It's been a roller coaster of a ride in the stock market lately, with the S&P 500 up one week and down the next.
The past week was one of those "up" weeks: The S&P 500 rose nearly 3%. This benchmark has been bouncing around in a pretty narrow range in the past month as traders make sense of progress and setbacks in the economy caused by the coronavirus pandemic. More recently, the market has also been hampered by tensions between the U.S. and China about the true extent and origin of the outbreak, along with the renewed threat of tariffs.
It's been about a month since states began reopening their economies, and now all 50 states have done so to some degree. Those efforts could benefit the 38.6 million American workers who have filed for unemployment benefits in the past nine weeks.
The coming week marks the unofficial start to summer with the Memorial Day holiday on Monday. Economists expect that Americans are feeling more optimistic about the economy and their personal finances, which could be reflected by two different measures of consumer confidence scheduled for release in the week ahead. In addition, the second read on gross domestic product (GDP) for the first quarter is due, along with reports on inflation and the housing market.
Here's what to watch — and how the news could affect your bottom line.
What's happening: As more areas of the country ease lockdown restrictions, how quickly the economy can rebound depends largely on American consumers. That's why traders will closely monitor two reports due in the week ahead that measure consumer confidence.
First up is a monthly survey from the Conference Board, scheduled for release on Tuesday. That's followed on Friday by a separate survey with a second read on confidence for the month of May from the University of Michigan. Economists currently project that this measure increased for May, and they suspect that confidence rebounded slightly compared with April.
Why it matters: Traders and economists watch surveys like these closely because how confident consumers feel translates to how comfortable they may feel spending on big-ticket items — and that ultimately affects the pace of gross domestic product (GDP) growth. Consumer spending accounts for more than two-thirds of GDP.
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What it means for you: With millions of Americans out of work, it's not surprising that consumer confidence fell sharply in March and April. Confidence is just one piece of a broader puzzle that people on Wall Street piece together to get a sense of the pace of growth ahead. The gains in the stock market in recent weeks show that traders are optimistic about the economic recovery.
As for your personal financial situation, there are steps you can take to feel more confident, too. File for unemployment benefits if you're eligible, consider refinancing a mortgage or other loans, or find some ways to earn extra money this summer.
What's happening: On Wednesday, the Federal Reserve is scheduled to release its so-called Beige Book, a report released eight times a year detailing current economic conditions. This will provide an important read on how businesses around the country, and across all major industries, are faring with the shutdowns.
Why it matters: In the last report, released April 15, policymakers referenced the coronavirus or Covid-19 nearly 90 times, noting that the economy contracted "sharply and abruptly." The forthcoming Beige Book will help traders to gauge how much GDP fell in the second quarter. A gauge from the Federal Reserve Bank of Atlanta now points to declines in excess of 40%, compared with prior estimates of about 30%.
What it means for you: Traders will pay extra attention to information in the Beige Book related to staffing needs, and whether companies are hiring or laying off workers. And those plans will reveal important clues about the severity of the current economic recession and the potential long-term impact of the coronavirus pandemic.
Not all sectors of the economy have been hit equally. Experts say there are lots of jobs available, and in fact, some of the in-demand jobs pay as much as $136,000. If you are looking for a job, optimize your LinkedIn profile and learn how to ace a video interview.
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Summer historically has been a slower period in the U.S. stock market as many traders go on vacation and trading volumes fall. Given the present uncertainties, along with stay-at-home measures, the stock market is likely to remain pretty active in the months ahead.
Traders will remain focused on reopening efforts around the country and how quickly different parts of the economy are rebounding. And as in recent weeks, experts caution that there's likely to be turbulence ahead.
Still, the past few months have attracted new investors who have taken advantage of a "generational opportunity" to buy stocks at lower prices. Just remember to keep a long-term perspective with your portfolio and avoid making emotional decisions. That's because some people on Wall Street are optimistic about the prospects for stocks in 2020 and believe the worst of the declines has passed — which partly explains why the market is already rebounding.
Finally, it's important to remember that downturns can benefit long-term investors and selling during a decline could be the biggest mistake of your investing career. In fact, right now could be a "real opportunity to create wealth."
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