Skip to content
Weekly Market Update · 12.05.23

U.S. Bonds Gain with Cooling Inflation, China’s Economic Indicators May Remain Weak

U.S. investment grade fixed income gained 2% on cooling inflation and comments from the Federal Reserve. Scheduled economic indicators in China expected to show disinflation and weak trade.
  • Markets & Economy
  • Market & Investment Trends
  • Commentary
Key Points
What this is
We review how key market events from last week affected investment performance and highlight what could impact markets this week.
Why it matters
Easing inflation in the U.S. boosted investment‑grade bonds last week, while Treasury yields fell.
Where it's going
The U.S. jobs report, scheduled for Friday, is expected to demonstrate continued resiliency in the jobs market, while China’s economic indicators this week may show lagging exports.

Last Week Review


U.S. investment grade fixed income gained 2% on cooling inflation and comments from the Federal Reserve. The two-year Treasury yield fell 0.41% while the 10-year yield declined 0.27%. Global equities underperformed fixed income but still managed a 0.8% gain with the U.S. ahead of emerging markets and developed markets outside the U.S.


Investors Temper Rate Cut Expectations

Federal Reserve Chair Jerome Powell reiterated that the Fed will not hesitate to tighten policy if appropriate. The remarks were largely aligned with previous comments, but the futures market pushed out the timing for expected Fed rate cuts. Expectations for European Central Bank rate cuts were also lowered after President Christine Lagarde guided against rate cuts in the first half of 2024.

An Exceptional November

November was an exceptionally strong month for most major financial assets. Global equities gained 9.3% last month and investment grade fixed income rose 4.5%. The 10-year Treasury yield fell 0.6%, off its near 15-year high with tempered Fed expectations and cooling inflation possible catalysts. Equities benefitted alongside the rate moves as economic activity remained intact overall and third quarter corporate earnings outperformed. Against this backdrop, credit spreads fell meaningful, 0.67% for high yield bonds and 0.22% for investment grade bonds. High yield bonds returned 4.5%. Natural resource stocks gained 5% and real estate equities rose 10.5%.


U.S. Inflation Moderates

The , which excludes more volatile food and energy prices, increased 3.5% year-over-year in October and 0.2% from September to October. to 3% year-over-year, while core PCE services ex-housing eased to 3.9% year-over-year and 0.1% month-to-month.


Europe’s Preliminary Inflation Eases

Europe preliminary Consumer Price Index fell to 2.4% year-over-year in November, below expectations, from 2.9% in October. Core inflation fell to 3.6%, also below expectations, from 4.2%. As a result, the futures market moved forward its expectation for the first European Central Bank rate cut to March/April from June.


OPEC Announces Production Cuts

Oil prices rallied in the leadup to last week’s OPEC meeting before giving back most of those gains post-meeting. The group announced additional voluntary cuts of 1 million barrels per day but left formal quotas unchanged.

This Week Preview


U.S. Jobs Expected to Stay Resilient in Friday Report

Friday’s U.S. employment report for November is expected to remain resilient with the pace of hiring estimated to increase to 180,000 from 150,000. The unemployment rate is projected to be unchanged from the prior level at 3.9%, while wage growth is expected to slightly ease to 4.0% year-over-year from 4.1% in October.


China’s Economic Indicators Expected to Remain Weak

China is scheduled to release trade data on Thursday and the Consumer Price Index later in the week. Activity is expected to remain weak with modest improvement in imports, estimated at 3.7% year-over-year, while exports are expected to fall by 1.2%. The Consumer Price Index is expected to fall 0.1% year-over-year, indicating deflation.


Israel-Hamas War Resumes After Cease Fire

An extended cease-fire deal that allowed for the release of hostages and humanitarian aid into the Gaza area ended late last week. The facilitation of hostage exchanges offers some hope of future deals that may lead to de-escalation. However, for now, military operations have resumed and we expect investors to continue to watch for any signs of escalation. Since the start of the war in October, natural resource stocks are up 4.6% and oil prices have fallen 6.7%.

Main Point

Inflation’s Downward Trend Sparks Optimism

November was an exceptionally strong month for most major financial assets. Global equities gained 9.3% last month and investment grade fixed income rose 4.5%. The 10-year Treasury yield fell 0.6%, off its near 15-year high with tempered Fed expectations and cooling inflation possible catalysts. Investors likely will look to the U.S. jobs report on Friday for wage growth, which could pressure inflation upward.

Markets & Economy

  • Read Now
Placeholder background

Contact Us

Interested in learning more about our expertise and how we can help? 


For Asia-Pacific (APAC) and Europe, Middle East and Africa (EMEA) markets, this information is directed to institutional, professional and wholesale clients or investors only and should not be relied upon by retail clients or investors. The information contained herein is intended for use with current or prospective clients of Northern Trust Investments, Inc (NTI) or its affiliates. The information is not intended for distribution or use by any person in any jurisdiction where such distribution would be contrary to local law or regulation. NTI or its affiliates may have positions in and may effect transactions in the markets, contracts and related investments different than described in this information. This information is obtained from sources believed to be reliable, its accuracy and completeness are not guaranteed, and is subject to change. Information does not constitute a recommendation of any investment strategy, is not intended as investment advice and does not take into account all the circumstances of each investor.


This report is provided for informational purposes only and is not intended to be, and should not be construed as, an offer, solicitation or recommendation with respect to any transaction and should not be treated as legal advice, investment advice or tax advice. Recipients should not rely upon this information as a substitute for obtaining specific legal or tax advice from their own professional legal or tax advisors. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities. Indices and trademarks are the property of their respective owners. Information is subject to change based on market or other conditions.


All securities investing and trading activities risk the loss of capital. Each portfolio is subject to substantial risks including market risks, strategy risks, advisor risk, and risks with respect to its investment in other structures. There can be no assurance that any portfolio investment objectives will be achieved, or that any investment will achieve profits or avoid incurring substantial losses. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Risk controls and models do not promise any level of performance or guarantee against loss of principal. Any discussion of risk management is intended to describe NTI or its affiliates’ efforts to monitor and manage risk but does not imply low risk.


Past performance is not a guarantee of future results. Performance returns and the principal value of an investment will fluctuate. Performance returns contained herein are subject to revision by NTI or its affiliates. Comparative indices shown are provided as an indication of the performance of a particular segment of the capital markets and/or alternative strategies in general. Index performance returns do not reflect any management fees, transaction costs or expenses. It is not possible to invest directly in any index. Net performance returns are reduced by investment management fees and other expenses relating to the management of the account. Gross performance returns contained herein include reinvestment of dividends and other earnings, transaction costs, and all fees and expenses other than investment management fees, unless indicated otherwise. For additional information on fees, please refer to Part 2a of the Form ADV or consult an NTI representative.


Forward-looking statements and assumptions are NTI or its affiliates’ current estimates or expectations of future events or future results based upon proprietary research and should not be construed as an estimate or promise of results that a portfolio may achieve.  Actual results could differ materially from the results indicated by this information.


Hypothetical portfolio information provided does not represent results of an actual investment portfolio but reflects representative historical performance of the strategies, funds or accounts listed herein, which were selected with the benefit of hindsight. Hypothetical performance results do not reflect actual trading. No representation is being made that any portfolio will achieve a performance record similar to that shown. A hypothetical investment does not necessarily take into account the fees, risks, economic or market factors/conditions an investor might experience in actual trading. Hypothetical results may have under- or over-compensation for the impact, if any, of certain market factors such as lack of liquidity, economic or market factors/conditions. The investment returns of other clients may differ materially from the portfolio portrayed. There are numerous other factors related to the markets in general or to the implementation of any specific program that cannot be fully accounted for in the preparation of hypothetical performance results. The information is confidential and may not be duplicated in any form or disseminated without the prior consent of NTI or its affiliates.


This information is intended for purposes of NTI and/or its affiliates marketing as providers of the products and services described herein and not to provide any fiduciary investment advice within the meaning of Section 3(21) of the Employee Retirement Income Security Act of 1974, as amended (ERISA). NTI and/or its affiliates are not undertaking to provide impartial investment advice or give advice in a fiduciary capacity to the recipient of these materials, which are for marketing purposes and are not intended to serve as a primary basis for investment decisions. NTI and its affiliates receive fees and other compensation in connection with the products and services described herein as well as for custody, fund administration, transfer agent, investment operations outsourcing, and other services rendered to various proprietary and third-party investment products and firms that may be the subject of or become associated with the services described herein.


Northern Trust Asset Management is composed of Northern Trust Investments, Inc., Northern Trust Global Investments Limited, Northern Trust Fund Managers (Ireland) Limited, Northern Trust Global Investments Japan, K.K., NT Global Advisors, Inc., 50 South Capital Advisors, LLC, Northern Trust Asset Management Australia Pty Ltd, and investment personnel of The Northern Trust Company of Hong Kong Limited and The Northern Trust Company.


Not FDIC insured | May lose value | No bank guarantee