The S & P 500 reached 3,000 for the first time on July 10. And although it was a temporary increase of only a few hours, it was a great moment for the observers of this index. The time was good news for investors, but not for the reason you might think.
The increase in the S & P 500 came at the same time people would digest the testimony in Congress of Federal Reserve Chairman Jerome Powell, in which he said the Fed would reduce interest rates soon, perhaps even this month. It's a more conservative approach than the Fed has recently adopted, after raising the federal funds rate nine times in three years. And many people worry that there is a recession on the way.
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So, why did traders jump on this particular index? Ian Salisbury writes for Money: "Stock market investors like low interest rates because they make US companies get cheaper loans, which increases business prospects."
Cool for the merchants. But what about you, investor at home?
Wait, what is the S & P 500 again?
The Standard & Poor's 500 Index measures the value of the 500 largest corporations listed on the New York Stock Exchange. It is a way to take a quick look at the health of the stock market and the economy in general, explains Investopedia. It is good to take a look at the market because it has 500 companies from all areas of the country and from all industries. But the S & P 500 is not perfect. It is weighted towards companies with greater capitalization, or those with a market capitalization of more than $ 10 billion (think of Microsoft, Apple, Exxon Mobil, Johnson & Johnson).
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Do not change your investment strategy
Do not panic with this new milestone (which will not even be official until the market closes with the S & P 500 in 3,000). On the other hand, if you are interested in investing in a diverse set of stocks in this way, make sure you do not pay too much in fees. When we mention "low rate" index funds, we are generally talking about those with an expense ratio of 0.25% or less.
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Remember that it is the time your money spends on investments that makes the biggest difference to your long-term outcome, not how you react to market changes. While you should rebalance your portfolio annually, any changes you make in doing so should be based on your own tolerance to risk, regardless of the ups and downs that the market has seen recently.