Fortunately, most analysts remain optimistic the S&P 500 will resume its upward march. Historically, the three-month period of August through October has been a weak one for stocks. In fact, the S&P 500 endured a 10% correction in 2023 only to finish the year up 24%. Adam Turnquist, chief technical strategist at LPL Financial, said the S&P 500 averages around three pullbacks of at least 5% per year. Historically, the S&P 500 has averaged about one 10% pullback per year as well.
What do interest rate cuts mean for savers?
But the stock market has consistently gained ground in the long term regardless of who is in the White House. The worse-than-expected jobs report sparked a global stock market selloff amid fears of a U.S. recession in the near future, and spurred talk of an emergency rate cut before the next Fed meeting. These two pieces of data have increased the odds of an interest rate cut on Sept. 18. Value stocks have historically outperformed growth stocks when interest rates are high, but that trend reversed in 2024 as investors anticipate a Fed pivot to rate cuts in the second half of the year.
News & World Report and a regular contributor for Forbes Advisor and USA Today. In his speech, Powell said it is unlikely the Fed will need to raise interest rates further but the appropriate path forward will instead be to continue to hold interest rates at current levels for an extended period of time. The FOMC has maintained its target fed funds interest rate range at between 5.25% and 5.5% since July 2023, its highest target range since 2001.
Crude oil prices today: WTI prices are down 2.10% today
The Vanguard Value ETF (VTV) has generated a total return of just 6.3% year-to-date, while the Vanguard Growth ETF (VUG) has generated a total return of 14.7%. The stock market has proved resilient in the face of growing recession fears, with support tied in part to expectations the Federal Reserve will pivot to rate cuts well before year-end. Investors should think through what that scenario would say about the backdrop for equities, said Seema Shah, chief global strategist at Principal Asset best forex trading app of 2021 Management, in a Monday note. Softer U.S. economic data may point to weaker earnings over the next several months as corporates’ pricing power will erode as inflation cools, while labor… Having said that, it’s fair to note that valuations are historically high.
Treasury bonds with long maturities is one option for savers who want a high yield in a falling interest rate environment, as a bond held to maturity has a fixed interest rate. She also noted that Treasury bond interest is exempt from state income tax. “When households are under stress, there are studies that show that their ability to think logically kind of goes down. So the focus becomes ‘how to make money fast.’ And if you believe you have an edge because of all the information you have regarding sports, that’s going to be your go-to,” Paré says. The National Football League’s regular season starts on Thursday, Sept. 5, when the Baltimore Ravens will face the Kansas City Chiefs. “The bottom line is that the US economy is not in a recession, and there are no signs of a recession on the horizon,” Apollo’s Tosten Sløk said.
If you have a long-term investment strategy with a time horizon of years or decades, it’s probably a good idea to ignore any temporary market corrections. If you are a trader with a time horizon of weeks or months, the August weakness may be a sign the AI technology trade is unwinding in the near term. The S&P 500 has historically averaged roughly a 10% annual return since 1957. It’s best to monitor economic data, pay attention to Federal Reserve commentary and 10 steps to creating your first trading strategy track election results. That said, you’ll need to remain flexible to take advantage of changing conditions.
Meyer added that savers who don’t need their money for 1 to 2 years should consider long-duration CDs. “Putting money into a CD right now guarantees you a relatively high rate,” she said, compared to the lower rate you might earn in a high-yield savings account after interest rates drop. But Paré and Woods both say that some people can find themselves unable to control the risks of their sports betting behavior. In other words, heavy sports betting can sometimes be a form of gambling addiction.
Bitcoin prices will soar 59% to $90,000 by the end of the year if Donald Trump wins election, Wall Street analyst says
- “The bottom line is that the US economy is not in a recession, and there are no signs of a recession on the horizon,” Apollo’s Tosten Sløk said.
- According to Meera Shireen Meyer, a CFP based in Boulder, Colorado, interest rate cuts can benefit certain sectors of the stock market by decreasing the cost of borrowing for businesses.
- Delia Fernandez, a certified financial planner based in Los Alamitos, California, added in an email interview that bond prices tend to increase when interest rates fall.
- In terms of the total price gain or total length of the super cycles, we seem to still have room to run.
This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. The shares included in it are weighted according to price; the index level represents the average of the shares included in it. Investors should focus on quality and income stocks, with market volatility here to stay through 2027, BofA said. The job market, meanwhile, held up as expected in the month of August, with the unemployment rate declining the basics of currency trading 2020 slightly to 4.2%.
While interest rate cuts can benefit stock market investors by decreasing the cost of debt for businesses, they also decrease the yields that savers can earn on savings accounts and certificates of deposit (CDs). That growth is apparent in the stock prices of sports betting companies such as DraftKings (DKNG). DraftKings shares have roughly doubled in price since the company went public in 2020, albeit with significant volatility since then. The stock market is headed for a tough two months, but investors could still see a strong rally by the end of the year, according to one of Wall Street’s most bullish forecasters. The bond market is currently pricing in a 98.7% chance the Fed will maintain its current fed funds target rate range of between 5.25% and 5.5% at its June meeting, according to CME Group. “For rate cuts to be in the cards, the Fed will need to see a desperately struggling economy or a financial crisis — not a particularly favorable backdrop for investors,” she wrote.
The Fed’s quarterly Senior Loan Officer Survey has finally been released, and as expected, most banks reported tighter lending conditions. But according to at least one analyst, things aren’t looking as bad as some had feared. The largest cryptocurrency on Monday fell to as low as $27,339, the lowest level since April 26, according to CoinDesk data. Bitcoin is up over 70% so far this year, but is still down almost 60% from its all-time high in 2021. In particular, he pointed to the three-month moving average of private-sector job gains dipping below 100,000.
In May, the S&P 500 gained 4.2% despite concerns over slowing economic growth, weakening U.S. consumer sentiment and the possibility of stagflation ahead. The S&P 500 is up 10% year-to-date as investors have shrugged off mixed economic data and now anticipate lower inflation, earnings growth acceleration and interest rate cuts in the second half of 2024. To combat inflation, the Fed raised interest rates to 23-year highs in 2023.
The July CPI report showed a modest month-over-month increase of 0.2%, and a year-over-year increase of 2.9%, which is closer to the level of the Fed’s 2% inflation target. Several recent economic data releases suggest that this strategy is working to tame inflation — but it may also be depressing economic activity a little bit more than investors would like. The Federal Reserve has raised interest rates almost a dozen times since 2021 in an effort to tamp down inflation by strategically slowing down the economy with higher borrowing costs. Woods adds that the opportunity cost imposed by betting money instead of investing it can make it more difficult to achieve long-term goals such as retirement. “You’re missing out on an opportunity for the consistent value creation that we’ve seen in the stock market over the long term,” Woods says.
