It took its time, but 2023 finally turned for the better

It took until the last two months of the year, but the ‘Golden 2023’ for investors, that I suggested just on a year ago might be delivered by the Fed, did finally arrive.

It took until the last two months of the year, but the “Golden 2023” for investors, that I suggested just on a year ago might be delivered by the Fed, did finally arrive.

Despite Wednesday’s overnight fall on Wall St, the Dow is up around 12 per cent on a year ago, with all of that and then some coming since the end of October.

The same was the case, but slightly more muted, with our banking, retail and resources-heavy local market.

It’s up around 7 per cent over the year, but 11 per cent in two months.

Of course, through the year, it was anything but clear-cut that things would turn out as they have, as sentiment waxed and waned, with the Fed continuing to hike through the first half and all the while engaging in decidedly mixed messaging.

It’s doing so again, right now; with its “dot-point” forecasting “saying” it will cut three times in 2024; while also Fed members literally saying we might not be done with hikes yet.

The Fed is done, just as our own Reserve Bank is also done – albeit, I say that with one huge, uniquely antipodean qualification: if we get generalised wage rises, spreading out across the economy, in the 4-5 per cent range.

If that happened, the RBA would have to hike, even into an economy that is clearly in per capita right now and could easily slide into a full-blown recession in the new year.

Looking back over the year – and I’m talking globally; my above comment shows I’m not so sanguine about Australia – it really is quite remarkable, how well things turned out. Especially in the US and China. None of the lurking and widely predicted disasters came about.

China did not implode. Oil and gas prices did not explode. The major central banks got to broad “soft landings” without having to send their policy rates to really brutal levels.

Our own RBA has, so far, stayed on previous RBA governor Philip Lowe’s “narrow path”.

Although the data over the coming “holiday” month are going to be very interesting and very possibly negative.

The best thing to be said about our immediate future is that it is “clouded” by this crazy mix of massive immigration-driven population growth and the mother-of-all infrastructure and construction spends, sucking up skilled labour and building materials, impacting on labour costs and inflation.

A year ago, we awaited further rate hikes – and so also, the “last hike” from each of the central banks.

The RBNZ – which had started hiking earliest in 2021 – had its last hike in May, the Fed in July, the Bank of England in August.

Our RBA – about the last to start hiking, in mid-2022 – was the outlier with its November hike.

Now we “know” rate cuts are coming. But in contrast to a year ago, to me, that does not signal a Golden 2024.

The cuts will be because of serious economic pain. And there are plenty of “left field” events, lurking out there, which in 2024 we may not be so lucky to escape.

Originally published as It took its time, but 2023 finally turned for the better