Investing

Inflation, retail sales, and other news affecting your money in the week ahead

Twenty/20

The stock market is riding high once again, setting a series of new records and notching five straight weeks of gains amid optimism about a possible resolution to the ongoing trade spat between the U.S. and China.

The question now: What's next? While China said on Thursday the two countries had agreed to remove existing trade tariffs on some goods, President Donald Trump said on Friday he has not agreed to roll back existing tariffs. Wall Street was expecting a so-called phase one trade deal this month, but a meeting between U.S. and China leaders may not happen until December.

Earnings season has also helped to keep traders in good moods. The multiweek period when companies report quarterly profit is concluding and results have generally exceeded analysts' expectations. The S&P 500 now is up a whopping 23% in 2019, and a less impressive but still strong 10% in the past 12 months.

Economic data in the past week showed that consumer borrowing grew at the slowest pace in 15 months and sentiment rose more than expected. In the week ahead, traders will await two different measures of inflation, along with the monthly report of retail sales. Here's what to watch — and how the news could affect your bottom line.

Inflation likely to remain below Fed's target

What's happening: Two inflation reports are scheduled for release in the week ahead. Wednesday's measures the average change in consumer prices, or what you pay for various goods and services, including food and housing. Thursday's report focuses on the other side, the producers, and the average change in prices these companies set for the products they sell.

Economists currently project both measures increased in October compared with September.

Why it matters: The Federal Reserve is tasked with keeping prices in check and closely tracks changes in prices for goods and services. They monitor a measure that excludes food and energy, which tend to have more wild price swings.

While the Fed's preferred measure is different than the two scheduled for release in the week ahead, all three show that inflation remains below the central bank's long-term target of 2%. Policymakers have cut interest rates three times this year, citing inflation as a factor. Even so, inflation has yet to pick up materially; as of September it's increasing at an annual rate of 1.7%, compared with a pace of 1.5% in May.

What it means for you: When prices go up, our dollars don't stretch as far when we're buying groceries or paying for services. The Fed closely monitors changes in the cost of living to decide whether further rate cuts are warranted. Traders don't see a greater than 20% chance of another such cut until at least March 2020.

Economists forecast slight increase in consumer spending

What's happening: The monthly retail sales report for October is scheduled for release Friday. This details how much American consumers spent on things like clothing and food. Economists currently forecast a slight increase in spending, after retail sales fell for the first time in seven months in September.

Even so, a report from the Federal Reserve showed that consumers are borrowing less money via revolving credit, like credit cards. This amount fell in September for the second straight month, the first consecutive declines since 2012.

Why it matters: Even amid signs of slowing in the broader economy, consumer spending has held up so far — but some people on Wall Street are worried that may change. They track the monthly retail sales report closely because consumer spending accounts for more than two-thirds of U.S. economic growth.

What it means for you: Perhaps you haven't made any changes to your shopping habits, but what your neighbors do matters to the overall economy. What's more, the all-important holiday shopping season is here. Spending between November 1 to December 31 accounts for about 20% of annual retail sales each year, and holiday sales are expected to increase about 4% compared with 2018, according to the National Retail Federation.

The bottom line

We may see more records for the U.S. stock market in the weeks ahead because it's pretty common to see a cluster of new highs in a short time span. Once the S&P 500 hits a new all-time high, another is often around the corner. That's partly because the stock market tends to close higher than lower on a daily basis: On more than half of trading days since 2000, or 53% of the time, the market has closed higher, according to data analyzed by Grow.

That said, experts do anticipate some bumpiness ahead as traders sort out what will push stock prices higher or lower once there's some sort of U.S.-China trade deal. And the 2020 election, which is less than a year away, could also cause some uncertainty.

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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