Investing

Market ups and downs, a gold rush, and other news affecting your money this week

Anna-Louise Jackson@aljax7
Twenty/20

The stock market took investors on a wild ride last week. At its worst, the S&P 500 was down nearly 6%, though it bounced back to recover some of its losses by Friday.

Much of the market's slump came as a result of "a big, big, big surprise," experts say: Fresh threats in the ongoing trade spat between the U.S. and China caused some professional investors to sell stocks and buy assets that are traditionally safer.

The U.S. stock market opened lower again on Monday. This week, we'll see if that so-called flock to safety continues and investors will monitor a monthly report detailing consumer spending. Here's how the news could affect you:

Traders flock to safe assets

What's happening: Stock prices rose for three straight days starting Tuesday, but fell again Friday when President Donald Trump said the U.S. is not ready to strike a trade deal with China. Throughout the week, many market participants bought assets that historically are less risky, like bonds and gold.

When traders are more eager to buy bonds, that pushes yields lower. The yield on the 10-year Treasury note fell to as low as 1.595% on Wednesday, the lowest since 2016. Meanwhile, the yield on the 30-year Treasury bond slumped to 2.12%, near its all-time low from 2016.

A rush to buy gold, though, pushes prices up. Gold soared to more than $1,500 per ounce, its highest value in more than six years, and climbed higher on Monday.

Why it matters: Whenever there's this type of flight to safe-haven assets, it shows that traders are worried about the economic outlook and when the next recession might be coming. The current U.S. expansion is the longest in history, but the Federal Reserve cut interest rates last month for the first time since the Great Recession amid some signs growth has slowed.

What it means for you: Lower bond yields can affect the rates you pay on your debt because the 10-year Treasury note is a barometer for 30-year mortgage rates, auto loans, student loans and credit card annual percentage rates, and more. The question is whether yields will rebound quickly.

Times like this can be a good reminder of why it's important to have a mix of reliable assets, such as bonds, in your portfolio. Diversification can help to reduce your overall risk, because your portfolio's performance doesn't hinge on just one investment.

Economists expect consumers cut back on spending in July

What's happening: The monthly retail sales report, which details how much American consumers spent on items like clothing and food, is scheduled for release on Thursday.

Why it matters: Economists currently forecast that retail sales slowed slightly last month, compared to June's stronger-than-expected numbers. Consumer spending represents more than two-thirds of the U.S. economy, and consumers have still been a strong engine for growth this year even as corporations have pulled back on making business investments.

The flight to safe haven assets shows that traders are concerned about the possible effect of tariffs on economic growth, and consumers could start to feel more pain from these tariffs this fall and over the holiday season. Wall Street will track this report, and surveys about how consumers are feeling, for any hint that consumers are cutting back on spending.

What it means for you: If bumpiness in the stock market causes your neighbors to become more worried about what's ahead, that could affect the overall economy, especially if they decide to shop less. But there's no sign yet that this has happened. Sentiment among consumers has held up so far — in fact, economists project no change in a monthly survey due Friday that tracks how confident Americans are feeling.

The bottom line

After a period when the stock market drops sharply, it's very important to keep perspective. The S&P 500 is only 3.5% below its all-time high from late July.

And the reaction by many people on Wall Street — selling stocks and flocking to assets like bonds or gold — isn't prudent for most long-term investors. That's because no one knows if or when bumpiness will return, and successfully timing when to buy and sell around based on these market moves is difficult, even for the pros.

Regardless of what happens in the coming weeks, it's a good idea to keep your long-term investing strategy consistent. And even though some experts anticipate there could be more swings in the market ahead, remember that this could present a good opportunity to invest.

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