At last, it seems some of the bad news for shares appears to be abating. It’s certainly been a rough year. Thanks to a combination of high inflation, hawkish central banks, a surging US dollar, war in Ukraine along with other geopolitical tensions and rising recession risks, bonds and shares have had poor returns. It’s been the rise in inflation that has been the key driver. From their highs late last year or early this year to their lows in October US and global shares fell around 25%. Australian shares held up better thanks to strong resource earnings & a less hawkish RBA but still fell 16% to their low in June and held just above this in October. Bonds which are normally a source of stability in the face of share market falls have had their biggest losses in decades as rising inflation pushed yields up. Tech stocks and crypto currencies, being amongst the biggest winners of easy money and the pandemic lockdowns, have been amongst the biggest losers from monetary tightening and reopening, with crypto land still in turmoil.

But, from their recent lows, global and Australian shares are up 10% or so. In fact, Australian shares are now only down about 4% year to date. Shares may have run a bit ahead of things in the near term as they often do, but the big question is whether the rebound is sustainable?

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