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AI points stocks to new highs


Middle-aged professional looking at screen displaying AI chatbot

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

Rate cuts?

Probably not likely before mid-year as the Fed confirms inflation will stay stable at its target.

A new record

In early February, broad-based strength saw the benchmark S&P 500 Index break the 5,000 level for the first time in history.

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


In early February, broad-based strength saw the benchmark S&P 500 Index® break the 5,000 level for the first time in history as investors maintained their optimism for a soft landing, slowing inflation and easier monetary policy likely just months away.

Earnings, broadly speaking, were supportive. Five of the Magnificent Seven reported over the month, with all meeting or exceeding expectations. But it was chip-maker Nvidia’s earning results reported late in the month that shocked markets. The company gained $277 billion in market cap in one day—the largest market cap gain on record by a U.S. company—as revenues exceeded the company’s own already elevated expectations. Its guidance was equally encouraging with forecast revenues well above consensus expectations, fueled by demand for artificial intelligence (AI) processing power by the company’s largest clients, which include Microsoft Corp. and Meta Platforms, Inc. With the outbreak of demand for AI continuing to surprise many investors, some Wall Street strategists have struggled to keep pace, steadily raising their forecasts for the S&P’s 2024 return with barely two months gone by.

Meanwhile, economic data continued to support the consensus view of a soft landing. On the plus side, January’s employment report showed 353,000 new jobs were added—well above both expectations and the recent trend—and both the Philadelphia and New York manufacturing surveys were stronger than expected. However, retail sales disappointed, falling 0.8% in January—well below expectations closer to a 0.3% drop—and worries persist about the lagged effect of higher interest rates. Regional banks particularly vulnerable to the commercial property market were again in the headlines last month as higher rates weighed on the value of buildings across the world, while workers—particularly in the U.S.—have been slow to return to the office. Outside of the U.S., data released in February revealed that both the U.K. and Japan slipped into a recession, with the latter losing its status as the world’s third largest economy to Germany.

Nevertheless, both U.S. stock and bond markets remain justifiably attentive to the outlook for inflation, insofar as inflation will determine when the U.S. Federal Reserve (Fed) will begin its long-awaited monetary policy easing. In February, inflation data was mixed. The January Consumer Price Index (CPI) figures were higher than expected, with headline inflation up 0.3% from December while core inflation (excluding the more volatile food and energy components) rose 0.4% on the month and was up 3.9% relative to a year ago. But late in February, the Personal Consumption Expenditures (PCE) Index—the Fed’s preferred measure of inflation—showed inflation falling closer to the Fed’s target, but not as much as many investors would have liked. 

Outlook: February’s economic data supports our outlook for a soft landing, and an eventual easing of monetary policy. While we have been skeptical of the market’s optimism over the pace of interest rate cuts, it is slowly moving closer to our view that rate cuts are not likely before mid-year. Indeed, there is some risk that the economy—which continues to surprise investors with its resiliency—could regain some steam while we, and the Fed, wait for inflation to reach its target. Should this happen, rate cuts could be further delayed insofar as their primary purpose—to add fuel to economic growth—may not yet be needed.

That said, it is clear that some areas of the economy are feeling the lagged effects of higher interest rates, whether by consumers eager to buy a house or a new car, or in the commercial real estate market where regulators are closely watching the balance sheets of the most exposed banks.

While we believe the economy will remain resilient, and is more likely to surprise with its strength than its weakness, we maintain our view that 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 it 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. While much of the recent gains have been driven by the largest, mega-cap companies, we are encouraged by the breadth of February’s rally. We expect sustained economic growth (and, eventually, more accommodative monetary policy) would allow stronger earnings growth to spread into the broader market, favoring sectors such as the small- and mid-cap markets, companies with relatively lower credit quality and more value-oriented stocks.

We also maintain our positive outlook on bond markets, although the path is likely to be bumpy. 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 lower yields, justifying long-term exposure. However, we expect periods of optimism will be balanced by periods of skepticism (as we saw in February), 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, also remain attractive insofar as they provide both higher income and the potential for greater capital appreciation should credit spreads tighten as yields fall.

Drilling down

U.S. stocks continue to set new highs

The S&P 500 Index rose 5.17% in February, setting a new record high intra-month, from 4,845.65 at the January close to 5,096.27 at the end of February. The total return of the S&P 500 Index (including dividends) for the month was 5.34%.

The NASDAQ Composite Index® also set new highs in February, rising 6.12% from 15,164.01 at the end of January to 16,091.92 at the February close.


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


Retail sales reverse

After modest gains in November and December, retail sales fell 0.8% from December 2023 to January 2024, but were still 0.6% above January 2023 levels. The decline was led by home furnishing stores (down 7.5%) and building materials (down 6.4%), as still high home prices and mortgage rates weigh on home improvement spending. Nonstore retailers (primarily online sales) remained a bright spot, up 8.2% over the month. Year-on-year gains were led by nonstore retailers (up 6.4%) and food services establishments (up 6.3%), while home furnishing stores (down 9.8%) and building materials (down 8.3%) were the largest detractors from the index’s gains.

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.

All sectors rise in a broad-based rally

All of the S&P 500 Index’s sectors rose in February, led by consumer discretionary (+8.71%), industrials (+7.26%), and materials (+6.46%). Information technology and communication services were not far behind at +6.21% and +5.70%, respectively.

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

Chart depicting the February 2024, first quarter 2024 and year-to-date returns of 11 S&P 500 sectors.

Treasury yields rise

The yield on the benchmark 10-year U.S. Treasury continued to climb in February, from 3.95% at the end of January to close the month at 4.24%, as a resilient economy and mixed inflation data pushed back expectations for interest-rate cuts.

The Bloomberg U.S. Aggregate Bond Index fell 1.41% in February.


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

Oil prices rise

Oil prices recovered in February, largely due to tensions in the Middle East and reduced supply. A barrel of West Texas Intermediate, a grade of crude oil used as a benchmark in oil pricing, rose 3.18% over the month, from $75.85 at the end of January to $78.26 at the February close.

Gasoline prices at the pump also rose in February, with the average price per gallon rising from $3.18 at the end of January to $3.39 at February’s end.


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

International equities rise modestly

International equities rose in February, supported by attractive valuations, encouraging manufacturing data in Europe and expectations for easier monetary policy in the quarters ahead. The MSCI EAFE Index, which tracks developed-economy stocks in Europe, Australasia and the Far East, rose 1.68% for the month, from 2,248.20 at the end of January to 2,285.97 at the February close.


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

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

All information and representations herein are as of 03/07/2024, 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.

This article refers to specific securities which Thrivent Mutual Funds may own. A complete listing of the holdings for each of the Thrivent Mutual Funds is available on

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.

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