Investors have been heartened by reports of softer economic conditions, an easing labour market and slowing wage growth in both New Zealand and the US. These are necessary developments for inflation to moderate and interest rates to stop rising. However, the outlook is finely balanced. When unemployment starts rising it tends to keep rising, and even modest increases have historically meant a downturn becomes hard to avoid. We want conditions to weaken, but not too much. So far, so good, but this can be a very difficult needle to thread.

Global sharemarkets have had a difficult few months, with the S&P 500 in the US and the NZX 50 here in New Zealand falling more than ten per cent between the end of July and late October. That’s been unsettling for investors, and there are still plenty of uncertainties ahead of us. However, a case can also be made for a stronger finish to 2023. Here are five reasons why markets could rebound over the balance of the year.

After a solid first half of the year, it’s been a difficult few months for the local sharemarket. The NZX 50 has fallen more than ten per cent since the end of July, to just above the post-COVID lows from the middle of last year. This weakness has seen it slip about six per cent into the red on a year-to date basis, putting it on track for a third consecutive annual decline. In data going back to the mid-1960s, New Zealand shares have never declined for three years in a row, making this a somewhat unwanted milestone. What’s driving this weakness, and what would it take to turn things around?

Global sharemarkets remain under pressure, with the S&P 500 in the US and the NZX 50 in New Zealand both down more than 10% since July. Rising global yields have been a key culprits, and although we saw a decline last week these remain close to the highest in many years. This week will be another very busy one, with central bank meetings taking palce in the UK, UK and Japan, as well as key economic releases such as the US jobs report and Chinese PMIs. Locally, the latest unemployment figures will be of interest, as will the final election results with the outcome of special votes to be announced on Friday. The reporting season will continue across the world, with McDonalds, Caterpillar, Ecolab, CVS Health, Apple, Starbucks and Zoetis likely to be some of the highlights.

One of our least favourite sharemarket analogies is when it’s said to be just like a casino. While some traders might treat their portfolio like a sports betting account, for genuine investors this comparison couldn’t be further from the truth. You might get lucky a few times at the casino, but the more you play the greater your chances of losing. In contrast, when it comes to investing in the sharemarket, the longer you stay the better your odds of success.

Whether to fix or float, and for how long is a common question for borrowers to ask. With interest rates at 15-year highs and household budgets considerably tighter than in the past, there’s more riding on these decisions today. Those who opt for a lengthier fixed term will save some money in the immediate future, but they might find themselves stuck on higher rates if the winds change. In that case, it might be preferable to select a shorter-term rate and keep your options open. As with most money matters, the best course of action will depend on your individual situation. However, here’s our take on the issues to consider at this juncture.

There's plenty to monitor in the week ahead, with Federal Reserve officials in focus as six of the seven Board members speak publicly before the blackout period begins ahead of the next meeting. The most important appearance will be that of Chair Jerome Powell, which takes place on Thursday at the Economic Club of New York. China will be in the spotlight on Wednesday, with the release of monthly economic indicators as well as gross domestic product for the September quarter. There will also be plenty to monitor on the corporate calendar, with the international reporting season set to heat up with results from the likes of Goldman Sachs, Johnson & Johnson, Netflix, Procter & Gamble and Tesla. Here at home, markets will have the election results from the weekend to ponder, as well as the latest inflation figures and the results of another dairy auction. Auckland Airport and Tourism Holdings are holding annual meetings this week, while all eyes will be on Fletcher Building when it resumes trading on Monday morning when the market opens.

A change of government was confirmed last night, with Christopher Luxon from the National Party set to be our new Prime Minister. Preliminary figures reflect a much stronger showing than expected from National, which ended with a very healthy 39 per cent of the party vote. However, those hoping for a relatively straightforward two-party coalition between National and Act shouldn’t get their hopes up. With more than half a million special votes still to be counted, there's a good chance NZ First will still be required to form a government. What happens next, when might we know the final outcome, and what does this mean for investors and financial markets?