Experts warned that, after an unusually calm September, October could spook investors.
Sure enough, on back-to-back days last week, the S&P 500 tumbled about 3%, for its biggest two-day slump since December — and now is 2.4% below its all-time high on July 26. The benchmark barely budged for most of September, rising or falling just 0.1% or less on more than one-third of trading days. Stocks rose Friday on some good news, though: Hiring remains steady and the unemployment rate fell to a 50-year low.
A much-anticipated meeting to discuss trade, scheduled on October 10-11 in Washington for leaders of the U.S. and China, could bring some additional bumpiness to the stock market. What's more, traders increasingly expect the Federal Reserve will cut interest rates for a third time when central bankers convene at the end of this month — and minutes from their last meeting are scheduled for release this week.
Here's what to watch this week, and how the news could affect your bottom line.
What's happening: Senior leaders from the U.S. and China are scheduled to meet starting Thursday for two days of trade talks in Washington. The meeting comes following what's been a thawing in the tensions between the two countries in recent weeks — and before another round of tariff hikes is scheduled to take effect October 15.
Why it matters: Trade has taken a back seat to other news out of Washington lately, namely an impeachment inquiry of President Donald Trump. In light of that, some people on Wall Street are optimistic that Trump will want to get some sort of trade deal struck soon. They'll be looking for action, not just talk.
What it means for you: The ongoing spat has had far-reaching implications. It has caused short-term bouts of turbulence in the stock market, made it more expensive to buy a variety of goods from China, and sparked anxiety among U.S. consumers. News out of these trade talks likely will cause some reaction in the stock market that could affect your portfolio — stock prices may move lower on any setbacks or higher on signs a deal is coming.
What's happening: The minutes from the most-recent Federal Reserve meeting, held in mid-September, are scheduled for release on Wednesday. Policymakers cut interest rates for the second time since the Great Recession at that meeting, though they were divided on what further action to take this year. Traders will scour the meeting minutes for more context about that decision and what's ahead.
Why it matters: Traders are betting, with about 74.3% probability, that central bankers will cut interest rates when they meet later this month, on October 29-30. Wall Street sees a higher chance of a rate cut in the wake of weak economic data that is fueling fears the U.S. economy could be headed for another recession. The Fed lowers interest rates in an effort to stimulate growth by making it cheaper for consumers and businesses to borrow money.
What it means for you: Interest rates have come down since the Fed cut rates in July and September. That's made it cheaper to take out a mortgage, which could save borrowers thousands of dollars, but also means you earn less on your savings account.
Still, the reason Wall Street is betting on a rate cut is because the economy is slowing. Uncertainty about the economy has also started to make consumers more anxious — but instead of fretting about when a downturn might come, you're better off taking steps preemptively to recession-proof your life.
After such a calm September, the return of bumpiness in the market can rattle investors. But it's important to put these moves in context. The S&P 500 is up almost 18% this year — nearly double its long-term average. And compared with five years ago, this benchmark has risen nearly 50%.
Any further turbulence in the market, be it this week or the weeks 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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