Rising numbers of Covid-19 cases, higher unemployment figures, and tensions between the U.S. and China have left some investors daunted. Stocks ended the week slightly down, with the S&P slipping roughly 0.2% — its first weekly decline in four weeks. Even so, the market continues to perform better than might be expected.
"A lot of the normal market indicators are being ignored," says Ben Barzideh, wealth advisor at Piershale Financial Group. "The economic data we're seeing is worse by a mile than anything we've seen in many years, but people aren't feeling it as much because we have so many safety nets in place. We're all in this together, doing the best we can to ride it out."
Next week, some of those safety nets are set to expire, such as the extra $600 per month unemployment benefit, which is helping millions of unemployed workers stay afloat. As investors look to the week ahead, one of the biggest looming questions is whether Congress will renew the extra funding for unemployment benefits, which could continue to help prop up individual workers and the economy as a whole.
If the stimulus package isn't large enough to continue holding up unemployed workers and other damaged sectors of the economy, "the market will likely have a negative reaction," Barzideh says.
Here's what to watch in and around the stock market during the week ahead — and how the news could affect your bottom line.
Congress is debating another trillion-dollar stimulus package in response to the coronavirus pandemic, and experts think we'll learn more details about it in the coming week. "Both parties are ironing out the details, and I think the package will be more robust than we might expect," Barzideh says.
What's happening: Democrats are campaigning for a stimulus package of about $3 trillion, while Republicans hope to spend about $1 trillion. However, with an election coming up, Barzideh expects that Republicans will compromise and end up with a package of at least $2 trillion.
Eric Bond, president of Bond Wealth Management, expects the package to extend the enhanced unemployment benefit until the end of the year, but reduce the figure to $300 per week. He also expects to see additional state and local government support of about $200 billion and an extended Paycheck Protection Program (PPP) to offer credit to the hardest hit economic sectors.
Video by Stephen Parkhurst
Why it matters: Extra unemployment benefits have been crucial for propping up the coronavirus economy for the past several months, and many experts believe that, if they're allowed to expire, the effects could be damaging for both individuals and the recovery as a whole.
What it means for you: If you're among those who are unemployed or hurting financially, the outcome of the stimulus debate could greatly affect your bottom line. As an investor, you may see an impact, too.
Publicly held companies are continuing the process of reporting their earnings for the second quarter of 2020. In the coming week, several big companies are scheduled to release their reports, including 3M, McDonald's, Pfizer, and Harley-Davidson.
What's happening: So far, second-quarter earnings have been fairly bleak, as expected, but there have been a few bright spots. For instance, Tesla showed a surprising second-quarter profit, and AT&T reported mixed results for the second quarter.
Why it matters: It doesn't take much to outperform analysts' low expectations for the second quarter of 2020, which saw most of the country in pandemic-induced shutdowns. Still, "there has been a strong start to the earnings season so far," Bond says.
In fact, the S&P 500 rose this week on the strength of more-positive-than-expected earnings reports from some large-cap companies, Barzideh says.
What it means for you: Earnings reports are still expected to be bleak in the coming week, but for individual investors, it's more important to look to the future. "The key thing to watch for is corporate commentary around reopening, rehiring, and available liquidity," Bond says. Those metrics will provide insight into how quickly the economy might recover.
Constant change and ongoing uncertainty is difficult for everyone — from the parents who are scrambling to find child care for their virtual-schooled children to the bar owner who has been instructed to close his doors for a second time as coronavirus cases spike.
The market is notorious for disliking uncertainty and that could drive negative stock market returns. And, on top of all that, there's the upcoming presidential election, which is less than 100 days away.
All those potentially market-rattling factors are a reminder that it's important to keep your eye on the long term rather than the short term. "As an investor, you want to look ahead to the next 12 to 18 months instead of focusing on the next week or two," Michael Sheldon, executive director and chief investment officer of RDM Financial Group, recently told Grow.
And remember that especially for younger investors, periods of uncertainty in the market can be a generational buying opportunity.
Nancy Mann Jackson is an award-winning journalist who specializes in writing about personal finance, real estate, business, and other topics. Her work appears in several publications, including CNBC.com, Fortune.com, Entrepreneur, Working Mother, and CNNMoney.com.
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