The event Wall Street has been waiting months for is finally here: Traders expect the Federal Reserve will lower interest rates when policymakers convene this Tuesday and Wednesday.
Wall Street wants a rate cut to help stimulate growth amid signs the economy is slowing, and lower interest rates make it cheaper for consumers and businesses to borrow money. If the Fed does cut its benchmark rate, that will affect how much interest banks charge you on products like mortgages and auto loans—and how much interest you'll earn on your savings.
Although the Fed meeting will likely be the week's big finance story, there's more news to come, too. The week wraps up with the release of the monthly jobs report. More than 150 companies in the S&P 500 are also expected to release quarterly earnings, including big names like Apple, Pfizer, and General Electric. Earnings season is off to a good start: Among companies that have reported results so far, a majority have posted better-than-expected profits, according to figures from FactSet.
Here's a rundown of this week's news and how it could affect your money.
What's happening: The Federal Reserve convenes for one of its eight annual meetings on Tuesday and Wednesday. Professional investors anticipate central bankers will lower interest rates for the first time since 2008, amid some recent signs the U.S. economy is slowing.
Why it matters: While a rate cut is widely expected, traders do have some lingering questions, like how aggressive such a cut will be and whether there will be additional ones this year. If so, when?
Most of Wall Street is betting that policymakers will trim the federal funds rate, currently set at 2.25%-2.5%, to a range of 2%-2.25%. Some traders expect a steeper rate cut that would bring the benchmark interest rate to a range of 1.75%- 2%.
What it means for you: There's been so much lead-up to this meeting that there's not likely to be a big market reaction to the news itself—unless the Fed shocks the market by leaving rates unchanged. Any potential choppiness is more likely to be related to messaging from Fed officials about next steps.
Beyond your investments, you may soon notice that your bank is offering lower interest rates. Some banks have already lowered the interest rates they're offering on savings accounts in anticipation of a rate cut, while mortgage rates have also fallen.
There are smart money moves you can make in the event of a rate cut, like targeting debt repayment and securing a higher rate for your savings.
What's happening: The monthly jobs report is scheduled for release on Friday, and economists project that employers added fewer jobs in July than in June. But forecasters also expect that the unemployment rate ticked down slightly, suggesting some job-seekers found work.
Why it matters: Fed officials use employment data to help them gauge the strength of the economy, and this report could help inform whether future rate changes are warranted. Wall Street also watches the employment rate because it can be an indicator of recessions.
What it means for you: The monthly labor report is relevant to you, even if you're not actively job hunting: If companies have difficulty finding new workers, you may have a better chance of getting a raise. And if you are job hunting or switching jobs, the report can be helpful because it breaks down which industries are hiring most.
The U.S. stock market set another new all-time high last week in what's shaped up to be a summer of records. The S&P 500′s year-to-date returns make 2019 so far the fifth best of the past 20 years, and the past decade has been one of the best periods ever to be an investor.
The long-term historical average annualized return for the S&P 500 is almost 10%, so this year's performance so far is nearly double what investors can expect to earn in an average year, when investing consistently. That's a great reminder of why the stock market makes such a good long-term investment.
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