Last week was another strong one for US shares, with the S&P 500 rising 1.8% to its highest level since August 2022. Investors celebrated a resolution to the debt ceiling debate, as well as evidence of slowing inflation and an easing labour market. The S&P 500 has rallied 11.5% in 2023, or 17.0% in New Zealand dollar terms! Looking ahead, it will be a holiday-shortened week here in Aotearoa, with markets closed for the King’s Birthday public holiday on Monday. There’s more happening in Australia, with the Reserve Bank of Australia’s interest rate decision on Tuesday afternoon set to take centre stage.

The Reserve Bank of New Zealand (RBNZ) and the Federal Reserve in the US both increased interest rates again last month. You can never be sure, but that could’ve been the final increase from both central banks. RBNZ projections imply as much, and while it’s unclear whether the Fed will move again, many economists believe it too has done enough. What does this mean for investors, and will it prove to be a turning point for financial markets?

It will be a holiday-shortened week in the US and the UK, with both markets closed on Monday. However, there's still plenty for investors to keep an eye on! The US debt ceiling debate will remain front of mind, after news over the weekend of a tentative agreement that could support investor sentiment. On the economic front, we will be watching the ISM manufacturing index and jobs report in the US, and the latest inflation figures in Europe. It'll be a quieter few days here in New Zealand, although markets will continue to assess what last week's Reserve Bank means for interest rates and financial markets.

World sharemarkets have been remarkably calm in recent weeks, despite plenty of uncertainty around. Inflation is still stubbornly high, nor is it completely clear how much further interest rates will rise. We’ve also got the small matter of the US debt ceiling to resolve. Former Federal Reserve Chair and current Treasury Secretary, Janet Yellen, has said the country might be unable to pay all of its bills by June. The US is the world’s largest economy and its more important borrower, so that’s kind of a big deal. With that in mind, you’d think markets would been on edge, but that’s not the case. The S&P 500 in the US has rallied almost ten per cent this year, while volatility is at the lowest levels since July 2021, almost two years ago. Are we being too complacent?

After all the excitement of Budget 2023, this week we’ll see how the Reserve Bank of New Zealand feels about a little more stimulus than many had expected. The Official Cash Rate is almost certain to increase on Wednesday, although it will be interesting to see how much further the Bank sees it going after that. It’s also a busy week on the corporate front, with several earnings releases to keep an eye on including announcements from market heavyweights Mainfreight and Fisher & Paykel Healthcare.