FY23 returns rebound

Markets Rebound in Financial Year 2023

After the rough ride of FY22, FY23 (ending last month) turned out to be a good one for investors as shares rebounded thanks to falling inflation and hopes that interest rates are near the top. Those with well diversified portfolios of shares and fixed income were in a good position to benefit from both assets’ advances, a welcome turn from last year’s broad declines. Balanced fund portfolios on average received returns in excess of 10% for the year.


Summary of market returns

After falling more than 10% in 2021-22, the Australian share market as measured by the S&P/ASX 300 Index (which tracks the share prices of the 300 biggest companies listed on the Australian Securities Exchange) regained almost all of its lost ground.


From 1 July 2022 to 30 June 2023 the S&P/ASX 300 Index rose by just under 9.4%.  It was an even stronger 12-month period for investors on the United States share markets. The S&P 500 Index, which tracks the top 500 companies there, fell more than 11% in 2021-22. But between 1 July 2022 and 30 June 2023 it completely erased that loss by rebounding around 17.7%.


Meanwhile, after recording a fall of more than 10% in financial year 2021-22, the Australian fixed interest (bond) market – measured by the Bloomberg AusBond Composite 0+ Year Index – ended the 2022-23 financial year with a positive return of more than 1.2%.


That sharp turnaround in nominal, non-inflation-adjusted, terms largely reflects the impact of rising interest rates, which fuelled strong investor inflows into Australian and international bonds.


Australian real estate investment trusts benefitted from better valuations and a stabilisation in bond yields, but global REITs remained under pressure.


Unlisted commercial property returns look to have been negative as the lagged negative impact of higher bond yields and reduced space demand for office and retail property weighed on capital values.


Australian residential property prices fell 5.3%, reflecting a sharp fall in the second half of 2022 as higher mortgage rates hit but saw some recovery in the last 4 months as immigration rebounded and supply fell.


Five financial years of returns






Some lessons from 2022-23

The big lesson of 2021-22 was that inflation was not dead, just resting, and can raise its head to cause mayhem when the circumstances are right. But there were two big lessons over the last year. The first was that just as easy money was a major contributor to inflation in 2021-22 the move to tight money looks to be working to bring inflation back under control again albeit there is a way to go yet. The second was yet another reminder of just how hard it is to time markets. Just when everyone was most gloomy about inflation and interest rates, share markets rebounded.


Things for investors to keep in mind

Of course, short term forecasting and market timing is fraught with difficulty and it’s best to stick to sound long term investment principles. Several things are always worth keeping in mind:

  • periodic and often sharp setbacks in growth assets like shares are normal
  • selling shares or switching to a more conservative superannuation strategy after falls just turns a paper loss into a real loss
  • when shares and other investments fall in value they are cheaper and offer higher long term return prospects
  • Australian shares still offer an attractive dividend yield versus bank deposits; shares and other assets invariably bottom when most investors are bearish; and
  • during periods of uncertainty, when negative news reaches fever pitch, it makes sense to turn down the noise around investment markets in order to stick to an appropriate long term investment


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If you have any questions/thoughts in relation to this article or have a need for some advice and would like to discuss your particular situation, please contact Gordon Thoms or David Conte at Calibre Private Wealth Advisers on ph. (03) 9824 2777 or email us here.


The information contained in this article is of a general nature only and may not take into account your particular objectives, financial situation or needs. Accordingly, the information should not be used, relied upon or treated as a substitute for personal financial advice. While all care has been taken in the preparation of this article, no warranty is given in respect of the information provided and accordingly, neither Calibre Private Wealth Advisers, its employees or agents shall be liable for any loss (howsoever arising) with respect to decisions or actions taken as a result of you acting upon such information.




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