Global shares

Global share markets made good gains in the December quarter, with the MSCI ACWI Index ‒ Net returning 5.4% in unhedged New Zealand dollar (NZD) terms. Much of the gains were driven by expectations the world’s major central banks will cut interest rates sooner and faster than anticipated. In the US, easing inflation saw the Federal Reserve (Fed) maintain its benchmark fed funds rate at a target range of between 5.25% and 5.50% throughout the period; though the Bank shifted to a slightly more dovish stance on monetary policy in December, saying it now expects to lower interest rates by 0.75% in 2024. That’s more than the 0.50% it forecast in September. Put another way, the Fed said it now expects to cut interest rates three times instead of twice, assuming 0.25% increments. However, Fed chair Jerome Powell did warn that the Bank will continue to proceed carefully in terms of its monetary policy as inflation is still too high. Investors, though, were unfazed by his comments. In fact, the market immediately moved to price in a far more aggressive rate-cut path, betting that the Fed will lower interest rates six times, or 1.50%, over the next 12 months; the first of which is expected as early as March. We saw a similar theme in Europe and the UK where, despite officials’ attempts to downplay rate cut expectations, the market bet the European Central Bank (ECB) and the Bank of England (BoE) will both cut interest rates six times in 2024. The ECB is expected to move first in either March or April, with the BoE seen following in May. Rate cut expectations also contributed to a sharp decline in government bond yields, providing further support for stocks.

At the country level, the benchmark US S&P 500 Index (11.2%), the tech-heavy NASDAQ Composite (13.6%) and the Dow Jones Industrial Average (12.5%) all posted very strong gains for the quarter. Stocks were also higher in Europe (8.3%1), Japan (1.9%2 ) and the UK (1.6%3 ) but fell in China (-7.0%4 ).

Q4 2023 Global Equities

New Zealand shares

The New Zealand share market also performed well in the fourth quarter, returning 4.3%5 . Like their global counterparts, the local market’s gains were driven by expectations that easing inflation will see the world’s major central banks cut interest rates more aggressively in 2024 and a subsequent decline in government bond yields. Limiting the advance was weakness across the broader commodities complex and softer-than-expected third quarter growth, with the economy contracting 0.3% in the three months to 30 September. This was down on the revised 0.5% growth we saw in the second quarter and less than the 0.2% expansion the market had anticipated. On an annual basis, the economy shrank 0.6%, which was well down on the revised 1.5% growth we saw in the previous quarter. In terms of inflation, headline prices eased from 6.0% to 5.6% in the third quarter. Whilst the outcome marked the lowest figure since the third quarter of 2021, inflation remains well above the Reserve Bank of New Zealand (RBNZ)’s 1-3% target range. Meanwhile, the RBNZ maintained the official cash rate at 5.50% throughout the period; though the Bank surprised the market following its latest (November) gathering with a more hawkish view of recent economic developments. Underpinning this shift were two factors; namely higher-than-expected migration rates and inflation that remains too high for the Bank’s liking. At the sector level, real estate and communication services recorded the biggest gains, while consumer discretionary and energy were both weaker.


Australian shares

Australian shares made strong gains over the period, returning 8.4%6 . In addition to global rate cut expectations, the Australian market benefited from speculation domestic interest rates have peaked. The Reserve Bank of Australia (RBA) raised interest rates a further 0.25% (to 4.35%) in November, though the decision had no material impact on stocks; not only because investors had already priced in the move but also because the Bank’s post-meeting statement struck a slightly less hawkish tone. Compounding this was the release of the latest monthly consumer price index data toward the end of November, which revealed an unexpected drop in inflation. Whilst the RBA left interest rates unchanged in December, the Bank warned that rates may need to increase if domestically-driven inflationary pressures remain strong. However, investors dismissed the warning, with market pricing at the end of 2023 implying two interest rate cuts over the next 12 months. Expectations that global central banks will cut rates sooner (and faster), together with speculation the RBA’s next move will be down, also drove bond yields sharply lower.

Global listed property

Global listed property performed very well in the fourth quarter, returning 12.97% in hedged NZD terms. Much of the gains were driven by a sharp decline in government bond yields, which fell amid expectations of more aggressive interest rate cuts globally. At the regional level, Continental Europe and the UK posted the biggest gains, followed by North America and Australia. Asia ex Japan recorded more modest returns, while Japan was relatively flat. In terms of sectors, US mall, storage and office names were amongst the best performers, while Japanese developers underperformed.

Global listed infrastructure

The global listed infrastructure was stronger over the period, returning 8.08% in hedged NZD terms. Listed infrastructure was another sector to benefit from falling bond yields. North America, Continental Europe and the UK posted the biggest gains. Australia and emerging markets also performed well, while Asia ex Japan and Japan both struggled. At the sector level, water utilities, electric utilities and airports were amongst the best performers. In contrast, gas utilities significantly underperformed the broader market.

Global fixed income

Global bonds were positive for the quarter, returning 5.79% in hedged NZD terms. Longer-term government bond yields fell (prices rose) over the period, driven mainly by global rate cut expectations. Bonds also benefited from their traditionally defensive characteristics in the face of fresh tensions in the Middle East. Credit markets were also stronger, with spreads on US and European investment-grade and high-yield debt all narrowing amid the ‘risk on’ tone that permeated financial markets throughout much of the quarter. Emerging markets debt also performed well.


New Zealand fixed income

The New Zealand bond market also performed well over the period, returning 6.010% . Similar to their global peers, domestic long-term government bond yields fell amid expectations global central banks will cut interest rates more aggressively in 2024 and the asset class’s traditionally defensive qualities in the face of heightened geopolitical uncertainty. The yield on New Zealand 10-year government debt closed the quarter 56 basis points lower at 4.3210%. Local credit markets were weaker, with spreads slightly wider over the period.


New Zealand dollar

The New Zealand Trade-Weighted Index11 gained 2.6% over the quarter, driven largely by general US dollar (USD) weakness; the greenback falling amid increasing speculation the Fed will start cutting rates sooner (and faster) than expected. The currency also benefited from surprisingly hawkish RBNZ comments; though local interest rates are widely seen as having more or less peaked at 5.50%. The NZD rose 6.3% against the USD, 1.8% against the British pound, 1.4% against the euro and 0.7% against the Japanese yen. It fell 0.1% against the Australian dollar.

Q4 2023 Index table

^ Russell Global Large Cap Index until 30 September 2018, MSCI ACWI Index ‒ Net thereafter

Note: all returns are in local currencies unless otherwise stated.


The information contained in this publication was prepared by Russell Investment Group Limited. It has been compiled from sources considered to be reliable, but is not guaranteed. This publication provides general information only and should not be relied upon in making an investment decision. Before making an investment decision, you need to consider whether this information is appropriate to your objectives, financial situation and needs. All investments are subject to risks. Past performance is not a reliable indicator of future performance.

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1 Dow Jones EuroStoxx 50 Price Index
2Tokyo Stock Exchange Tokyo Price Index (TOPIX)
3 FTSE 100 Index
4Shanghai Shenzhen CSI 300 Index
5S&P/NZX 50 Index with imputation credits
6S&P/ASX 300 Accumulation Index
7 FTSE EPRA/NAREIT Developed Real Estate Index Net NZD Hedged
8S&P Global Infrastructure Index (NZD hedged)
9Bloomberg Global Aggregate Index – $NZ Hedged
10Bloomberg NZ Bond Composite 0+ Yr Index
11 The trade-weighted index for the NZD is an indicator of movements in the average value of the NZD against the currencies of our major trading partners.