Published: Fri, 14 Aug 2020 20:07:34 +0000
Market Blog Index Performance S&P 500 Index: .6% Dow Jones Industrial Average: 1.8% Nasdaq Composite: .1% Equities Markets were broadly higher for the week, with the Nasdaq the laggard as the rotation to cyclical value sectors remained the primary … Continue reading →
Published: Fri, 14 Aug 2020 15:58:17 +0000
Market Blog August 14, 2020 The S&P 500 Index has been flirting with a new all-time high the past few days and is currently less than half a percent away from exceeding the last all-time high set on February 19. … Continue reading →
Published: Thu, 13 Aug 2020 15:58:10 +0000
Economic Blog We continue to follow high-frequency data to assess whether the US recovery remains on track or if it has been derailed by COVID-19 outbreaks in parts of the country. Here we look at 5 charts that illustrate that … Continue reading →
Published: Thu, 13 Aug 2020 14:58:07 +0000
DAILY INSIGHTS Stocks edging lower after Wednesday’s record. In the last hour of trading Wednesday, the S&P 500 Index traded above its all-time record closing high of 3386 set on February 19 before fading in the closing minutes to end … Continue reading →
Published: Wed, 12 Aug 2020 15:58:14 +0000
Market Blog The S&P 500 Index is a few points away from a new all-time high, completing one of the fastest recoveries from a bear market ever. But this will also seal the deal on the shortest bear market ever. … Continue reading →
Published: Wed, 12 Aug 2020 15:09:59 +0000
DAILY INSIGHTS Markets higher. US markets opened higher with the S&P 500 Index within striking distance of an all-time high, its first since COVID-19’s emergence. In the midst of Washington gridlock, strained US-China relations, and the pandemic’s challenges, the markets … Continue reading →
Published: Tue, 11 Aug 2020 16:00:33 +0000
Market Blog As election season heats up, we are often presented with questions regarding market returns based on the political party composition of the White House and Congress. In our Election Preview Weekly Market Commentary, we took a closer look … Continue reading →
Published: Tue, 11 Aug 2020 15:34:54 +0000
DAILY INSIGHTS New highs are close. Stocks opened higher in the United States as the S&P 500 Index could reach new all-time highs today, with Europe up big and gains in Asia as well. It’s a quiet news day, with … Continue reading →
Published: Mon, 10 Aug 2020 15:57:39 +0000
Market Blog Gold continues to move higher and higher, making new all-time highs along the way. As we discussed in Calendar Concerns and Gold Gains, we see many fundamental reasons to expect this rally in gold to continue. Here are … Continue reading →
Published: Mon, 10 Aug 2020 15:04:51 +0000
DAILY INSIGHTS Stocks opened little changed. Market participants will remain focused on whether lawmakers in Washington, DC, can agree on a fifth coronavirus relief package. Meanwhile, several executive actions taken by the White House to provide relief without involving Congress … Continue reading →
Published: Fri, 07 Aug 2020 20:01:08 +0000
Market Blog Index Performance S&P 500 Index: 2.5% Dow Jones Industrial Average: 3.8% Nasdaq Composite: 2.5% Equities This week was positive for the markets as some encouraging economic data and well-received earnings reports helped propelled stocks higher. Technology, communications services, … Continue reading →
Published: Fri, 07 Aug 2020 16:03:24 +0000
After falling the most on record in April, the US labor market has rebounded with three consecutive months of job gains, adding back more than 9 million of the 22 million jobs lost in March and April. In July, the … Continue reading →
Published: Fri, 07 Aug 2020 14:58:09 +0000
DAILY INSIGHTS Markets point lower to end the week. US equities are modestly lower in early trading, following negative closes in Asia and a mixed session in Europe. Tensions with China are weighing on investors’ minds as President Donald Trump … Continue reading →
Published: Thu, 06 Aug 2020 15:58:16 +0000
Economic Blog We’ve written quite a bit lately about the deterioration in high-frequency data. Indicators of mobility (such as auto and air travel, commuting activity, restaurant diners, etc.) leveled off in July due to the latest wave of COVID-19 cases. … Continue reading →
Published: Thu, 06 Aug 2020 15:07:21 +0000
DAILY INSIGHTS Stocks set to open slightly lower. The S&P 500 Index is going for its fifth straight positive session today, while the Nasdaq will try to make it seven in a row. Today, market participants will focus on the … Continue reading →
Published: Wed, 05 Aug 2020 15:58:23 +0000
Market Blog This isn’t like any recession we’ve ever seen, as it was sparked by a horrible pandemic and happened because people were told to stay inside. The impact was the worst contraction in gross domestic product (GDP) last quarter … Continue reading →
Published: Wed, 05 Aug 2020 15:26:10 +0000
DAILY INSIGHTS Stocks opened higher. US stock markets opened in the green, with the Nasdaq reaching its 30th new record high of 2020. Investors are focusing on positive earnings reports, developments on the COVID-19 relief bill, vaccine progress, and jobs … Continue reading →
Published: Tue, 04 Aug 2020 15:57:52 +0000
Economic Blog The 10-year Treasury yield is historically low, so low that it could climb a full 1% before the end of the year and still be the lowest year-end yield on record, with room to spare. Historically low rates … Continue reading →
Published: Tue, 04 Aug 2020 14:58:57 +0000
DAILY INSIGHTS Stocks opened slightly lower. The S&P 500 Index is down slightly in early trading on a quiet day for economic data. Tuesday, market participants will focus on stimulus talks in Washington, United States and China tensions, earnings season, … Continue reading →
Published: Mon, 03 Aug 2020 15:58:17 +0000
Market Blog 2020 has been historic and devastating in many ways, from the fastest bear market ever, to one of the greatest stock market recoveries ever. Not to mention a historic drop in the economy in the second quarter, with … Continue reading →
Published: Mon, 03 Aug 2020 14:58:40 +0000
DAILY INSIGHTS Stocks start the week on a positive note. The S&P 500 Index is set to open higher this morning to kick off August, a month that historically has been one of its weakest, after a strong 5.5% gain … Continue reading →
Published: Fri, 31 Jul 2020 20:01:15 +0000
Market Blog Index Performance S&P 500 Index: 1.7% Dow Jones Industrial Average: -.2% Nasdaq Composite: 3.7% Equities This week was another mixed week for the markets, as large cap growth earnings powered tech behemoths and the Nasdaq to more than … Continue reading →
Published: Fri, 31 Jul 2020 15:57:58 +0000
Market Blog Apple, Microsoft, Amazon, Google, and Facebook. These five stocks have helped spawn a number of acronyms as they try to capture the rise of mega-cap tech stocks that have led the market higher for much of the past … Continue reading →
Published: Fri, 31 Jul 2020 14:58:13 +0000
DAILY INSIGHTS Tech stocks fuel gains to end week. The S&P 500 Index is marginally higher in early trading, as large cap growth stocks fuel gains in the technology, consumer discretionary, and communication services sectors. Asian markets were mostly lower, … Continue reading →
Published: Thu, 30 Jul 2020 17:45:13 +0000
Economic Blog The best thing we can say about today’s US gross domestic product (GDP) report for the second quarter is that it’s behind us. GDP contracted at a 32.9% annualized rate during the quarter, the largest decline on record. … Continue reading →
Published: Thu, 30 Jul 2020 15:58:17 +0000
Economic Blog The Federal Reserve (Fed) completed its latest two-day policy meeting Wednesday, July 29, and the primary message coming from the world’s most important central bank was a continued commitment to supporting the economy as long as it’s needed—and … Continue reading →
Published: Thu, 30 Jul 2020 14:59:52 +0000
DAILY INSIGHTS Stocks opened lower on big news day. Futures were already lower ahead of the historic gross domestic product (GDP) report and jobless claims data and those data points didn’t change the picture much. Asian markets were modestly lower … Continue reading →
Published: Wed, 29 Jul 2020 15:56:41 +0000
Market Blog “An object in motion tends to remain in motion along a straight line unless acted upon by an outside force.” Sir Isaac Newton Last September, we noted that gold had many structural reasons to soar. Well, soar it … Continue reading →
Published: Wed, 29 Jul 2020 15:03:11 +0000
DAILY INSIGHTS Markets showing resilience. After finishing near their lowest trading levels Tuesday, US markets opened higher this morning. Investors are gauging the wide differences between Republicans and Democrats on the next fiscal stimulus package given the present economic climate. … Continue reading →
Published: Tue, 28 Jul 2020 15:57:37 +0000
Economic Blog After carving out the first part of a “V-shaped” recovery, the US economy has leveled off somewhat in response to the latest wave of COVID-19 infections. In this week’s Weekly Market Commentary: Stalling Economic Recovery May Slow Stock … Continue reading →
Published: Tue, 28 Jul 2020 15:00:09 +0000
DAILY INSIGHTS S&P 500 slightly lower with stimulus, virus in focus. The S&P 500 Index is slightly lower early today as market participants continue to assess stimulus progress, COVID-19 case growth, and earnings. The S&P 500 climbed 0.7% Monday as … Continue reading →
Published: Mon, 27 Jul 2020 15:57:36 +0000
Market Blog “That’s not a knife … that’s a knife!” Paul Hogan in Crocodile Dundee There is growing talk that growth stocks and specifically technology stocks are in a bubble. But as Paul Hogan showed is in the classic 1986 … Continue reading →
Published: Mon, 27 Jul 2020 14:57:53 +0000
DAILY INSIGHTS Stocks opened higher. After ending last week on a down note and seeing its three-week win streak snapped, the S&P 500 Index is in the green in early trading this morning. Markets are awaiting the release of the … Continue reading →
Published: Fri, 24 Jul 2020 20:02:13 +0000
Market Blog Index Performance S&P 500 Index: -0.3% Dow Jones Industrial Average: -0.8% Nasdaq Composite: -1.3% Equities Large cap US equities pulled back modestly this week, as technology-oriented stocks paused for the second consecutive week. The Nasdaq fell more than … Continue reading →
Published: Fri, 24 Jul 2020 15:58:22 +0000
Leading economic indicators continued to rebound in June, albeit at a slightly slower pace than in May. Yesterday, The Conference Board released its June report detailing the latest reading for its Leading Economic Index (LEI), a composite of data series … Continue reading →
Published: Fri, 24 Jul 2020 14:59:02 +0000
DAILY INSIGHTS Down again. US stocks opened lower following Thursday’s broad weakness. Caution is in the air, as China retaliated by shutting down the US consulate in Chengdu. Asian markets were down significantly on the news. European markets are firmly … Continue reading →
Published: Thu, 23 Jul 2020 16:00:01 +0000
Economic Blog The US dollar was remarkably strong during the first quarter of 2020, benefitting from the flight to safety and rallying to nearly a 10% year-to-date gain at the stock market’s low point on March 23. However, as equity … Continue reading →
Published: Thu, 23 Jul 2020 14:59:17 +0000
DAILY INSIGHTS Stocks opened little changed. The S&P 500 Index is trying for its sixth straight positive session as mostly well-received earnings results and optimism that the next big stimulus package out of Washington, DC, will soon be secured are … Continue reading →
Published: Wed, 22 Jul 2020 17:57:47 +0000
Market Blog LPL Research released our Midyear Outlook 2020 last week, discussing the path of the eventual economic and market recovery. What makes this year so incredible is, as of July 21, the S&P 500 Index moved positive for the … Continue reading →
Published: Wed, 22 Jul 2020 14:59:15 +0000
DAILY INSIGHTS Mixed markets. US stocks opened mixed, as Tuesday the S&P 500 Index moved to its highest level since February. Caution is in the air as the United States ordered China to close its consulate in Houston, fueling potential … Continue reading →
A stock represents a share of ownership in a business. When you hold one or more shares of stock in a company, you actually own a piece of that company. Your percentage of ownership will depend on how many shares you hold in relation to the total number of shares issued by the company. Investors who purchase stock are known as the company's stockholders or shareholders. The price of shares reflects the public's level of interest in owning the shares. If a lot of investors want to buy shares, they bid against one another, driving up the market price of the stock. If interest is low, competing bids are few and far between, and the price of shares is likely to fall. You may hold the stock in the form of a stock certificate, which identifies you as the owner of the stock and the number of shares you own. Alternatively, shares may be held in an account with a brokerage firm.
Your percentage of ownership in a company represents your share of the risks taken and profits generated by the company. If the company does well, your share of the total earnings will be proportionate to how much of the company's stock you own. The flip side, of course, is that your share of any loss will be similarly proportionate to your percentage of ownership, though you are not personally financially responsible for any share of the liabilities of the company in which you hold an equity interest. Beyond that, depending on the company and the types of shares you have, stock ownership may carry other benefits. Specifically, you may be entitled to dividend payments (which you can generally receive either in cash or additional shares), capital gains payouts, voting rights, and other corporate privileges. For example, common stockholders have the right to vote for candidates for the board of directors and on other important issues.
From the standpoint of the company, issuing and selling stock enables it to raise capital needed to expand, conduct research, modernize, pay off creditors, and meet other corporate expenses. When you give a company capital by buying its shares, you acquire equity in that company. Just as your equity in a home represents the portion that you actually own relative to the amount you owe on the mortgage, equity in a company represents your ownership stake. That's why stocks are sometimes referred to as equities.
Many investors never venture beyond the world of cash alternatives--bank accounts, CDs, money market accounts, and Treasury bills. They take comfort in knowing that these investment vehicles provide relative safety coupled with liquidity that allows them to access their money easily if they need it. However, while these investments are relatively low risk, they generally yield minimal returns; some may not even keep pace with inflation. At some point, most investors want the potential for greater returns, which is where stocks enter the picture. A variety of factors motivate people to invest in stocks. Many view equity investments as an opportunity to accumulate wealth or to prevent inflation from eventually reducing the purchasing power of their money. They generally take a long-term view, hoping their stocks will appreciate in value over time. They may also be interested in the dividends that some stocks pay, which shareholders may accept in cash or (in some cases) reinvest in additional shares of the company. Dividends and any increases or drops in the stock's price combine to produce the stock's total return. Investors with a gambler mentality may be attracted by the thrill of playing the market. They may trade actively, sometimes buying and selling the same issue within a few days or a few hours. These day traders try to take advantage of small, intra-day price movements in volatile stocks or indexes.
Investors who purchase stock hope to make money in one of two ways--through dividend payments and/or capital gains.
Some investors buy stocks because they seek regular income from dividends. Dividends represent distributions of corporate earnings to shareholders. The company's board of directors decides whether to distribute a dividend to shareholders; payment of a dividend is by no means mandatory. Dividends, if distributed, are usually paid out to investors in cash. However, a company may also pay dividends in the form of additional stock, known as stock dividends, or in property (this is rare). Some companies allow investors to buy stock through an automatic dividend reinvestment plan. A brokerage commission may or may not apply. Qualifying dividends received by an individual shareholder from domestic corporations (and qualified foreign corporations) are taxed at long-term capital gains tax rates, making dividends more attractive to many investors. As of January 1, 2013, those rates range from 0% for individuals in the 10% and 15% marginal income tax brackets to 20% for individuals in the highest marginal tax bracket of 39.6%. In addition, a 3.8% Medicare contribution tax applies to the investment income (including qualified dividends) of individuals with income that exceeds $200,000 ($250,000 for married couples filing jointly). Not all stock dividends qualify for capital gains tax treatment. Dividends that are ineligible will be taxed at ordinary income tax rates. These include:
Further, dividends paid on hybrid preferred stock (i.e., stock that is reported as debt) are also ineligible for capital gains tax treatment.
Capital gains represent increases in stock prices. Investors looking for capital gains hope to buy a company's stock at a low price and sell it when the price has risen. Stock prices can increase for many reasons, including company profitability, a good economic environment, or rumors of a takeover. Conversely, stock prices may decline for many reasons, including poor earnings reports, poor management, lawsuits, faulty or out-of-date products, competition, bad publicity, or an overall poor economy. Prices also can be affected simply by the investment community's view of the stock market as a whole. Capital gains from selling stock result in taxable income; however, such gains, if long term, will generally be taxed at a lower rate than ordinary income tax rates, as was discussed above in connection with dividends. Also, in any given year, any capital loss you sustain can be used at tax time to offset capital gains. Finally, if unused capital losses remain, they can be used to offset up to $3,000 ($1,500 if married filing separately) of ordinary income for that year or can be carried forward to future years. Caution: Capital losses cannot be used to offset dividend income taxed at long-term capital gains rates.
The decision to invest in stocks is a personal one that should depend on your individual situation. Before taking this step, and before selecting specific types of stocks to add to your portfolio, there are some issues you should take into account.
One of the main factors to consider before buying stock is your attitude toward risk. How much financial risk, if any, are you willing to accept? If the thought of even a small amount of risk makes you anxious, you probably would be considered risk averse, in which case stocks might not be an appropriate investment for you. If you can handle some risk, you still need to tailor the stock portion of your portfolio to your particular level of risk tolerance. Though past performance is no guarantee of future results, stocks as a whole have historically offered relatively high potential reward over the long term compared to most other types of investments. As a result, stocks generally have a higher level of risk compared to other investments. You can lose a portion of your investment in stocks--or even your entire investment. Among the factors that affect the level of risk you face with stocks are:
Different kinds of stocks carry different degrees and types of risk and are therefore suited to different types of investors. For example, if you are fairly conservative and prefer minimal risk, you might think about stable, relatively safe blue-chip stocks. If you are very aggressive, however, you may want to consider riskier investments like aggressive growth and microcap stocks. Although an investor can screen for potential risks before making an investment, it is virtually impossible to plan for every conceivable contingency that could affect a business. For this reason, stock investors must be prepared for some degree of risk.
How much of a profit do you hope to make on your stock investments? If you seek the potential for better returns than cash alternatives and most fixed-income securities such as bonds or notes can offer, and you don't want the management responsibility of real estate or partnerships, you should probably at least investigate investing in stocks. Their potential for higher returns than many other investments means that stocks as a whole have a better chance at staying ahead of inflation, thus preserving your money's purchasing power over the long term. If you are certain that you want to pursue the highest returns possible, the stocks that you should consider are very different from those suitable for an investor who would be happy with modest returns. Of course, you should always weigh your desired return against the amount of risk you are willing to assume, because the potential for higher returns also means greater potential for loss. It can be challenging to strike the right balance.
First and foremost, your finances will determine whether you are in a position to invest in stocks and, if so, what types of stocks are appropriate for you. If even a small loss would have a meaningful impact on your finances, stocks may not be a viable option for you. If you have relatively limited resources, the types of stocks you choose and the amounts you invest will probably differ from those of an investor with substantial assets. Also, make sure you consider your finances in relation to your income and other personal circumstances. For example, if you have $200,000 available to invest but also have a child who will be attending college within a couple of years, the choices you make about stocks probably won't be the same as those of someone who has the same amount of investable assets but no significant near-term financial obligations.
Stocks are typically a long-term investment. The reason is that stocks can be volatile. If you're counting on a stock's price going up, it may take several years of ups and downs to reach your desired selling point--if indeed it ever does. But there is another reason. The sale of stock held for one year or less results in short-term capital gain or loss, and short-term capital gains are taxed at ordinary income tax rates. By comparison, the sale of stock held more than one year results in long-term capital gains, and long-term capital gains generally are taxed at lower rates than ordinary income. For example, if you are in the 28 percent tax bracket for ordinary income, your long-term capital gains are generally taxed at 15 percent.
Your investment choices will naturally be affected by the various factors discussed previously: your attitude toward risk, your desired return, and your financial and personal circumstances. Other factors may come into play as well, but these are the most common ones. Based on these very important considerations, you and your financial professional will be able to choose investments that match your situation. Different stocks may have very different strengths and weaknesses in terms of how they attempt to achieve a return. For example, you may want short-term gains, long-term capital appreciation (growth in value), steady income, or some combination.
No one, not even the most esteemed expert, can forecast with any certainty what the stock market will do from day to day or from year to year. It's not for a lack of trying, however. It seems there are always a number of conflicting theories floating around that attempt to predict or explain the market. You may have your own theories as to how the market works or will perform in the future. If so, such beliefs will likely influence your decisions about which stocks to invest in or whether to invest in stocks at all. In addition, your research into specific companies may guide you toward certain stocks and steer you away from others.
As you probably know, hundreds of millions of shares of stock trade daily on the stock market. The stock market is a general term referring to the organized trading of stocks and other securities through various exchanges, including the over-the-counter market. Stocks are generally bought through intermediaries, known as securities brokers and dealers. Investors can also purchase a group of stocks indirectly by owning shares of a mutual fund or an exchange-traded fund (ETF).
Most stocks are traded on various stock exchanges. Two major U.S. exchanges are the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX). The Nasdaq is an equally important U.S. exchange, although there is no trading floor—the stocks are bought and sold over a broker-dealer computer network. In most cases, when you buy or sell stock, you go through a broker rather than deal directly with the issuer of the stock. This is true for most transactions, including initial public offerings (IPOs) and secondary offerings. In exchange for brokerage services, you ordinarily have to pay your broker (including discount brokers) a commission based on the dollar value of a particular transaction or the number of shares purchased. Many brokerage firms also offer so-called wrap fee programs, which are all-inclusive accounts whose fee structure includes commissions and investment advisory services.
In addition to the major exchanges, you can buy and sell stocks on the over-the-counter (OTC) market. Stocks that trade on the OTC market are generally those of smaller companies that don't trade on the NYSE and the AMEX because they don't meet the listing requirements of those exchanges. In recent years, however, many companies that qualify for listing have chosen to remain with OTC trading because they prefer this system to the centralized approach of the major exchanges.
An IPO occurs when a corporation decides to go public by offering shares of its stock to the general public for the very first time. Only the first issue of stock made available to the public is considered an IPO; subsequent issues by a public corporation are called public secondary offerings.
There are several ways that investors can evaluate the financial health of a company, as well as its prospects for the future. These methods may include an examination of factors specific to the individual company, or they may pertain to the industry as a whole.
The stock market is enormous; there are many different types of stocks from which you can choose. This should come as no surprise, given the number of companies worldwide that sell stock to the public. The types of stocks that you ultimately pick should depend on your individual circumstances. In narrowing the field to appropriate stocks for your portfolio, your financial professional can be immensely helpful. Very broadly speaking, stocks can be divided into two general categories--common stock and preferred stock. In many cases, a single company will make both kinds of stock available to investors. Each has its own particular strengths and weaknesses. Stocks can be further broken down into voting stock and nonvoting stock. Beyond that, there are stocks for investors of all types. For the more conservative investor who wants to keep risk to a minimum, there are blue chip stocks and conservative, income-oriented stocks. For the very aggressive investor who sits at the other end of the spectrum and is more interested in the potential for greater returns, there are aggressive growth stocks, microcap stocks, and emerging market stocks, among others. If you fall somewhere in between these two extremes, you may find a fit with midcap stocks, value stocks, and growth stocks. If you closely follow current economic conditions, cyclical stocks may be an appropriate option, just as international stocks may be a good match for an investor who stays attuned to foreign markets and is willing to accept the added risks of foreign investing.
There are several strategies you can adopt to get the most out of your stock investments. These range from very basic strategies appropriate for a novice, to more complex strategies that a sophisticated investor might be inclined to use. Some of the most common strategies available to you include buy low/sell high, buy and hold, and dollar cost averaging.
Contact a VyStar Investment Services Financial Advisor today by phone (904) 908-2495 or email VISMarketing@vystarcu.org.
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