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Weekly Market Digest: Musk Sued by SEC, Fed Hikes Interest Rates

If you’re a market-focused investor, the big news this week was the Federal Reserve’s move to raise interest rates another 25 basis points, or 0.25%. This came along with messaging that indicated expectations of a 4th rate increase in 2018 with further rate raises expected in 2019.

Also sharply in focus this week was the testimony of Dr. Christine Blasey Ford and Supreme Court nominee Brett Kavanaugh during Thursday’s Senate Judiciary Committee hearing. The hearing centered around allegations of sexual misconduct by Kavanaugh.

Tesla CEO Elon Musk is being sued by the Securities Exchange Commission on grounds that he may have mislead investors in his publicly traded company with his tweet about taking the company private.

Weekly Returns

S&P 500: 2914 (+0.6%)
FTSE All-World ex-US(VEU): (-1.33%)
US 10 Year Treasury Yield: 3.053% (-0.36%)
Gold: $1196 (-0.25%)
EUR/USD: 1.16 (-1.69%)

Major Events

  • Monday – The US signed an updated free trade agreement with South Korea. Some of the largest provisions surrounded the auto industries of both countries.
  • Tuesday – President Trump spoke at a United Nations General Assembly, specifically addressing the US’s recent focus on protectionist trade measures.
  • Wednesday – The Federal Reserve messaged the 3rd short term rate increase of 2018.
  • Thursday – Goldman Sachs launched online consumer banking platform Marcus in the United Kingdom.
  • Thursday – Supreme Court nominee Brett Kavanaugh and Christine Blasey Ford testified before the Senate Judiciary Committee.
  • Friday – Tesla’s share price opened at over 10% down from the previous night’s close based on news that the SEC was suing CEO Elon Musk over his tweet about taking Tesla private.

Our Take

The SEC seems to be specifically targeting Elon Musk rather than Tesla itself. Their suit is reported to be aimed at preventing Mr. Musk from participating in an executive position for any publicly traded US company. As of Thursday evening, it appeared that Elon will fight the case, as opposed to settling directly out of court. Tesla shares closed Friday at $264.77, down more than 12% from Thursday’s close.

With unemployment at record lows, and inflation sluggish in its response to a strongly performing economy (inflation is expected to increase in strong economic periods), the Fed’s message of increased rates was unsurprising to many. Still, while unemployment & inflation are low, recent reports indicate that wage growth over the past few years has not increased significantly. This could be a factor in why inflation has yet to really pick up.

These two major events from this week illustrate a couple of the multitude of complex factors that contribute to economic growth both here in the US and globally. While our write-up this week focuses on some of the more conspicuous news points, there are other factors driving the markets. This is a point we hope all investors take to heart – it is very hard to determine exactly what will happen in the markets in the near term. The US economy looks strong now, and that very may well continue, but it also may not. As always, it’s important that investors remain disciplined in their investments, and that they understand that things can (and at some point, will) change.

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