2023 Highs on the Horizon: Can Holiday Shopping Push the Stock Market Even Higher?

Goldman Sachs predicts that the consumption rate is likely to see a decline, yet it will persistently expand at a satisfactory pace.

American stocks have seen a considerable increase and are now nearing the highest levels reached in the summer. This remarkable rebound coincides with investors preparing for the holiday season, with the eagerly awaited Black Friday just around the corner.

The expected surge in shopping on the day after Thanksgiving marks the beginning of a season of higher spending for the holidays. This has the possibility of boosting the stock market after its recent growth.

Yardeni Research analysts have stated that the beginning of the holiday sales season seems optimistic, as consumers are currently employed and have a positive view of their finances. Although there is a concern that high interest rates might impact purchases of expensive items that require financing, the strong sales numbers in October indicate a promising start to the holiday shopping season.

However, investors are worried that the rise in U.S. stocks in November might have been too much. The S&P 500 index is set to record its largest monthly increase this year due to the strong performance of both bonds and equities. However, it is important to note that the S&P 500 is still 1.6% lower than its highest closing point in July 2023. In just this month, the index has surged by 7.6% following three weeks of positive outcomes according to Dow Jones Market Data.

In a telephone interview, Bob Elliott, the co-founder and CEO of investment company Unlimited Funds, shared his view that the situation is being overstated and that there has been a noticeable enhancement in financial circumstances.

Elliott states that the enhancement in financial circumstances can be attributed to the U.S. Treasury Department’s recent decision to issue a smaller amount of long-term Treasury bonds than what was anticipated by the market. This action has relieved concerns among investors regarding the demand for long-duration U.S. government debt, which was worried due to the substantial quantity of Treasurys entering the market.

Stock prices have risen as a result of the decrease in yields caused by the increase in prices of long-term Treasury bonds.

Elliott stated that the Treasury’s decision to enact a policy that lessens constraints is advantageous for the economy as a whole, effectively postponing the implementation of more stringent measures.

The Federal Reserve has taken steps to lower inflation, which is currently higher than its desired level of 2%, by increasing interest rates to slow down economic growth. In October, inflation, as measured by the consumer-price index, remained stable at 3.2% compared to the previous year. This is a decline from 3.7% in September and a significant decrease from the peak of 9.1% in June 2022.

Investors were hopeful after the consumer-price-index report was made public on November 14th, as it resulted in a sharp decrease in treasury yields. This decline in yields continued throughout the month, while there was an upward trend in stocks.

In November, the prices of stocks and long-term Treasury bonds have been rising at the same time.

Data from FactSet shows that both the Vanguard Total Stock Market ETF VTI and the Vanguard Long-Term Treasury ETF VGLT have seen a notable rise of more than 7% this month until the end of last week.

Based on Dow Jones Market Data, the interest rate for the 10-year Treasury note (BX:TMUBMUSD10Y) stayed relatively consistent at 4.441% on Friday. However, it has fallen by about 43 basis points this month, considering the levels at 3 p.m. Eastern Time.

In an interview with MarketWatch, Don McCree, the vice chairman of Citizens Financial Group, mentioned that with the decline in Treasury yields, it would be beneficial for the bank’s corporate clients to take advantage of the opportunity to tap into the debt markets if they expect to refinance in the next three years. This is because borrowing expenses have become cheaper.

McCree, who holds the position of commercial banking leader at Citizens, further disclosed that corporations he serves are carefully keeping track of consumer expenditure, particularly throughout the period of holiday shopping.

Yardeni Research’s report states that Home Depot and Target have both experienced a decline in their revenue recently. Despite this, their actual performance surpassed the expectations set by analysts. In contrast, TJX, the most successful retailer among the three, saw a notable increase in their quarterly results and expressed optimism for the upcoming holiday season.

Consumer savings

Jan Hatzius, the chief economist at Goldman Sachs Group, stated during a virtual media briefing on November 16th that the surplus savings of consumers were instrumental in the events of 2022. This can be partially explained by a notable drop in real disposable personal income, which can be attributed to the increase in inflation. Hatzius made these remarks while discussing the future prospects of the bank’s global investment research group in 2024.

According to Hatzius, the decline in excess savings has been accompanied by a significant rise in real disposable income, with an estimated growth rate of 4% in 2023. He further added that they expect a similar rate of growth, around 3%, in 2024, which should be sufficient to maintain a decent pace of consumption at approximately 2%.

In October, there was a 0.1% decrease in retail sales in the United States – the first decline in seven months, as per Yardeni analysts. However, they mentioned that not every sector saw a decrease. They pointed out that the most recent data indicates that consumers are still spending more on eating out at restaurants compared to last year.

Currently, the United States is experiencing a low unemployment rate of 3.9% as of October.

During the press conference, Hatzius stated that our goal is to prevent a notable increase in the unemployment rate in the coming year. Moreover, he mentioned that there is a mere 15% possibility of a recession taking place within the following year.

Elliott holds the belief that employment is the paramount concern for consumers. He argues that the increase in income outweighs any rise in prices, leading to a stronger ability for households to spend.


In an attempt to battle inflation, the central bank has increased its benchmark rate to the highest point in 22 years, now at 5.5%. Jerome Powell, the Chair of the Federal Reserve, recently described the central bank’s monetary policy as “restrictive”.

Nonetheless, Elliott remarked that if the economy remains steady at its current rate levels, it suggests that the rates are not limiting, and consequently, rates could remain high for an extended duration.

He stated that the economy as a whole is developing slowly and proposed that the Federal Reserve might need to lower the value of assets to speed up their efforts to restrict the economy.

The stock market in the United States saw a positive trend on Friday, as the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all rose for the third straight week. Over the past three weeks, the S&P 500 witnessed a significant increase of 9.6%, its largest three-week gain in percentage terms since June 2020, according to Dow Jones Market Data.

Time to buy quality stocks?

UBS suggests that it would be wise to think about investing in top-notch stocks as data shows signs of a deceleration in the growth of the American economy.

Solita Marcelli, the chief investment officer for the Americas at UBS Global Wealth Management, mentioned that historically, stocks that are considered to be of high quality have shown consistent positive performance in the later stages of the business cycle and even during economic downturns. This can serve as a protection for portfolios in case the economy experiences a more significant slowdown than expected. Marcelli also expressed a preference for U.S. technology companies, which is in line with the focus on quality.

Tom Hancock, who leads GMO’s equity team with a focus on GMO, explains that companies with a solid financial position and a steady stream of cash flow, along with being seen as high-quality, may have the upper hand in regulating prices. This viewpoint is in agreement with the beliefs of well-known investor Jeremy Grantham.

Hancock, a portfolio manager for the GMO U.S. Quality ETF QLTY, expressed to MarketWatch that his focus is on identifying reasonably priced stocks of exceptional quality. These stocks can be discovered across various sectors such as technology, healthcare, and consumer staples.

In the media briefing, David Kostin, the main strategist for American stocks at Goldman Sachs, stated that high-quality stocks are predicted to do well in the present circumstances. These stocks are usually larger in terms of market value and demonstrate more consistent growth in revenue and sales. This stability is beneficial in case predictions about economic growth prove to be wrong.

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