We’re on the home stretch, and 2023 has been a surprisingly good year for investors. Conservative assets have returned to form with a five per cent gain, while world shares have also been strong, returning almost 20 per cent, which is well above the long-term average. In contrast, the local sharemarket has been a notable laggard, with the NZX 50 flat with just two weeks to go. Looking ahead to 2024, there are some obvious positives, such as the prospect of further declines in inflation and potentially interest rate cuts. How might financial markets perform in the year ahead, are we out of the recessionary woods, and what should investors be thinking about for their portfolios?

Last week was another good one for investors, with shares and fixed income rising further. The S&P 500 in the US posted a 0.2% gain, finishing at its highest level since March 2022, while the local NZX 50 rose 1.1%. Not only was that the sixth consecutive weekly gain (the longest winning streak in more than a year), but it saw the index move back into marginal positive territory on a year-to-date basis. The coming week is a very busy one, as the end of the calendar year looms. Central banks will be in the spotlight, with monetary policy decisions due from the Federal Reserve in the US, as well as the Bank of England, European Central Bank and Swiss National Bank. Global growth will also be in focus, with December flash purchasing managers' indices out on Friday, as well as monthly economic indicators in China. September quarter gross domestic product figures out on here in New Zealand, while we should also get a housing market update from the Real Estate Institute.

November lived up to its name as a very good month for investors. World shares were up 9.3 per cent, the best return in three years. The S&P 500 in the US rallied 8.9 per cent and the local NZX 50 posted an impressive 5.3 per cent increase, the biggest monthly gains for both indices since July 2022. It wasn't just shares that had a great month, with conservative assets getting in on the action too. US bonds had their best month since 1985 (with a 4.5 per cent rise), while the NZX Investment Grade Corporate Bond Index posted a 2.7 per cent increase, the strongest since the index came into being in 2001. Why was November such a strong month, and what might determine whether this strength continues through to the end of the year?

November lived up to its name as a very good month for sharemarkets around the world, with the S&P 500 rallying 8.9% and the NZX 50 posting an impressive 5.3% increase. Those were the best monthly gains for both indices since July 2022. It wasn't just shares that had a great month in November, with US bonds posting the best monthly performance since May 1985 (+4.5%) and New Zealand corporate bonds enjoying their strongest monthly gain in at least 20 years. Let's talk about all of that, as well as last week's bombshell OCR forecast from the Reserve Bank, and the key events that we expect to shape the coming week across financial markets.

Shares have delivered impressive long-term returns. The US is the biggest market in the world, and its long history lends itself well to analysis. Between 1900 and today, US shares have returned 9.8 per cent per annum (including dividends). That means an investor has, on average, doubled their money every 7.4 years. Not bad at all. That’s a recipe for wealth generation, and an excellent way to ensure your capital grows more than inflation (which has been three per cent per annum over that entire period) and your purchasing power is maintained. However, what’s equally interesting is to consider the typical return in any given calendar year. I did that, and the results surprised me.

There's no shortage of things to watch this week, with Wednesday’s Reserve Bank meeting (which is the last of the year) likely to be the main event. Nobody is expecting any change in interest rates, but the updated projections in the accompanying Monetary Policy Statement will be very important. There will be plenty of corporate earnings releases to monitor across the New Zealand market too, including interim results from market heavyweights Fisher & Paykel Healthcare and Ryman Healthcare, both of which are on Wednesday. Markets will also be digesting the news of what our new government looks like, and which policies have survived negotiations.

US shares had another very strong week, with the S&P 500 rising 2.2%. The index is up 7.6% in November and on track for its best month in more than a year. The NZX 50 in New Zealand was more subdued, although it still added 0.3% for its third consecutive weekly gain. The local market has rallied 3.9% this month, on track for its best performance since January. Looking ahead, it will be a holiday-shortened week in the US, with markets closed for Thanksgiving on Thursday. There will also be an early close on Black Friday, the day after Thanksgiving and the unofficial start to the Christmas shopping season. The highlight of the global economic calendar will be the flash PMIs for November. Investors will be watching to see if manufacturing rebound continues, and whether the services sector weakens further. There's a bit happening on the corporate front too, with Oceania Healthcare, Goodman Property Trust and My Food Bag all set to announce earnings in New Zealand, while in the US artificial intelligence will be in focus when NVIDIA releases its latest result on Tuesday.

Many principles of investing are considered compulsory, and one of these is the need for diversification. It can mean spreading your capital over different asset classes, such as bonds and fixed income as well as shares and real estate, or ensuring you own a range of companies across multiple regions and sectors. Being diversified protects you from the risk of major losses, just in case something goes wrong with one of your individual investments or holdings. Let's talk about the basics of diversification, how much is too much, and why some investors might advocate for a more concentrated approach.