Your Week In The Business World

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Photo: Huffington Post

Photo: Huffington Post

Photo: Huffington Post

Cole Cummins, Staff Writer

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American Markets Struggling to Rally: After the rough week American markets had last week, they are still struggling to bounce back. The dip in the market is being led by tech stocks like Apple and Netflix. One of the contributing factors has been the Fed’s raise of interest rates. Rising interest rates mean businesses will take out fewer loans, which slows economic growth. The big challenge the Fed has is trying to keep inflation around two percent, without hurting our economic growth too much.

Musk Reaches Settlement with SEC: After the infamous “Funding Secured” tweet Elon Musk sent out in August, the SEC sued him for fraud. His tweet, which suggested that he had found funding to take Tesla private, manipulated stock prices (they rose by 11%). Because Musk did not have an actual investor lined up, this was a misleading statement which, as a CEO of a publicly traded company, Musk has a responsibility to not tweet. The case has now reached settlement, in which Musk must step down as Tesla’s chairman and he and the company must pay $20 million each to the SEC. There are rumors this change in leadership dynamics will lead to less focus on the semi-truck that Musk was pursuing and more focus on the Model Y, the affordable version of the Model X SUV.

More Tariffs?: President Trump has already imposed 250 billion dollars worth of tariffs on China. Trump indicated recently that he is considering more tariffs on Chinese goods.  In a recent 60 Minutes interview, the President said that, “I want them to negotiate a fair deal with us. I want them to open their markets like our markets are open.” The initial goal of imposing such tariffs was to decrease the trade deficit we have with China. A trade deficit refers to having more imports than exports. If you subtract our exports to China from our imports from China, there is a 500 billion dollar deficit. Another key issue Trump wants to target is intellectual property theft. China has a reputation for making knockoffs of famous brands and “borrowing” technological breakthroughs. The so-called trade war that we are experiencing is a series of tariffs and fees imposed by the U.S. and China on each other. Many of us are wondering why it’s so important for the U.S. to protect our industries at home; if China is able to produce goods more efficiently is it worth it for us to produce them? An important thing to consider, however, is that China heavily subsidizes many goods it produces, such as steel, which is unfair to other producers who cannot compete with Chinese subsidized prices. The challenge with the trade changes Trump is attempting to make is that, while it is a valid cause to try to protect U.S. companies from predatory practices (subsidization by the competitions), we don’t want to spark a recession in either country.

Student Investment Tip of the Week: Utilize the Roth IRA!

The Roth IRA is a special retirement account that allows you to only pay taxes when you initially put money into it; there is no tax on withdrawal. Because of this, putting in money at an early age, when you don’t make enough for your income to be taxed, allows you to invest money with absolutely no taxes paid at any time. Money put into the IRA fund can be invested in many different ways, although index funds or ETFs (exchange traded funds) are my personal recommendations. Think about the impact this could have on younger students- compound interest is powerful and can result in huge money growth by retirement. Let’s say that you invest $1,000 into the Roth IRA when you’re 17. If you have annual returns of 8% (a fairly conservative estimate), you will have $40,211 when you’re 65, which you can then withdraw tax-free. If you had annual returns of 10%, the average return for the S&P 500 in the last 90 years, your ending balance would be $97,017. That’s more than 90 times the principal investment.

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