The share market has been rising since October, after a weak period. The All Ordinaries Total Return Index gained 5.2 per cent in November. That’s good news for superannuation and retirement pension accounts as well as share funds. It’s been a wobbly year but is finishing strongly.

The financial year to June produced strong returns after a mid-year market rise. Back then investors thought inflation and therefore interest rates, had peaked. They hadn’t. Inflation remained high, requiring interest rates to rise further. The share market fell back.

Now there is more evidence our interest rate pain won’t get worse. The US Federal Reserve has said its next rate move is likely to be down. The Bank of England is worrying about a recession and won’t be raising further. European interest rates have very likely peaked.

Inflation in Australia is also coming down. Hopefully we will get the final confirmation that our interest rates have peaked with the December Quarter CPI reading in late January.

Investors have been more confident since October. Businesses have too. When interest rates are unlikely to go higher they can plan better.

Knowing the risk-free rate and the cost of borrowing allows decisions to proceed on important projects. Businesses can think innovation and expansion, with interest rates likely to fall in late 2024. When businesses do well investors do too.

The All Ordinaries Index began the year at 7222 points. At the time of writing it was at 7716, a gain of 6.8 per cent with dividends paid averaging around 4 per cent in addition. The best returns have come from large companies, with mid-caps and smaller companies lagging.

International shares have done even better. Over the year to the end of November they earned around 14 per cent average. They have continued to rise in December. Among major economies Japanese shares have done best earning nearly 20 per cent, while US and German shares returned around 12 per cent.

Commercial property has done poorly, earning about one per cent. Rental income has been good but valuations fell. Infrastructure investments lost money. With interest rates peaking and rents rising a recovery is on the cards.

Surprisingly, fixed interest investments such as government bonds made very little, with values declining as interest rates rose. Over the last year cash, as measured by the Bank Bill Index, earned 3.8 per cent. Australian inflation over the same period was 5 per cent, for a negative real return.

Diversified portfolios earned 4.4 per cent for the year to November, with further gains since. Happy Christmas.