Investing

Lower confidence, higher prices, and other news affecting your money this week

Anna-Louise Jackson@aljax7
Twenty/20

The U.S. stock market appeared poised to do something it hadn't done since March: rise for four consecutive weeks.

Then the S&P 500 fell Friday on news that Chinese leaders had cut short a visit to the U.S. This meeting was the first time in nearly two months that trade negotiators from the U.S. and China resumed face-to-face talks. Earlier that day, the U.S. said it would temporarily exempt over 400 Chinese products — items such as dog leashes and Christmas tree lights — from tariffs that President Donald Trump's administration imposed last year.

Even with a sharp spike in oil prices, stock market investors had other reasons to be optimistic. The Federal Reserve just cut interest rates for the second time this year, a move that Wall Street broadly expected. Economic reports remain mixed, however. U.S. manufacturing activity hit a five-month high, while economic data in Europe has been weaker, raising concerns about a global slowdown.

Even so, U.S. stocks have steadily rallied nearly 5% in the past month, after a wild August.

This week, traders await two much-watched surveys that measure confidence among American consumers, along with the Fed's preferred measure of inflation, or the change in prices for goods and services. Combined, these could offer clues about the pace of consumer spending in the months ahead, and could also offer clues about the Fed's next steps — especially with policymakers divided on what further action they'll take in 2019. Economic data that previously pointed to a weaker U.S. economy has strengthened more recently.

Here's what to watch, and how the news could affect your wallet:

Are Americans feeling less confident?

What's happening: This week brings two surveys tracking confidence among consumers. One, from The Conference Board, is scheduled for Tuesday, and one from the University of Michigan is due on Friday. Economists currently project that sentiment weakened slightly in September.

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. There are a slew of housing-related reports due this week, and economists generally expect gains in home sales during the month of August.

That said, it remains an open question whether higher oil prices could cause consumers to pull back on their spending — especially if they increase further following attacks in Saudi Arabia. Beyond the pump, higher oil prices can also affect the costs of other modes of travel, and even your portfolio.

What it means for you: Even though economists expect some weakening in consumer confidence, they don't anticipate these measures to fall as low as they were earlier this year in January. Still, it's important to monitor trends, especially as talk of a recession has gone mainstream, and some experts worry that fears of a recession themselves could trigger one.

Finally, 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.

Economists expect prices are going up

What's happening: A much-watched report on inflation for the month of August is scheduled for release on Friday. This measures the average change in consumer prices, or what you pay for a basket of various goods and services, including food and housing.

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. Economists currently project that this measure increased 1.8% in the past 12 months, which would be the highest since December, and in line with the Fed's expectations.

What it means for you: When prices jump, 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 to raise or lower interest rates.

The bottom line

The S&P 500 still is flirting with a new all-time high, though it didn't happen last week. If such a record comes this week, it will mark the 14th of 2019. Even so, it's a reminder of just how good this year has been for investors, with the benchmark index up about 20% — more than double its long-term average.

Even so, experts warn that bumpiness could return to the market again, especially when the next round of trade negotiations takes place. Any market turbulence 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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