Clarity Capital Management Notables - May 2023
CLARITY CAPITAL MANAGEMENT NOTABLES AUDIO VERSION
Wow! It seems like time is flying by this year! Can you believe that this week is already June? Our office has been enjoying the weather while even getting some CCM volunteer work done to help clean up downtown Portland! And yes, Eric has been getting some sleep with his new baby.
We had a couple of quick updates for this month’s Notables. We’ll spend some time providing an update to what’s happening in DC, catch up on yields and iBonds, and finally, discuss our office’s transition from TD Ameritrade Institutional to Charles Schwab.
Washington Update: Debt Ceiling Addition
Over the weekend, House Republicans made a handshake deal with the White House to extend the federal Debt Limit for a couple of years. We are writing this as of Wednesday…which means by the time you are reading this; we could see a deal already approved or potentially more political mayhem. Although we don’t like to make political predictions, the equity and bond markets clearly think a last-minute deal will be made. Either way, we can expect some volatility over the next few weeks with lots of political jockeying.
Every time we have a split government, the minority party seems to use the debt limit as a tool to be heard in Washington. It seems like it was just yesterday when we went right up to the edge of the government running out of money in 2011 and 2013. During the showdown, the US had its debt downgraded by the ratings agencies along with some short-term rocky equity returns. Although anything could happen, let’s hope that we can move past this week without too much fanfare. We need to remember that if we have money invested, it is likely meant for the long-term and that some ups and downs are totally normal. We are likely to sit through plenty more capriciousness in DC!
Finally, Some Yield (but not for iBonds)!
For a while now, we have seen rates rise for safer investments including cash. One of the perks of the quickly rising interest rate environment in 2022 and into 2023 has been the increase of high interest savings accounts, CDs, money market accounts, and short-term treasuries. For people with short-term goals, we can finally earn some yield!
On the other hand, fortunately, inflation has started to ease. Over the last couple of years, we have talked a lot about iBonds purchased through TreasuryDirect. Starting in May of 2023, iBond rates have dropped to 3.4% (annualized). For a bit, we were getting close to 10%! Now that rates have started to come down, it might be a good time to think about an exit strategy. iBonds receive a new rate every six months from the purchase date. Any iBonds purchased prior to May of 2023 should retain a higher interest rate for the six months that follow the last new rate. For those who have purchased iBonds in the last few years, we’ll work with you on your own exit strategy while keeping in mind that we need to have held them for at least one year and that we receive a 3-month penalty if sold prior to 5 years.
TD Accounts to become Schwab Accounts
As you’ll likely remember, a few years ago Charles Schwab acquired TD Ameritrade. While the merger has been a long process, the official transition will be occurring this fall. There will be a lot more to come, but we wanted to make sure you knew it continues to be on our radar. TD and Schwab have both ensured us that the transition will be easy for clients. Here are some notes to be aware of as we move towards the fall transition:
- Your relationship with Clarity Capital Management will not change
- Account transition notices will be sent to you beginning June 28. This is to notify you of the transition. There is no action required on your part
- Your account will move from TD Ameritrade Institutional to Schwab on Labor Day of this year
- Schwab will automatically transfer your assets and holdings - there is nothing you will need to do
- After the move, you will have access to Schwab Alliance, which is the secure online portal where you will be able to view your accounts
- You will have a new Schwab account number after the transition
- If you have banking information set up at TD, we will not need to reconnect your bank once at Schwab. Automatic monthly incoming or outgoing money movements should continue normally
- If you have direct deposits or recurring payments set up directly with your bank, you’ll need to provide your bank with Schwab’s information after the transition
Be sure that we will be with you through this transition. We are excited to have access to Schwab’s larger universe of products and technology.
Have a great beginning of summer!
Further Reading:
Blackrock May student of the market
This Game Will Show You Just How Foolish It Is To Sell Stocks Right Now
The Best Places to Park Your Short-Term Investments
Mind Over Matter: Perspective for Investors on the US Debt Ceiling