Skip to main content

Federal Reserve Says Stocks Driven by Fundamentals, Not Speculation

By U.S. News & World Report

The newly-released Federal Reserve meeting minutes from its July meeting kept investors guessing about when to expect the next interest rate hike and when the Fed will begin to unwind its bloated balance sheet. For now, the best news for investors may be that Fed members see no obvious cause for concern about the record-high U.S. stock market.

The U.S. jobs report from July indicated that unemployment has dipped to its lowest level in 16 years. However, Fed members remain concerned about slow wage growth and slipping inflation levels. The core personal consumption expenditures index, a popular measure of inflation, dipped from 1.8 percent in February to 1.5 percent in June, still well short of the Federal Reserve’s 2 percent target.

[See: 9 International ETFs That Are Off the Beaten Path.]

Some Fed members argued that further interest rate hikes should be delayed “in light of their concern about the recent slowing.”

The Federal Reserve is still forecasting another interest rate hike before the end of the year, but investors aren’t so certain. Bond traders are currently pricing in only a 42 percent chance of a rate hike by the December Fed meeting, according to CME Group’s FedWatch tool. Bond investors were pricing in a 48.3 percent chance of a December hike just one month ago.

The Fed also failed to shed much light on its plan to start reducing the massive bond portfolio it accumulated as part of the economic stimulus efforts following the last recession. Earlier this week, New York Fed President William Dudley said he didn’t think market participants “are unreasonable” in expecting a definitive decision on balance sheet measures at the next Fed meeting in September.

[See: 9 Ways to Invest in America With Bond Funds.]

While investors were likely disappointed by the lack of clarity the Fed provided on interest rates and balance sheet initiatives, they did get a major vote of confidence regarding what some see as an overheated U.S. stock market.

The Fed discussed record-high stock prices but concluded that the momentum in the market is based more on fundamentals than the type of leverage-fueled speculative buying that is typical during market bubbles.

The Standard and Poor’s 500 index drifted lower into Wednesday’s close following the release but remains up 10.2 percent for the year.

More from U.S. News

9 Psychological Biases That Hurt Investors

The Fastest Ways to Lose All Your Money in the Stock Market

9 Ways to Invest in America With Bond Funds

Federal Reserve Says Stocks Driven by Fundamentals, Not Speculation originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
Read Next Story

Related News

Frustration grows in Venezuela as earthquake death toll reaches 1,430

Israel and Lebanon sign framework agreement with US in ‘first step’ toward peace, Rubio says

Trump-endorsed populist poised to become Colombia’s next president as rival challenges vote