The ongoing trade spat between the U.S. and China deserves some of the blame yet again, as a report Wednesday suggested the so-called phase one deal between the two countries may not be completed by year's end.
While some people may already be in vacation mode leading into the Thanksgiving holiday, the week ahead is shaping up to be a busy one on Wall Street. There is a bevvy of economic reports scheduled for release on Tuesday and Wednesday, including housing sales, consumer confidence, durable goods, gross domestic product (GDP), and an inflation measure.
The all-important holiday shopping season is now here, and sales are set to reach $1.1 trillion, according to a survey by Deloitte. With Black Friday on November 29 and Cyber Monday on December 2, traders will give this week's consumer confidence report extra scrutiny to see how that might factor into overall economic growth. That's especially important because two Federal Reserve gauges are suggesting economic growth is close to zero for the fourth quarter.
Here's what to watch in the week ahead — and how the news could affect your bottom line.
What's happening: The second of three estimates of third quarter GDP is scheduled for release on Wednesday, and economists currently project no changes. The first reading was better than expected, with a 1.9% pace of economic growth in the three months ending September 30.
Why it matters: GDP, or the sum of the value of all goods and services produced in the U.S. economy, is closely tracked on Wall Street. While the early estimate shows growth picked up in the third quarter, figures for the current quarter aren't as rosy.
Two gauges from the Federal Reserve — one from the New York Fed and the other from the Atlanta Fed — currently suggest that GDP will expand by just 0.4% to 0.7% in the fourth quarter. If so, that would be the slowest pace of growth since 2015. Consumer spending makes up about two-thirds of GDP, and we're in the midst of the holiday shopping season, so traders will be even more interested in how cheery people are feeling.
What it means for you: Slower economic growth has been the primary reason that the Fed has cut interest rates three times this year. Traders don't see a greater than 20% chance of another such cut until at least April 2020. While economists don't project a slowdown in the third quarter, traders will be watching to see if the GDP estimate is revised lower — and any sign that lower growth will continue into the fourth quarter.
What's happening: 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. At the heart of those holiday shopping decisions is the question of how confident Americans feel about the future.
A closely watched survey from the Conference Board, scheduled for release on Tuesday, could help experts get a better sense. Economists currently forecast that sentiment improved for the November reading, as it did for a separate survey released earlier this month.
Why it matters: Economists care so much about these surveys because whether Americans are feeling more or less confident affects whether they'll cut back on big-ticket purchases like homes, cars, and dining. The latest jobs report for October was better than expected, and economists currently project that hiring picked up in November.
What it means for you: Consumers have been very resilient this year, even in the face of higher tariffs and the impeachment probe in Washington.
Still, it's important to monitor trends because how your neighbors feel matters to the overall economy — and to you. If people don't feel confident, they'll spend less money, which in turn affects larger trends like whether employers add jobs or start shedding them. In turn, that can affect GDP growth.
The upcoming week is the last one of November, a month that's on track for the best gains for the S&P 500 since June. What's more, the stock market is poised to end one of its best decades ever with a bang. The Dow Jones Industrial Average is up nearly 20% this year. A $500 investment in the Dow 10 years ago would be worth about $1,700 today.
That said, experts do anticipate some bumpiness in the weeks ahead as traders sort out whether some sort of U.S.-China trade deal will come to fruition. 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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