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Market outlook: Delivering value in a changing economic environment

Illustration of man looking through binoculars.

Markets closed out 2023 on solid footing and then quickly reached new record highs in January of 2024. While last year brought some unexpected bumps (the bank failures in March, for example) and market volatility, the economy remained resilient while the Fed worked to wrangle inflation.

Early on, our asset management team looked beyond the consensus predictions that suggested a recession was imminent or unavoidable. We took a bit of a contrarian view that a recession could very well be avoided, but even if the U.S. were to experience a recession, it would most likely be mild. When we looked at the underlying data points of the economy, we saw resilience in areas like savings rates, real wages, consumer spending and employment.

It's different this time

But we also recognized the fact that the economic environment has been different this time. We have never gone through a pandemic in modern times, when the government quickly added significant amounts of money and quantitative easing into the economy.

Also, recessions are uncommon—we’ve only had four in the last 40 years, so having another one follow quickly on the heels of the pandemic-induced recession of 2020 also would be unusual compared to other economic cycles.

This brings me to my point: Something was going to be different this time. Either the U.S. would have the highly unprecedented event of two recessions within a three-year timeframe, or the economy would defy the long-held probability models, and we would avoid a recession. Most signs currently point to an averted recession and a trajectory of continued economic growth.

2024 outlook

Our outlook is relatively bullish for 2024, particularly in the first half of the year. Interest rates will continue to be a headline. After rapidly raising interest rates over the past two years, the Federal Reserve has now moved into a “watch and wait” posture, while signaling the rate cuts likely will be appropriate at some point in 2024 as post-pandemic inflation moderates.

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It’s clear the Fed only will begin lowering rates when they are confident inflation will not spike again. While markets once expected the Fed to lower rates as early as March, it’s likely those cuts will not happen until this summer.

We remain optimistic on U.S. equities. In 2023, gains in the markets were driven by a handful of massive technology companies. In 2024, we expect ongoing economic growth will drive broader market gains, particularly in small- and mid-cap stocks, cyclicals and other value-oriented stocks that 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-term 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. 

Thrivent’s 2023 financial performance

assets under management/advisement1
total adjusted surplus1
assets under management/advisement1
total adjusted surplus1

I am pleased to share that Thrivent remains financially strong and stable amid the backdrop of a changing macroeconomic environment. Assets under management and advisement (AUM) climbed to $179 billion as of Dec. 31, 2023, and our strong credit ratings were affirmed in 2023 by three independent agencies: AM Best, Moody’s and S&P Global*.

We saw strong performance in 2023 across our general account, which houses the premiums and assets from our clients. In fact, all general account portfolios performed in line with or outperformed benchmarks in 2023 in an uncertain market environment and following a very strong year in 2022.

Thrivent Mutual Funds continued to perform well, with more than 54% of our funds receiving a 4- or 5-Star Overall Morningstar Ratings™, based on risk-adjusted performance as of Dec. 31, 2023. Thanks to the diligent management of our investment team, we have delivered value and returns across asset classes and in innovative ways.

Our total adjusted surplus reached $17.3 billion1 at the end of the year. This figure is noteworthy because it comprises three important buckets of capital. First, we hold aside a significant amount of capital reserves to be prepared for a worst-case scenario in order to be able to continue to fulfill the promises we make to clients. Another part of this capital includes fraternal dollars, which enable the generosity programs and community impact at the heart of our organization.

Finally, it includes the capital we use to deliver value to our clients through things like dividends, product rate enhancements and investments into the business to continue to serve you well. In 2023, we distributed more than $430 million in dividends and policy enhancements,2 and we expect to increase that figure to $542 million in 2024.

We recognize that we make promises to you, our clients, that may not be fulfilled for decades down the road. Thank you for trusting us to be there when you need us most. We look forward to continuing to serve you in 2024 with purpose-based advice that helps you meet your goals in life.

David Royal is executive vice president and chief financial & investment officer at Thrivent.

1As of December 31, 2023.

2Dividends are not guaranteed and do not apply to all products or clients. Policy enhancements refer to improvements in non-guaranteed policy features such as future credited rates or fees. These enhancements are not guaranteed in the future.

*Ratings are based on Thrivent’s financial strength and claims-paying ability. Does not apply to investment product performance. For information on each rating, visit the individual rating agency's website.

Before investing, investors should consider carefully the investment objectives, risks, charges and expenses of a fund or portfolio and the variable insurance product. This and other important information is contained in the fund, portfolio and variable insurance product prospectuses, which may be obtained from, a financial professional or by calling 800-847-4836. Read them carefully before investing.

Past performance does not guarantee future results.

The views expressed 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.

A high Morningstar rating does not imply positive performance. © 2024 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

Thrivent is the marketing name for Thrivent Financial for Lutherans. Insurance products issued by Thrivent. Not available in all states. Securities and investment advisory services offered through Thrivent Investment Management Inc., a registered investment adviser, member FINRA and SIPC, and a subsidiary of Thrivent. Licensed agent/producer of Thrivent. Registered representative of Thrivent Investment Management Inc.