Last week, traders finally got the interest rate cut they'd been wanting, as the Federal Reserve lowered its benchmark rate for the first time since 2008. And yet, the S&P 500 fell the most since December during the week.
While the Fed's decision helped answer one of the biggest questions on Wall Street this year, there's still speculation about the central bank's next steps.
The topic of trade has also rattled investors again. On Thursday, President Donald Trump tweeted about imposing an additional 10% tariff on $300 billion worth of goods imported from China. After the tariff announcement, the yield on the 10-year Treasury fell below 2%, indicating that traders in the bond market are concerned about the economic outlook.
On Monday, China retaliated by allowing its currency, the yuan, to fall to its lowest level against the dollar in more than a decade — and the S&P 500 and the yield on 10-year Treasurys both fell further on this news.
The potential impact of tariffs has emerged as a major theme during earnings season, when publicly traded companies disclose results for the most-recent quarter. Nearly 60 companies are expected to disclose earnings this week, including Loews, Walt Disney, and Kraft Heinz.
Here's a rundown of the market news to watch this week, and how it could affect you:
What's happening: Trump tweeted last week that the U.S. will impose 10% tariffs on another $300 billion of imports from China starting September 1, and later said the tariffs could be raised to more than 25%. Trade negotiations between the U.S. and China are scheduled to resume again in early September. But the trade war appeared to intensify with China's apparent retaliation.
Why it matters: Back in the spring, the uncertainty surrounding trade deals between the U.S. and major trade partners China and Mexico caused a lot of anxiety on Wall Street. That resulted in some bumpiness: The S&P 500 fell nearly 7% in about 30 days in May and June.
Trump's latest trade threat came as a surprise to the market and followed resumed talks between U.S. and Chinese leaders at the G-20 meeting in June. The S&P 500 tumbled on the news to end the day Thursday down 0.9%, fell another 0.7% Friday — and tumbled more than 1% on Monday's open.
What it means for you: The value of your stock portfolio could take a small hit if a prolonged trade war becomes the status quo, as some experts worry it will. But short-term disruptions are normal, so it's important to keep focus on the long-term benefits of investing — because the market has, in the past, always bounced back.
What's happening: Federal Reserve policymakers lowered interest rates in an attempt to stimulate growth, amid some signs the U.S. economy is slowing, to encourage businesses and consumers to borrow money. But the Fed wasn't explicit about next steps, and Chair Jerome Powell left Wall Street confused about whether the central bankers would cut rates again by the end of the year.
The uncertainty following the Fed's rate cut, along with Trump's fresh trade threats, pushed the yield on the benchmark 10-year Treasury note below 1.8%, the lowest level since 2016.
Why it matters: U.S. Treasurys are considered a relatively safe investment because governments generally repay their debts. But whenever traders are worried about the economic outlook, they're more likely to buy these bonds — which, in turn, pushes yields lower.
Falling interest rates are good for consumers, but they also signal that professional investors on Wall Street are seeking safer investments, at least in the short-term.
What it means for you: The 10-year Treasury note is a barometer for 30-year fixed mortgage rates, auto loans, student loans, credit card annual percentage rates, and more. Lower rates are good if you plan to borrow money — and you're likely to soon see lower rates for such products, if you haven't already.
The high-flying summer has seen the S&P 500 set a series of new records and soar more than 20% year to date, at its best. Last week saw the benchmark index fall more than 3% in five straight days of declines — and while that doesn't mean the good times in the market are over, it's a reminder that such bumpiness is normal. No matter what happens in the short term, the smart move is to continue following your long-term financial plan and stay invested for the long haul.
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