This week in the markets
- A new sector called Communication Services was created in the Standard & Poor's 500 Index (S&P 500) this week, which will shift companies like Facebook and Google out of the Technology sector.
- Ford Motor Co. joined other American brands in warning the presidential administration that it believes continued trade tariffs on US imports will cause prices to rise across the motor industry.
- The Federal Reserve raised rates again this week by 0.25%, and still expects another rise before the end of the year.
- The Securities and Exchange Commision (SEC) sued Tesla’s CEO Thursday for making misleading statements to investors in a tweet back in August.
The S&P has a new sector called Communication Services
The creation of a whole new sector within the S&P 500 called “Communication Services” shifted how some prominent large-cap stocks are labeled. The new sector is replacing Telecommunication Services and will add a number of popular tech and media stocks, including Google, Netflix, and Facebook. The modification won't have an impact on index investors, since the overall makeup of the S&P 500 will include the same 500 stocks. Remember -- index investors, like many exchange-traded fund (ETF) investors, seek to track a market index.
Despite the fact that the composition of the S&P 500 remains unchanged, the new sector is still important as it modifies the appeal of investing purely in Technology indexes, since many popular stocks like Verizon and AT&T will be moved.
Ford says tariffs could ignite price increases
The CEO of Ford, Jim Hackett, said Wednesday that trade tariffs on imported steel and aluminum are going to cost Ford $1 billion and could cause prices to increase across the auto industry. Ford is one of many American companies, like Walmart and Procter & Gamble, who have called for a trade war truce due to increasing prices that they have argued will trickle down to American consumers. If you’re in the market for a new car, you may want to consider purchasing now, before prices go up.
The Federal Reserve raised rates (again)
Since the economy has been on overdrive, the Fed has decided to tap the brakes by increasing interest rates for the third time this year. The Fed made a .25% increase to its short-term interest rate and continues to forecast another rate hike before the end of the year. What does this mean for consumers? Increased rates will likely cause borrowing costs for loans, and credit cards to rise. On the flip side, this strategy will also push up bank savings and CD rates. Yay!
The SEC sues Tesla CEO
The SEC is asking a federal judge to prevent Musk from serving as an officer or director of a public company, among other penalties after Musk tweeted back in August that he had funding secured to take his company private. The SEC found that Musk had not actually secured funding and may have attempted to disrupt the markets and cause harm to investors. The tweet did cause Tesla’s stock price to shoot up nearly 9%. Beware of what you tweet.
And now for your weekly Lionomics wrap-up. 🤓
Lionomics: Finance made easy
It's been a busy week in the Lionomics classroom. We learned when you should withdraw from your investment account and when you should deposit more. Spoiler alert: It’s all about compounding interest. We also learned the importance of understanding investment fees and how they affect your investment returns. Finally, we reviewed how to decide between hiring a financial advisor or managing your own investments, and how there may be a better investment approach.
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