Investing

Federal Reserve meeting, jobs report, and other news affecting your money in the week ahead

Twenty/20

Next week, the week of October 28, will arguably be among the busiest of the year and jam-packed with potential market-moving news. Nearly 30% of companies in the S&P 500 are scheduled to report quarterly earnings results. Traders widely expect the Federal Reserve will cut interest rates again. What's more, several key economic reports — monthly jobs data, the first reading of GDP (gross domestic product) for the third quarter, consumer confidence, and a measure of inflation — are scheduled for release.

Meanwhile, the S&P 500 is just 0.1% below its all-time high from July. The coming week's news could finally push the benchmark above this threshold, after hovering within 1% of a new high for seven of the past 10 trading days. On average, the S&P 500 has posted weekly gains of 1.4% and losses of 1.5% in the past 10 years, according to data compiled by Grow.

While there's the potential for surprise from publicly traded companies as earnings season heats up, results have generally been better than analysts expected. Any surprises from the Fed or economic reports could rattle traders, though.

Here's what to watch in the week ahead — and how the news could affect your bottom line.

Wall Street expects the Fed will cut rates again

What's happening: Central bankers convene for one of their eight annual meetings on Tuesday and Wednesday. Professional investors currently anticipate — with 93.5% probability — that the Fed will lower interest rates for the third time this year.

The federal funds rate is currently set at 1.75%-2%, down from 2.25%-2.5% as recently as July. If the Fed does cut this rate to a range of 1.5-1.75%, as expected, it will be the first time it has lowered rates by 25 basis points at three consecutive meetings since 1998. Ahead of the 2002 and 2007-2009 recessions, central bankers made more drastic rate cuts of 50 basis points or more.

Why it matters: The Fed has lowered interest rates amid signs of slower growth in the U.S. economy. But at the last meeting, central bankers were divided on what further action to take this year — and there's speculation that they'll pause the interest rate-cutting cycle following this meeting. Some experts also believe the need may be fading for the Fed to lower rates, especially amid signs of progress in trade talks between the U.S. and China.

But the Fed has one vocal opponent who believes further rate cuts are needed: President Donald Trump. In a tweet on October 24, he said the Fed "is derelict in its duties" if it doesn't lower rates further, and that central bankers have been "way too slow to cut."

What it means for you: Even if the Fed were to surprise Wall Street by holding off at this meeting, another cut is likely coming soon.

The goal of lower interest rates is to stimulate economic activity by making it cheaper for consumers and businesses to borrow money. If you haven't already taken advantage of the rate cuts, consider some smart money moves, like targeting debt repayment and securing a higher rate for your savings.

Economists project slightly weaker economic reports

What's happening: Next week is slated to be especially busy with traders poring over lots of closely tracked economic indicators. Here's what to expect, and what economists are currently forecasting:

  • Tuesday: A survey of consumer confidence, which economists project improved in October versus September.
  • Wednesday: The first reading of GDP for the third quarter, which measures the sum of the value of all goods and services produced. Economists project the U.S. economy grew 1.7% in the three months ended September 30, a slowdown from 2% and 3.1% in the prior two quarters.
  • Thursday: The Fed's preferred measure of inflation, or the average change in consumer prices you pay for various goods and services. Economists currently forecast that inflation increased slightly in September.
  • Friday: The monthly jobs report for the month of October, which economists expect declined significantly from September.

Why it matters: Economists broadly expect data that points to slower economic growth, which is why so many people on Wall Street want the Fed to cut rates again. However, central bankers will make their decision before several of these data points are scheduled for release.

What it means for you: While recession fears have abated a bit, one closely tracked model suggests a nearly 35% probability of such a slowdown by September 2020, according to data from the Federal Reserve Bank of New York. Economists, Federal Reserve policymakers, and investors on Wall Street closely track these reports to gauge whether or not U.S. economic growth is accelerating.

The bottom line

The coming week will mark the end of October, which, so far, hasn't lived up to its spooky reputation among investors. Even so, with much potential market-moving news on the calendar, there could be some more significant moves in the weeks ahead.

Still, it's important to keep perspective. The S&P 500 is up nearly 21%, more than double its long-term average — and compared with five years ago, this benchmark has risen more than 50%.

Any turbulence in the market ahead 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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