Following four weeks of declines, stocks jumped 4.4% last week in the S&P 500’s best week since November.
Still, this week Wall Street will continue monitoring ongoing trade talks and falling yields, as well as new economic reports that show how American consumers are doing.
Here are few things for you to watch this week that could affect your money.
U.S. and Mexico reach deal on tariffs
What's happening: President Donald Trump had promised to impose a 5% tariff on all Mexican imports starting Monday, but the U.S. says it reached an agreement with Mexico over the weekend to suspend those tariffs indefinitely. Meanwhile, Trump threatened to raise tariffs on $300 billion more of Chinese imports, though he said Monday he believes China will make a deal with the U.S. “because they’re going to have to.”
Why it matters: Higher tariffs, which are effectively tax increases, tend to raise prices. There are also implications for the profits of publicly traded corporations, the pace of economic growth, and the Fed's decisions to raise or lower interest rates.
What it means for you: You can expect to see higher prices on goods imported from China. And as we outlined in the June market outlook, expect trade to continue moving the market in the coming weeks, or even months. Progress in trade talks—like the weekend agreement between the U.S. and Mexico—can lift the stock market, and your portfolio, higher.
Traders expect the Fed to cut interest rates this year
What's happening: Treasury yields slumped in recent weeks, as traders rushed to buy these government-backed debt obligations, which are generally considered safe. More demand drives prices higher—and pushes down the yield, or the amount of money you earn in exchange for holding these securities.
Last week Federal Reserve Chair Jerome Powell signaled the central bank could cut interest rates to sustain the economic expansion, and traders celebrated: The S&P 500 jumped 2.1% that day and the 10-year Treasury yield rose from a nearly two-year low.
Why it matters: Bond-market traders are concerned about slower economic growth. In addition to driving yields lower, their worries can affect stock prices—and your portfolio. Traders liked Powell's comments, though, because they've been betting with near-certainty the Fed will lower interest rates by year’s end.
What it means for you: If the Fed does lower interest rates, that means you’ll get a better deal on financing, like getting a mortgage or auto loan—but you’ll earn less money on your savings account.
Reports about inflation could affect how you spend
What's happening: Last week's jobs report showed employers added only 75,000 jobs in May, which was much worse than expected. This week, watch for more data related to U.S. consumers.
The monthly consumer price index report, which measures inflation, or the price changes for everyday goods and services, comes out on Wednesday, and the monthly retail sales report, which tracks how much Americans spent on those goods and services, along with a survey about consumer sentiment, comes out Friday.
Why it matters: Consumer spending accounts for more than two-thirds of U.S. gross domestic product and if Americans aren’t feeling confident, or if prices are increasing too much, that affects how much we actually spend and how much value we get for our money.
What it means for you: Inflation matters for two main reasons: Higher prices mean our dollars don’t stretch as far when we go to buy goods or services, and the Fed closely monitors changes in cost of living when deciding whether to raise or lower interest rates. Finally, how confident we’re all feeling can affect big spending decisions like whether to buy a home.
The bottom line
Traders say the type of choppiness we’ve seen in the market recently could stick around for a while. Still, it’s important to keep perspective: The S&P 500 still is up more than 15% year-to-date. It's important not to overreact to the news, to keep saving and investing, and to stick to your long-term financial plan.
More from Grow:
June 10, 2019