The stock market started off 2020 doing what it did for much of 2019: going up.
The S&P 500 notched a new all-time high to start the year, before falling on Friday after the U.S. confirmed that an airstrike killed Iran's top military commander. This market benchmark barely missed rising for a sixth straight week and experienced only its second decline in the past 13 weeks.
Still, the price of gold has been surging, especially after the attack in Iran, and is near a six-year high, indicating that traders are seeking safe haven investments. And in the coming week, economists are projecting the monthly employment report will show that in December employers added fewer workers to payrolls.
Here's what to watch in the stock market during the week ahead — and how the news could affect your bottom line.
What's happening: Gold prices have been surging since late November, up nearly 7%, to the highest level since September when they reached a six-year high. The attack in Iran preceded the most recent jump. More broadly, the increase in gold prices reflects some traders' doubts about whether the latest stock market rally will continue.
The commodity just capped its biggest year since 2010, with annual gains of more than 18%.
Why it matters: Investment pros consider gold to be a safe haven, an asset they usually favor during periods of slower economic growth or as a refuge for when other markets decline. People invest in gold because it can serve as a "hedge" for their portfolios because when other investments lose value, gold tends to appreciate.
What it means to you: Even if you don't have any investments in gold — the metal itself or exchange traded-funds (ETFs) that track this commodity — it can still be useful to track its performance. That's because some people on Wall Street are concerned about a possible slowdown in the stock market and even the broader U.S. economy. What's more, the recent rise in prices can mean it's a better time to sell old jewelry or coins.
Finally, this can be a good reminder of why it's important to have a mix of various assets in your portfolio. Diversification can help to reduce your overall risk, because your portfolio's performance doesn't hinge on just one investment.
What's happening: The monthly employment report always is a must-watch event for Wall Street types, and particularly the number of non-farm jobs created in the previous month. The jobs report is scheduled for release on Friday, January 10, and economists are currently projecting that employers added the second-fewest monthly jobs since May. November was a particularly strong month for hiring.
Why it matters: On average, employers added just under 180,000 jobs through November in 2019, the lowest since 2011. Sluggish hiring gains are symptomatic of the weaker economic growth that led the Federal Reserve to cut interest rates three times last year. That said, the U.S. economy is nearing full employment, meaning almost everyone willing and able to work can.
Even as traders are now focusing on 2020, the weeks ahead will bring a slew of economic data for the month of December, and the fourth quarter more broadly. This information will help to confirm how the U.S. economy finished the year.
This monthly jobs report can also be informative for people looking to switch jobs because it shows which industries are hiring most. And data from Monster shows that January is popular among job seekers, with eight of the 10 busiest days for job searches on the platform occurring during the first month of the year.
With respect to the stock market, you could see some short-term swings around this monthly report because hiring is one of the most-watched economic indicators on Wall Street.
The stock market just finished its best year since 2013 with gains of nearly 29%. In the market outlook for January, traders will be awaiting leaders of the U.S. and China to sign the first part of a trade deal, along with the weeks-long period when companies report quarterly results — both of which could cause some bumpiness in the market.
That said, any turbulence in the market can be a good opportunity for long-term investors to buy stocks at lower prices. And no matter what happens in any given week, it's important to keep perspective and remain consistent with your investment strategy.
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