Published: Fri, 22 Jan 2021 21:04:05 +0000
Market Blog 1/22/2021 Index Performance View enlarged chart. US and International Equities The major market indexes finished the week higher. The tech-heavy NASDAQ had a solid week returning over 4%. In addition, many international markets followed in lockstep with their … Continue reading →
Published: Fri, 22 Jan 2021 17:00:23 +0000
Economic Blog 1/22/21 It has been exactly one year since the first COVID-19 case in the United States was reported to the Centers for Disease Control (CDC), and to say the world as we know it has been completely changed … Continue reading →
Published: Fri, 22 Jan 2021 16:00:54 +0000
Friday, January 22, 2021 Top Story Stocks take a pause as investors reassess risk appetite US stocks opened firmly lower after the S&P 500 Index reached another all-time high Thursday. European markets are lower in midday trading as the European … Continue reading →
Published: Thu, 21 Jan 2021 16:59:16 +0000
Economic Blog 1/21/21 The onset of the global pandemic shocked the economy and triggered one of the deepest recessions ever in 2020. As investors fled to “safe haven” Treasuries and the Federal Reserve (Fed) lowered interest rates, the yield on … Continue reading →
Published: Thu, 21 Jan 2021 16:00:19 +0000
Thursday, January 21, 2021 Top Story Low Mortgage Rates Add Fuel to Housing Boom The national average 30-year fixed mortgage rate continues to decline, falling below 2.9% as the housing market remains one of the hottest areas of the economy. … Continue reading →
Published: Wed, 20 Jan 2021 16:00:46 +0000
Wednesday, January 20, 2021 Top Story Inauguration Day in the United States Joseph R. Biden, Jr. will become the 46th President of the United States today. He is expected to issue sweeping executive orders that focus on the environment, immigration, … Continue reading →
Published: Wed, 20 Jan 2021 15:04:04 +0000
Market Blog 1/20/2021 Today Joe Biden becomes the 46th President of the United States. We’ve already looked forward at what his presidency, coupled with a blue wave in Congress, could mean for policy in Market Policy Projections for 2021, so … Continue reading →
Published: Tue, 19 Jan 2021 17:10:21 +0000
Economic Blog 1/19/2021 Investment-grade credit spreads, the extra yield you get from investment-grade corporate bonds compared to similarly dated US Treasuries, have already tightened to a level you usually only see during the middle of the economic cycle—and that can … Continue reading →
Published: Tue, 19 Jan 2021 16:00:42 +0000
Tuesday, January 19, 2021 Top Story Market Signals Covers It All This week’s Market Signals podcast covers all the latest events impacting markets and the economy: Q4 earnings, a new stimulus proposal, the Democratic blue wave, and President-elect Joe Biden’s … Continue reading →
Published: Fri, 15 Jan 2021 21:12:53 +0000
Market Blog January 15, 2021 Index Performance US and International Equities The major market indexes finished the week lower. In addition, many international markets followed in lockstep with their US counterparts. Emerging markets (MSCI EM Index) outperformed developed international markets … Continue reading →
Published: Fri, 15 Jan 2021 17:00:19 +0000
Economic Blog January 15, 2021 One of the top questions we’ve received recently has been what a blue wave may mean for investments. After the Democrats won the two Senate runoff elections in Georgia, they will now control the White … Continue reading →
Published: Fri, 15 Jan 2021 16:00:02 +0000
Friday, January 15, 2021 Top Story Retail Sales Worse Than Expected Retail sales in the United States declined 0.7% month over month in December, below all but two of the 70 forecasts in Bloomberg’s consensus survey (US Census Bureau). The … Continue reading →
Published: Thu, 14 Jan 2021 17:25:56 +0000
Market Blog January 14, 2021 Heading into 2020, we maintained our preference for growth stocks as we believed that earnings growth would become harder to come by as the economic cycle aged, and their robust earnings growth was greatly appealing. … Continue reading →
Published: Thu, 14 Jan 2021 16:00:27 +0000
Thursday, January 14, 2021 Top Story New Street View Video Sets Positive Tone The stock market has started off 2021 surprisingly well, and LPL Research Chief Market Strategist Ryan Detrick says this bull market is alive and well. “Surprises to … Continue reading →
Published: Wed, 13 Jan 2021 17:00:38 +0000
Economic Blog 1/13/21 Rising COVID-19 cases and concern about the policy environment put a dent in small business optimism in the month of December, the index’s second straight monthly decline. As shown in the LPL Chart of the Day, the … Continue reading →
Published: Wed, 13 Jan 2021 16:00:57 +0000
Wednesday, January 13, 2021 Top Story Consumer prices in line with forecasts Consumer inflation for December, based on the Consumer Price Index (CPI), grew 0.4% month over month, buoyed by higher gasoline prices. Core inflation, excluding food and energy prices, … Continue reading →
Published: Tue, 12 Jan 2021 17:00:41 +0000
Economic Blog 1/12/2021 Treasury yields hit two key levels the first week of 2021. As shown in the LPL Chart of the Day, the 10-year Treasury yield moved above 1% for the first time since March 2020, and the 10-year … Continue reading →
Published: Tue, 12 Jan 2021 16:00:55 +0000
Tuesday, January 12, 2021 Top Story 2021 Policies Update and the Markets In this week’s Market Signals podcast and video, LPL Research talks about 2021 policy updates and the possibilities of higher taxes and more regulation, more stimulus, higher Treasury … Continue reading →
Published: Mon, 11 Jan 2021 16:00:53 +0000
Monday, January 11, 2021 Top Story Stocks open modestly lower as investors reassess risk sentiment. The US dollar traded higher with demand supported by higher Treasury European stocks pulled back from a 10-month high in midday trading as Germany underperforms. … Continue reading →
Published: Fri, 08 Jan 2021 21:00:11 +0000
Market Blog January 8, 2021 Index Performance View enlarged chart. US and International Equities This week, we gained clarity on the makeup of Congress with the Georgia US Senate runoff. Democrats will now have control of both chambers of Congress, … Continue reading →
Published: Fri, 08 Jan 2021 17:00:59 +0000
Economic Blog 1/8/2021 The differences in strength between the stock market and real economy were laid bare this week as the stock market surged to new highs while the jobs market continued to deteriorate and remains well short of its … Continue reading →
Published: Fri, 08 Jan 2021 16:00:05 +0000
Friday, January 8, 2021 Top Story Jobs Growth Turns Negative The US economy lost 140,000 jobs in December, according to the US Bureau of Labor Statistics, missing Bloomberg survey estimates of a 50,000 gain. This represents the first monthly loss … Continue reading →
Published: Thu, 07 Jan 2021 18:19:52 +0000
Markets Blog 1/07/21 2020 was a good year for stock investors despite unprecedented challenges. After being down more than 30% at the March 2020 lows, the S&P 500 Index ended the year with a solid 18.4% total return. Last year … Continue reading →
Published: Thu, 07 Jan 2021 16:23:11 +0000
Thursday, January 7, 2021 Top Story LPL Research Condemns Violence in Washington, DC LPL Research condemns the violent actions at the US Capitol Building on Wednesday and hopes for healing in our nation’s political and societal divides. We fully support … Continue reading →
Published: Wed, 06 Jan 2021 17:00:50 +0000
Market Blog January 6, 2021 Well, we can officially say goodbye to 2020. Although there still will be many challenges in 2021, we do see much better times ahead. Just how amazing was it? “2020 will go down in history … Continue reading →
Published: Wed, 06 Jan 2021 16:00:44 +0000
Wednesday, January 6, 2021 Top Story 2020 in 20 Charts 2020 was a historic year in many ways, which made it hard to highlight just a few charts. So in honor of 2020, we picked 20 charts that show how … Continue reading →
Published: Tue, 05 Jan 2021 18:18:28 +0000
Economic Blog 1/5/2021 US investment-grade bonds had a solid 2020 despite a tumultuous year overall. The broad Bloomberg Barclays US Aggregate Bond Index had a total return of 7.5%—not as strong as 2019’s 8.7% but its fifth-best year in the … Continue reading →
Published: Tue, 05 Jan 2021 15:57:24 +0000
Tuesday, January 5, 2021 Top Story 10 Lessons LPL Research Learned in 2020 LPL Research reviews its top 10 takeaways from 2020, the year-end Santa Claus Rally, and what the markets are saying about the Georgia runoffs in this week’s … Continue reading →
Published: Mon, 04 Jan 2021 17:46:29 +0000
Market Blog View enlarged table. US and International Equities The S&P 500 Index, Dow Jones Industrial, and Nasdaq Composite indexes, continued their November run in December. As noted last month, November was a record-breaking month for equities, thanks to … Continue reading →
Published: Mon, 04 Jan 2021 16:42:25 +0000
Monday, January 4, 2021 Daily Insights Markets start the New Year higher. US markets continue their trek higher following last year’s nine-month rally. Market participants appear optimistic for a better 2021 in the wake of COVID-19 vaccine progress and December’s … Continue reading →
Published: Thu, 31 Dec 2020 21:02:00 +0000
Market Blog 12/31/2020 US and International Equities As we finish out a challenging year this week, Congress passed COVID-19 relief, providing increased unemployment benefits, small business assistance, along with an additional $600 stimulus payment. In addition, Congress is presently in … Continue reading →
Published: Thu, 31 Dec 2020 16:00:51 +0000
Thursday, December 31, 2020 Happy New Year to all from LPL Research! We made it through a very challenging 2020. Have a happy, healthy, and safe 2021. Top Story What a big end of year rally means. The S&P 500 … Continue reading →
Published: Thu, 31 Dec 2020 13:00:51 +0000
Market Blog 12/31/2020 Welcome to the last day of 2020! It has been a devastating year in so many ways, yet for investors it has been quite rewarding. Much of the gains in 2020 have taken place the final two … Continue reading →
Published: Wed, 30 Dec 2020 17:00:47 +0000
Economic Blog 12/30/20 For many economic data series, 2020 has been a roller coaster. Not for housing, however. The onset of the COVID-19 pandemic and social distancing measures jump-started the “nesting” behavioral shift away from urban apartments and into single-family … Continue reading →
Published: Wed, 30 Dec 2020 16:00:31 +0000
Wednesday, December 30, 2020 Top Story Home prices continue to climb. While some industries continue to struggle during the pandemic, housing data in the United States (US) remains a strong point of the US economy. Standard & Poor’s 20-city composite … Continue reading →
Published: Tue, 29 Dec 2020 17:54:05 +0000
Economic Blog 12/29/2020 2020 was an extraordinary year for the Federal Reserve (Fed). The Fed responded swiftly and decisively to the rapidly accelerating financial and economic uncertainty brought on by efforts to contain the COVID-19 pandemic. The current Fed was … Continue reading →
Published: Tue, 29 Dec 2020 16:00:03 +0000
Tuesday, December 29, 2020 Top Story Lessons learned from the Fed in 2020. The Federal Reserve (Fed) will remain in focus for markets in 2021. “Don’t fight the Fed” seems like obvious investor guidance in hindsight, but it didn’t in … Continue reading →
Published: Mon, 28 Dec 2020 16:00:31 +0000
Monday, December 28, 2020 Top Story Solid holiday shopping season. Holiday sales grew 3%, beating forecasts for a 2.4% increase according to MasterCard’s SpendingPulse. Online sales rose 49% year over year. These results were impressive for a recessionary period—the comparable … Continue reading →
Published: Thu, 24 Dec 2020 17:28:26 +0000
Market Blog 12/24/2020 Data is as of 11:15 AM ET View enlarged chart. US and International Equities This week, concerns about a new COVID-19 strain in the United Kingdom along with new lockdown restrictions have weighed on the markets even … Continue reading →
Published: Thu, 24 Dec 2020 16:00:25 +0000
Thursday, December 24, 2020 Top Story Markets Close Early Today The NYSE and NASDAQ will close at 1 p.m. ET today. The bond markets will close at 2 p.m. ET. All markets will be closed Friday, December 25, and will … 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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