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On the road to recovery


Close-up of a senior couple hiking in the woods, looking positive

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

Soft landing achieved

January’s data highlights that an economic soft landing was achieved.

Interest rates unchanged

We believe the U.S. Federal Reserve will continue to be conservative on raising rates in 2024.

Anticipated sustained economic growth

We expect sustained economic growth will allow stronger earnings growth to spread across the broader market.

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


On January 30, the International Monetary Fund (IMF) raised its outlook for 2024 global growth from 2.9% to 3.1%. At its press conference, IMF Chief Economist Pierre-Olivier Gourinchas explained their rationale: “The global economy continues to display remarkable resilience, and we are now in the final descent toward a soft landing with inflation declining steadily.” That sentiment defined much of January’s U.S. market performance and the data, broadly, backed it up.

U.S. Gross Domestic Product (GDP) rose 3.3% in the fourth quarter of 2023, according to the Commerce Department’s January 25 report. The figure shocked markets—consensus expectations were for growth near 1.5%, less than half the reported rate—and the growth was encouragingly broad based. Consumer spending was up 2.8%, business investment accelerated and government spending rose. Even improvement in housing conditions (pending home sales surged 8.3% in December), contributed to the economy’s unexpected strength.

Meanwhile, the Personal Consumption Expenditures Price Index (PCE), the U.S. Federal Reserve’s (Fed) preferred measure of inflation, fell below 3% for the first time since early 2021, when inflation was just starting its rapid acceleration. Core PCE (which excludes the more volatile food and energy components) rose just 2.9% in December 2023 from December 2022, down 0.3% from the 3.2% year-on-year rise reported in November. The month-on-month changes were even more encouraging. With the December data, the Core PCE’s annualized monthly rate of inflation over both the last three and six months is now below the Fed’s 2% long-term average target.

While confidence has been growing since early November that the Fed may have achieved a soft landing, January’s data largely puts the debate to bed. The S&P 500® Index initially surged in January, hitting new record highs and exceeding the consensus forecasts for the Index’s total 2024 annual return by January 24. However, a late month correction retraced some of its gains, only to see the Index set new highs again in early February.  

The Fed, unsurprisingly, neither raised nor lowered its policy rate at its January meeting, the fourth straight meeting with no changes. While the month began with investors giving a roughly 50% chance of the Fed cutting interest rates at its March meeting, those hopes faded over January. In an interview in early February, Fed Chairman Jerome Powell made it clear the Fed is optimistic inflation would continue to decline but was also cautious: “We want to see more evidence.” 

Outlook: Recent inflation data, in our view, confirms the Fed’s interest-rate hiking cycle has ended. The question now is how soon—and by how much—the committee will feel comfortable lowering interest rates in the face of robust U.S. (and global) economic strength.

In our 2024 outlook we argued the four to five rate cuts then priced into the market were optimistic. We maintain that view despite better-than-expected inflation data because we believe the Fed is determined to be conservative. The Fed created justifiable concerns about its credibility as stewards of moderate growth and low inflation when it was slow to raise rates in the face of rapidly rising inflation. We don’t think the Fed can afford to make the same mistake twice and will thus favor lower inflation over more accommodative monetary policy until it is confident inflation is not just correcting lower, but is at a stable, fundamentally-based equilibrium closer to its target.

We remain optimistic on U.S. equities, despite recent strength. Once again, much of the recent gains have been dominated by the largest, mega-cap companies. We expect sustained economic growth (and, eventually, more accommodative monetary policy) will allow stronger earnings growth to spread across the broader market, favoring sectors such as the small- and mid-cap markets, companies with relatively lower credit quality and the more value-oriented stocks which have lagged the overall market.

We also maintain our positive outlook on bond markets. We believe U.S. Treasury yields are near their peak for this economic cycle, and believe both long- and short-dated Treasuries will end 2024 at significantly lower yields, justifying long-term exposure. However, we expect periods of optimism will be balanced by periods of skepticism, keeping volatility relatively high during the transition from a restrictive to a more accommodative monetary policy.

Corporate bonds, which offer a yield spread over similar maturity Treasuries, provide both higher income and the potential for greater capital appreciation should credit spreads tighten as yields fall. While current valuations may already be pricing in a more optimistic outlook, some of this richness could be explained by the simple fact these bonds offer compelling yields. After a decade of paltry bond yields, investors can be forgiven for happily earning around 5% a year on investment-grade corporates, regardless of their potential for capital appreciation if spreads tighten.

Markets are currently optimistic on improving growth and the prospects for interest-rate cuts in 2024. While we agree that 2024 is likely to deliver positive total returns in both stocks and bonds broadly, we remain mindful that volatility can spike or remain elevated for extended periods as economic or geopolitical uncertainty rises. 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 more attractive.

Drilling down

U.S. stocks set new highs

The S&P 500 Index rose 1.59% in January, setting a new record high intra-month, from 4,769.83 at the December close to 4,845.65 at the end of January. The total return of the S&P 500 Index (including dividends) for the month was 1.68%.

The NASDAQ Composite Index also performed well in January (up 1.02%) from 15,011.35 at the end of December to 15,164.01 at the January close.


Chart depicting the value of the S&P 500 Index from February 2023 to February 2024


Retail sales rise

Retail sales rose 0.6% in December and 5.6% relative to December 2022, according to the Department of Commerce retail sales report issued January 17. Higher sales were led by nonstore (primarily online) retailers and clothing and clothing accessories stores, which were both up 1.5% over the month. On a year-on-year basis, food services and drinking establishments led, up 11.1%, followed by heath and personal care stores (up 10.7%) and motor vehicle and parts dealers (up 10.3%).

Job growth surges

The U.S. economy added 353,00 new jobs in January, according to the Department of Labor’s February 2 report, marking the second consecutive month new jobs added were above 300,000 (December’s estimate was revised up to 330,000) and both months were well above the average 255,000 monthly gain in 2023.

The unemployment rate remained unchanged at 3.7% for the third straight month, while the labor participation rate was unchanged at 62.5% and the number of people employed part time was essentially unchanged. However, average hourly earnings, which can help fuel inflation, rose 0.6% from December 2023, and 4.5% from January 2023.


2024 Outlook: Fixed income

Learn what may be ahead in 2024 for fixed income as the Treasury curve normalizes, fixed income returns as a hedge to market risk and the Fed takes a “dovish” turn.


2024 Market Outlook

Take a look at the 2024 economy and what may be ahead with perspectives from Thrivent Asset Management.

More sectors fell than rose

Most S&P 500 Index sectors fell in January, led by real estate (-4.74%) and materials (-3.91%). However, technology (information technology was up 3.95%) and technology-related sectors such as communication services (up 5.02%) led the overall market higher.

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

Chart depicting the January 2024 and year-to-date returns of 11 S&P 500 sectors.

Treasury yields decline

The yield on the benchmark 10-year U.S. Treasury declined from 4.57% at the end of December to close the month at 3.95%. Yields initially rose on better-than-expected economic data, but fell back late in the period as inflation data was more supportive for expectations of lower interest rates.

The Bloomberg U.S. Aggregate Bond Index fell 0.27% in January.


Chart depicting U.S. Treasury 10-year bond yields from February 2023 to February 2024

Oil prices rise

Oil prices recovered in January, largely due to the improving global economic outlook. A barrel of West Texas Intermediate, a grade of crude oil used as a benchmark in oil pricing, rose 5.86% over the month, from $71.65 at the end of December to $75.85 at the January close.

Gasoline prices at the pump nevertheless retreated in January, with the average price per gallon falling from $3.24 at the end of December to $3.18 at January’s end.


Chart depicting the price per barrel of West Texas Intermediate crude oil from February 2022 to January 2024

International equities rise modestly

International equities rose in January on the back of expectations for improving economic growth and easier monetary policy. The MSCI EAFE Index, which tracks developed-economy stocks in Europe, Australasia, and the Far East, rose 0.54% for the month, from 2,236.16 at the end of December to 2,248.20 at the January close.


Chart depicting the value of the MSCI EAFE Index from February 2023 to February 2024

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

All information and representations herein are as of 02/07/2024, 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.

The S&P 500® Index is a market-cap weighted index that represents the average performance of a group of 500 large-capitalization stocks.

NASDAQ – National Association of Securities Dealers Automated Quotations – is an electronic stock exchange with more than 3,300 company listings.

The Bloomberg U.S. Aggregate Bond Index is an unmanaged index considered representative of the U.S. investment-grade, fixed-rate bond market.

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.