Our Thoughts

FJY News to Know #47

In the Middle of the Zero Commission War, Schwab Buys TD Ameritrade

Charles Schwab and TD Ameritrade are finalizing their merger, which would be worth about $26B.  This comes in the midst of a battle between the big online brokerage firms.  IBKR, a rival of Schwab, recently announced it would end commissions charged for trades.  Following suit, Schwab said it would also end commissions.  Robinhood, a popular trading app launched a few years ago, began with a no-commission business model; the effects of which are finally kicking in.  However, a merger like any other could have consequences. To read what the experts are saying about it, go here.

Growth and Value Stocks Have Been Playing Tag for a Decade or So — But is One Set to Run Away From the Other?

The S&P Value Index (IVX) is composed entirely of value stocks, and the corresponding IGX of growth stocks. Value stocks are strong on the balance sheet, and are usually undervalued based on the analysis of their earnings and sales-to-price. Growth stocks, on the other hand, show greater profits on a graph and tend to show up with newer companies, although they often have higher volatility.  Growth has outperformed value in this decade’s bull market, but variations from both stocks’ EMA (Exponential Moving Average) have been evidence of the two changing places recently. For more details about these tandem assets and if it is a pattern or a pause, click to this page.

A Bear Stock Market Might Echo Over to Bonds as Well

Interest rates continue at all-time lows. If they rise, fixed-income prices would take a beating.  While many are worried about a major downturn in stocks, bond prices could theoretically do the same thing.  The benchmark 10-year Treasury bond yield is down to 1.76% from 3.04% — over the past year.  30-year bonds have fallen from 3.31% to 2.23% in the same time span.  Goldman says that as soon as bond yields flip, the market begins to cost in fee hikes — by the central financial institution.  To read more about these financial relationships, visit this article.

The 2020 Election is One Year Out, but Democrats are Already Planning on Raising Taxes on the Wealthy and Investors

A major shift in the Oval Office, House, and Senate might mean much higher taxes — and Democrats are preparing legislation in case this happens.  Democrats Alexandria Ocasio-Cortez and Jan Schakowsky are helping draft a bill that would raise taxes on the top tier to almost 60%.  The bill is also aimed at changing capital gains, not only to raise the percentage but to tax investments annually — as opposed to taxing when they sell an asset.  To read what the Democrats would do with this revenue, visit this link.

Congress Considering Bill Allowing Tax-Free 401(k) and IRA Withdrawals to Purchase Long-Term Healthcare Insurance

Congress is discussing a bill that would allow retirement savers to tap assets held in 401(k) plans and individual retirement accounts to buy long-term care insurance.  Withdrawals would be tax-free, with the aim of making the insurance more affordable and potentially driving down premiums.  Senator Patrick Toomey of Pennsylvania plans to introduce a bill in the coming weeks that would allow the withdrawal of up to $2,000 of retirement assets.  To read about the causes of this move by legislators, this article contains more information.

Ho-Ho-Ho?  ‘Tis the Season to be Jolly — and Mind Your Wallet

 The holidays are now upon us.  It’s fun to play Santa Claus and travel to visit friends and relatives, but it invariably comes with a price tag.  So how does one prepare for the ‘damage’ done during the holidays?  ‘The best way to take care of unexpected expenses is to try to plan in advance’, says financial expert Jennifer Streaks.  One way to plan in advance is to look up last year’s expenses and purchases — if possible.  Another tactic is to take care of holidays for next year, by buying critical items during the post-holiday sales.  For more tips on pinching pennies, this article might help.