Fourth Quarter 2023 Review

Stocks were pressured lower in the third quarter by rising 10-year U.S. Treasury bond yields. In the three months ending September 30, the yield on the 10-year climbed from 3.86% to 4.57%, while the S&P 500 fell -3.3% over the same period.

To sum up the third quarter in a single sentence: Interest rates went up, and stocks went down.

Rising yields and falling stocks marked a departure from the first half of 2023, when Treasury bond yields moved mostly sideways as inflation trended lower and as investors and economists anticipated a mild economic recession. We noted last quarter that the recession never arrived, and it’s even possible the U.S. economy defied expectations and accelerated in Q3. In our view, it’s this hotter-than-expected economic growth that drove bond yields higher—and stocks lower—for the quarter.