Cases of Covid-19 have continued to spike in hot spots around the country, leading to cancellations, layoffs, and furloughs. Despite the grim economic news, the stock market is not experiencing the lows it saw in March during the first wave of shutdowns and uncertainty. In fact, the Nasdaq hit a new all-time record high this week, and both the S&P and Dow are on six-day winning streaks.
"The market continues to seek every reason to remain optimistic and validate the rally off the March low," says Anthony Glomski, principal and founder of AG Asset Advisory. "In the coming week, investors will be looking for a new bipartisan stimulus bill and continued progress on the employment front in next Friday's jobs report."
In the week ahead, here's what investors are watching.
What's happening: Congress has spent much of the past month debating a potential fourth stimulus package to help the economy and individual Americans in response to the pandemic. However, Democrats and Republicans have yet to come to an agreement on important details such as extending the extra unemployment benefits, which expired at the end of July, sending out another cash payment for qualifying taxpayers, and providing more support to businesses.
Why it matters: The potential stimulus package could be vital to the continued positive performance of the U.S. economy. Stakes are high this week because Congress is set to leave for recess on August 10.
What it means for you: The still-unpassed stimulus package could have a big impact on your bottom line in the form of a second stimulus check.
Experts also say that passing a robust stimulus bill soon would be good for the market as well as the economy. The delay "creates a highly variable situation for stocks, which is typical of the environment we regularly face," Glomski says. "These variables, however, are beyond investors' control."
Video by Stephen Parkhurst
What's happening: The Consumer Price Index (CPI) report will be released on Wednesday, August 12. CPI measures the average change over time in prices paid by consumers for common goods and services. Investors will be eyeing this report because "we have seen minimal-to-no inflation so far this year," says Ken Van Leeuwen, managing director and founder of Van Leeuwen & Company.
Why it matters: Analysts expect that the Fed will be tolerant of an uptick in inflation, "but any indication that we might be getting too much too fast" could lead to more volatility in the market, Glomski says.
What it means for you: Inflation can affect your finances in a number of ways, including how much you pay for purchases, what you earn, and how much incentive you have to invest. So it's worth paying attention to measures that track it.
Video by Stephen Parkhurst
What's happening: Ups and downs are standard for the stock market, but during this year of a global pandemic, a hotly contested presidential election, and quickly changing headlines, volatility is especially intense. "The economic story of the Covid-19 pandemic is yet to be fully told," says Jeff Landle, managing principal and chief investment officer at Little Harbor Advisors. "While the stimulus money masked much of the potential economic pain, the pandemic's influence, especially on small businesses and longer-term issues, may not yet be fully realized."
Why it matters: Federal and local governments alike are running deficits. "Money is being spent on a major economic and societal illness," Landle says. "The bill has yet to be delivered, much less paid. Investors should be prepared and understand the risks, many of which are latent, in their portfolios."
What it means for you: Although there are some signs the economy could be improving, the struggle is far from over. But that doesn't mean investors should be worried. It's smart to be forward-looking, like the market. Take a long-term view: Rocky markets can be a "generational buying opportunity."
Nancy Mann Jackson is an award-winning journalist who specializes in writing about personal finance, real estate, business, and other topics. Her work appears in several publications, including CNBC.com, Fortune.com, Entrepreneur, Working Mother, and CNNMoney.com.
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