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Goldilocks? Is that you?


New York Stock Exchange with holiday decorations in foreground

Key points

Economic impact

Interest rates are unlikely to rise much further or fall quickly.


Investors may want to consider rotating from cash to Treasuries and/or corporate bonds.

Chief Investment Strategist
Steve Lowe, CFA,Chief Investment Strategist

Thrivent Asset Management Contributors to this report: John Groton, Jr., CFA, Director of Administration and Materials & Energy Research; Matthew Finn, CFA, Head of Equity Mutual Funds; and Jeff Branstad, CFA, Model Portfolio Manager

Key points

U.S. stocks surged

The S&P 500 and NASDAQ turn around their losses from the previous three months

Interest rates and the new year

Rising rates likely end this month but their lagged effect could impact 2024’s economy

U.S. Treasury yields slip

Slowing inflation data and potential soft landing for U.S. economy contribute to falling U.S. Treasury yields

Bonds could be compelling for the long term

Short-term securities issued by either the U.S. Treasury or high-quality companies offer attractive yields

Chart summarizing the performance of select market indexes, 10-year T bonds, and oil.


Goldilocks may have made an appearance at Thanksgiving, finding growth not too slow nor inflation too hot, because U.S. stocks had a stellar rebound from a miserable October. Solid earnings, slowing inflation, and falling Treasury yields seem to have created a just-right mélange to whet investor appetites.

The S&P 500 Index ended the month just shy of a new year-to-date high (ultimately reached in early December), reversing not just October’s, but September’s and most of August’s losses as well. Technology stocks led the market, with the S&P 500 Information Technology sector up 12.9% over the month, followed by Real Estate (up 12.5%) and Financials (up 10.9%). What do all of these sectors have in common? Their sensitivity to interest rates.

With economic growth slowing (but not too much), and inflation decelerating, markets were quick to reassess the outlook for both U.S. Federal Reserve (Fed) policy rates and the current yield of Treasury bonds, where benchmark 10-year yields fell more than 0.5%. The prospect of lower borrowing costs boosts not just growth companies prevalent in the technology sector, but both residential and commercial real estate markets while giving banks something of a breather against the concerns that plagued regional banks earlier this year.

To be clear, economic data released in November supported such a reassement. The jobs market has softened, inflation-adjusted personal spending rose just 0.2% in October1 (though a record $9.8 billion was spent online during Black Friday), the Consumer Price Index (CPI) did not rise in October, and Core CPI (stripping out the more volatile food and energy components) rose just 0.2%.

The Fed, unsurprisingly, unanimously voted to keep interest rates on hold in November. Fed Chairman Powell went a step further when he suggested sustained economic growth may not necessary pass through to higher prices as it had previously. In support of this view, he credited easing bottlenecks in the supply chain, a rise in labor supply, and overall productivity.

“Goldilocks and the Three Bears” may be a fairy tale, and thus a healthy portion of skepticism is appropriate, but November’s economic data and the market’s response suggest Goldilocks would have felt right at home last month, with no grumpy bears in sight.

Outlook: The long period of rising U.S. policy rates will likely end with 2023. But the toll that higher rates extract from economic growth has a lagged effect, and we believe the impact will become steadily more apparent as we head into 2024.

Should the economy slow more abruptly than the market currently expects, the Fed could relent and begin to talk about lowering interest rates. While the recent inflation data, if sustained, might support such an outcome, we believe the Fed will be reluctant to embrace lower rates without compelling evidence inflation will reach its target. We believe the Fed, which has the difficult task of balancing the so-called “dual mandate” of simultaneously targeting lower inflation and higher employment, currently favors the former and will do so until they are confident inflation has stabilized at appropriate levels.

In this environment, and despite November’s strength, we continue to think bonds broadly can be compelling long-term investments. Short-term securities issued by either the U.S. Treasury or high-quality companies offer attractive yields given our expectation that the Fed is likely to keep short-term interest rates high into next year. While longer-dated Treasury bonds have been volatile recently, they offer the opportunity to lock in today’s yields for the length of the bond. If we are right that Treasury yields have likely peaked, then the total return realized in longer-dated bonds could be impressive as the capital appreciation gained from any decline in rates is added to the already attractive yield earned just by holding them.

High-quality corporate bonds also offer attractive yields, in our view, insofar as the underlying Treasury yield remains high and the spread offered over that yield remains attractive. While this is most apparent in the high-yield (below investment grade) market, we are not convinced their current yields adequately compensate for the risks that could emerge in a slowing economy. Investment-grade corporate bonds, however, are more likely to weather any economic storms.

While the recent strength in both stocks and bonds could well continue, we expect periods of optimism will be balanced by periods of skepticism, keeping volatility relatively high during the transition to a lower growth, lower inflation, environment. While the short-term effects of volatility can be alternatingly elating and painful, these same periods can also offer opportunities for actively managed portfolios and investors who have heeded our words of caution and retained some flexibility to add risk when valuations become attractive.

Drilling down

U.S. stocks surged

The S&P 500 Index rose 8.92% in October, from 4,193.80 at the October close to 4,567.80 at the end of November. The total return of the S&P 500 Index (including dividends) for the month was 9.13% and 20.80% year to date. (The S&P 500 is a market-cap-weighted index that represents the average performance of a group of 500 U.S. large capitalization stocks.)

The NASDAQ Index also rose in November (up 10.70%) from 12,851.24 at the end of October to 14,226.22 at the Nobember close, bringing its year-to-date gains to 35.92%. (The NASDAQ – National Association of Securities Dealers Automated Quotations – is an electronic stock exchange with more than 3,300 company listings.)

Chart depicting the value of the S&P 500 Index from December 2022 to November 2023.


Retail sales fall

Retail sales fell -0.1% from the previous month in October, but remained positive (up 2.5%) relative to October last year, according to the Department of Commerce retail report issued November 15. Lower sales were led by furniture and home furnishing sales (-2.0%) over the month, followed by miscellaneous store sales (-1.7%).

On a year-on-year basis, health and personal care sales led, rising 9.7% from October of last year, followed by food services & drinking places (+8.6%) and non-store sales (+7.6%), which are primarily online retailers.  

While sales at gasoline stations were down modestly (at -0.3%), year-on-year sales plummted, down 7.5% from last October, as gas prices fell.

Job growth persists

The U.S. economy added 199,000 new jobs in November, according to the Department of Labor’s December 8 report. While this figure was higher than the October gain (when the economy added 150,000 new jobs), it remained below the average monthly gain of 240,000 over the last 12 months.

Once again, job growth was led by the healthcare sector, adding 77,000 of the 199,000 new jobs—a sharp rise from the average gain of 54,000 new monthly jobs over the last 12 months. Given the healthcare worker shortage which emerged out of COVID-19, and the steadily aging population of the U.S., healthcare may remain a key source of job growth for some time.

The unemployment rate fell from 3.9% in October to 3.7% in November, near the high end of the range for the past few years. Average hourly earnings growth, which can help fuel inflation, was broadly inline with expectations at up 0.4% over the month, and up 4% from a year ago.


Bonds: Time to shift out of park

It is the welcome return of yield. We believe yields on most bond asset classes are now high enough to be attractive on an absolute basis. It is time for investors to reconsider their bond allocations.


The U.S. housing market

Do high mortgage rates mean trouble is brewing, or will high demand continue to drive prices? Bottom line, we do not foresee a significant correction in home prices, but we do think investors would be well served to understand market conditions.

All sectors but Energy rise

November’s rally was broad based, with every sector but Energy generating a positive return for the month. Four sectors produced double-digit returns, let by Information Technology (+12.9%), followed by Real Estate (+12.46%), Financials (+10.92%) and Consumer Discretionary (+10.91%). Strength across the market was sufficiently broad-based that even the lone detracting sector, Energy, was only down 1.00%.

The chart below shows the past month and year-to-date performance results of the 11 sectors:

Chart depicting the November 2023 and year-to-date returns of 11 S&P 500 sectors.

Treasury yields tumble

The yield on the benchmark 10-year U.S. Treasury bond fell from 4.90% at the end of October to close the month at 4.36%. The collapse in yields was largely a result of slowing inflation data, but supported by optimism that the U.S. economy could achieve a soft landing, allowing a transition from high to low interest rates with lower volatility.

The Bloomberg U.S. Aggregate Bond Index was up 4.53% in November, the largest monthly gain in nearly four decades. (The Bloomberg U.S. Aggregate Bond Index is an unmanaged index considered representative of the U.S. investment-grade, fixed-rate bond market).

Chart depicting U.S. Treasury 10-year bond yields from December 2022 to November 2023.

Oil prices slide

Oil prices fell again in November, as global economic data remained weak, investors were less concerned about spreading conflict in the Middle East, and reports of capitulation by investors expecting higher prices. A barrel of West Texas Intermediate, a grade of crude oil used as a benchmark in oil pricing, fell 6.25% over the month, from $81.02 at the end of October to $75.96 at the November close.

Gasoline prices at the pump also retreated again in November, with the average price per gallon falling from $3.60 at the end of October to $3.36 at November’s end.

Chart depicting the price per barrel of West Texas Intermediate crude oil from December 2021 to November 2023.

International equities rebound

International equities surged in November as weaker euro-area inflation and soft economic data bolstered the outlook for stable, and possibly lower, interest rates from the region’s central banks. The MSCI EAFE Index rose 9.09% for the month, from 1,947.91 at the end of October to 2,142.91 at the November close. The index, which tracks developed-economy stocks in Europe, Asia, and Australia, increased its year-to-date gains to 9.31% as of November 30.


Chart depicting the value of the MSCI EAFE Index from December 2022 to November 2023

Media contact: Callie Briese, 612-844-7340;

1 Bureau of Economic Analysis

All information and representations herein are as of 12/08/2023, unless otherwise noted.

The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Thrivent Asset Management, LLC associates. Actual investment decisions made by Thrivent Asset Management, LLC will not necessarily reflect the views expressed. This information should not be considered investment advice or a recommendation of any particular security, strategy or product. Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon, and risk tolerance.

Any indexes shown are unmanaged and do not reflect the typical costs of investing. Investors cannot invest directly in an index.

Past performance is not necessarily indicative of future results.