite Index (+3.7 per cent) and the Hong Kong Hang Seng Index (-4.3 per cent) were laggards. All these numbers refer to capital gain/loss only, and do not take dividends into account.
On the Government Bond front, the UK ten-year Gilts sold off from 2.29 per cent to 4.39 per cent over the year on the back of the loss of confidence in the seven week leadership of Prime Minister Liz Truss and her Chancellor, Kwasi Kwarteng combined with the stubbornly high inflationary expectations.
Official cash rates moved up considerably, both in magnitude and speed, as Central Banks seem committed to hosing down inflation. Some areas of the world seem to be succeeding on this front, but not all.
Slower global industrial production growth saw commodity prices generally weaker, with oil down 30 per cent over the year to June 2023 to US$74.34/barrel. Iron-ore did well to finish the financial year above US$110/tonne.
Domestic live cattle prices came back a long way in the June 2023 half-year on the back of the El Nino (big dry) threat, whilst Wheat fell to US$6.84/ bushel. The gold price peaked in May 2023 at above US$2,050/ounce and has since retreated to US$1,918/ounce.
Whilst the A$/US$ exchange rate has been relatively steady in the mid to high US$0.60 range, the A$ declined against both the British Pound and the Euro.
The 6 months and 12 months to 30 June 2023
| 30-Jun | 31-Dec | 30-Jun | 6 months to | 12 months to | |
| 2022 | 2022 | 2023 | 30-Jun-23 | 30-Jun-23 | |
| % Change | % Change | ||||
| Indicies | |||||
| All Ordinaries | 6746.5 | 7221.7 | 7401.5 | 2.5% | 9.7% |
| S&P 500 | 3785.4 | 3838.5 | 4450.4 | 15.9% | 17.6% |
| Nasdaq | 11028.7 | 10466.5 | 13787.9 | 31.7% | 25.0% |
| Nikkei 225 | 26393.0 | 26094.5 | 33189.0 | 27.2% | 25.7% |
| FTSE 100 | 7110.7 | 7451.7 | 7531.5 | 1.1% | 5.9% |
| Dax 30 | 12783.8 | 13923.6 | 16147.9 | 16.0% | 26.3% |
| CAC 40 | 5922.9 | 6473.8 | 7400.0 | 14.3% | 24.9% |
| Shanghai Composite | 3398.6 | 3089.3 | 3202.1 | 3.7% | -5.8% |
| Hang Seng | 21859.8 | 19781.4 | 18939.6 | -4.3% | -13.4% |
| Sensex (India) | 53018.9 | 60840.7 | 64446.0 | 5.9% | 21.6% |
| NZ50 Gross | 10868.7 | 11473.2 | 11938.4 | 4.1% | 9.8% |
| Bonds | |||||
| US 10 Year Bonds | 3.02% | 3.88% | 3.84% | -0.04% | 0.82% |
| German 10 Year Bunds | 1.37% | 2.57% | 2.39% | -0.18% | 1.02% |
| UK 10 Year Gilts | 2.29% | 3.67% | 4.39% | 0.72% | 2.10% |
| Japan 10 Year Bonds | 0.22% | 0.41% | 0.39% | -0.02% | 0.17% |
| Australian 10 Year Bonds | 3.58% | 4.05% | 4.03% | -0.02% | 0.45% |
| Australian 11am Call | 0.85% | 3.10% | 4.10% | 1.00% | 3.25% |
| Commodities | |||||
| Gold (US$/oz) | 1806.2 | 1829.1 | 1918.7 | 4.9% | 6.2% |
| Oil (US$/bbl) | 105.84 | 82.90 | 74.34 | -10.3% | -29.8% |
| Iron-ore (US$/tonne) | 123.65 | 115.50 | 110.75 | -4.1% | -10.4% |
| Copper (US$/lb) | 3.68 | 3.82 | 3.76 | -1.6% | 2.2% |
| Wheat (US$/bushel) | 8.90 | 7.92 | 6.84 | -13.6% | -23.1% |
| Currencies | |||||
| $US/$A | 0.69 | 0.68 | 0.67 | -1.5% | -2.9% |
| $A/GBP | 1.75 | 1.77 | 1.91 | 7.9% | 9.1% |
| $A/EUR | 1.52 | 1.57 | 1.64 | 4.5% | 7.9% |
| Yen/$A | 93.68 | 89.30 | 95.99 | 7.5% | 2.5% |
Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
