Next Week Investing Outlook (9/16)

There will be a lot of news for investors to digest next week, including earnings releases from several companies such as FedEx and Adobe (Tuesday after hours) as earnings season winds down, as well as the results of the Federal Reserve meeting and announcement about the Federal Funds Rate on Wednesday morning.  Another potentially interesting piece of information for investors will be credit card charge-off reports that will be issued by major card issuers such as Bank of America, Citigroup, Capital One, Discover and JPMorgan, which may give a good indication of how the American consumer is doing and might give some insight into how much longer we have before we can expect an economic recession.  The stronger retailers such as Target, WalMart, Home Depot and Lowes posted very strong results in their most recent quarter, indicating the consumer is doing well.

Major stock indexes have been moving positively and ended last week on a positive note (Dow was up 1.6%, S&P 500 and Nasdaq both up 0.9% for the week), suggesting that new all time highs could be coming, although there's also a chance that investors will be disappointed in the Federal Reserve's actions / messaging next week and markets could drop.  Markets are currently anticipating an 80% chance of a 25 basis point cut and a 20% chance of no cut.  

Chart courtesy of www.macrotrends.net
What does all this mean for the average investor?  If there's a rate cut, the interest you earn on your cash in the bank will be reduced and depending on how much the cut is, the market could react positively, but it will depend on what is said about future rate cuts if the cut is only 25 basis points.  A 50 basis point cut would be totally unexpected and would likely ignite a huge rally in stocks, as would any announcement of a "early trade deal" with China.  
As I have said in previous posts, although there is risk that the value of your stocks will drop short term, if you invest in good dividend stocks for the long term, you can enjoy a yield that will be much higher than cash held in a bank account (or even Treasury bills), given the low interest rate environment we are heading into.  Bonds have rallied recently from their recent lows, but the rates are still well below the 3% to 5% yields that can be found in many quality dividend stocks.  Obviously, if there's no rate cut, you will continue to earn the same interest from your bank savings account, but look for a big sell-off in the stock market which could be an opportunity to pick up some good dividend paying stocks when the dust settles.  See this post for some suggestions for building a high quality dividend stock portfolio.
I hope you find this post useful as you chart your investing course and Build a Financial Fortress this year.
To see all my books on investing and leadership, click here.
Disclaimer:  I use affiliate links where I get paid a small amount if you buy the service or product. This helps support my blog.