After flirting with another new high for weeks, the S&P 500 finally set a new, all-time record on October 28 — and then again two more times in the week. These achievements came as the Federal Reserve cut interest rates for a third time, quarterly earnings reports generally came out better than expected, and the monthly jobs report was stronger than economists had forecast.
In the week ahead, Wall Street will turn its attention to American consumers. With just over 50 days until Christmas, the all-important shopping season now is upon us. Spending related to the holidays 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.
Even amid signs of slowing in the broader economy, consumer spending has held up so far and confidence, as measured by various surveys, hasn't changed much. Experts will watch to see whether those trends continue. And traders will get a key report on how much money Americans borrowed in September.
It's also the last hurrah of earnings season, with companies like Under Armour, Marriott, Expedia, and Ralph Lauren expected to report results.
Here's what to watch in the week ahead — and how the news could affect your bottom line.
What's happening: A monthly report detailing the amount of money that consumers borrowed in the month of September is due for release on Thursday — and economists currently project it slowed to $15.6 billion from $17.9 billion in August. If so, that would mark the second consecutive monthly decrease. A report in mid-October showed that consumer spending unexpectedly fell for the first time in seven months in September.
Why it matters: Borrowing is closely watched because it provides insight about consumer spending, which accounts for more than two-thirds of U.S. economic growth. While mortgages aren't included, this report does capture auto, student, and personal loans, along with credit card debt.
Traders want to see people borrowing more money — especially since the Federal Reserve has been cutting interest rates, making it cheaper to take on debt. Instead, Americans are saving more money: 8.3% of their income as of September, up from 6.5% three years ago.
What it means for you: It's smart to save money: Experts recommend you set aside funds for an emergency and invest for your retirement. But while one person's spending or saving decisions don't affect the broader U.S. economy, collectively all of our decisions do. That's why Wall Street wants to spot if those decisions are changing in a way that could lead to a more significant slump in spending and ultimately slower economic growth.
What's happening: At the heart of a lot of those spending, saving, and borrowing decisions is the question of how confident Americans feel about the future. And a closely watched survey from the University of Michigan, scheduled for release on Friday, could help experts get a better sense. Economists currently forecast that sentiment improved for the November reading, though a separate survey showed confidence dipped slightly in October.
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. In last month's survey, consumers were most focused on income and job growth — and the latest jobs report showed that hiring increased more than expected in October. That said, hourly earnings increased only slightly.
What it means for you: While economists expect some improvement in confidence, 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.
The S&P 500 managed to shake off its spooky reputation in October, set new records, and end the month 2% higher. The start of a new month also ushers in the best six-month period for stock prices since 1950, according to data compiled by Ryan Detrick, senior market strategist at LPL Financial. The November-April period has seen average returns of 7%.
That said, experts do anticipate some bumpiness ahead as traders sort out what's next, especially with the U.S.-China trade deal. But 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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