When I wrote in December I was very optimistic about the year ahead and the performance of both US and Australian equities. The reason for this optimism was purely based on the fact that following poor years (2022) there is usually a very good year. Remembering the mandatory statistics unit at University the term “reversion to the mean” was drummed into us. Markets inevitably are a bell curve and usually following any correction there will be a reversal. A decline of 20% or more in a share market is often accompanied by a positive year.

This year has proven not to be an exception. 

The top 300 stocks in Australia (ASX300) provided a 14.4% increase over the 2023 financial year, while global shares provided a 20% return for the financial year. Since the start of this year the S&P 500 is up 9.65% while the NASDAQ tech stock composite index is up over 24%.

Moving to the present we have seen the tightening of interest rates and lending standards. We may well be at the end of the tightening although its anyone’s guess. While life has become noticeably tougher, we still see prices on housing holding and increasing. We still see strong demand and we still don’t have enough people working in the economy to meet the demand. Perhaps the 715,000 new immigrants arriving in Australia between now and 30 June 2024 will be the answer.

Australian and US companies are still reporting record profit margins and I suspect it has held up better than many investors thought, while Australian commodities are still in high demand.

So, while many out there have called and forecast a recession, I just don’t think so. People might well be pulling their belts to meet increased mortgage payments but house delinquencies’ are not rising and the restaurants and cafes still seem as busy as before. I remain positive going forward.