Brokerage Accounts: Risks, Protections, and Alternatives

During times of financial stress, it is important to examine the risks associated with past recessions, including the possibility of brokerage firms filing for bankruptcy. Namely, what would happen to the assets of a brokerage account being held at a firm that goes bankrupt? There are two main regulations that help protect client assets should a brokerage firm become insolvent: the Net Capital Rule and the Customer Protection Rule. The Net Capital Rule requires that brokerage firms maintain at least a 1:1 ratio of highly liquid assets, such as cash…

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Lemonade from A Barrel of Lemons

The May inflation report did little to ease concerns of a coming recession. Overall inflation was up 8.6% year over year, even more than the 8.3% in April. The most volatile segments of the inflation report, food and energy, were up 10% and 35%, respectively. These segments are particularly affected by the Ukrainian War. Investors are concerned that the Federal Reserve’s (Fed) interest rate increases in response to this inflation will slow the economy too much. That is, higher rates and a tighter money supply will slow demand for goods…

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Reading the Tea Leaves

Any reading of the financial media focuses on all the problems confronted by the markets. Inflation ravages purchasing power and the Federal Reserve (Fed) responds by raising interest rates. Russia’s invasion of Ukraine crimps food and energy supplies and destabilizes the world order. It’s not all bad news though - there is strength in our current economy. The April jobs report showed an increase of 428,000 jobs and an unemployment rate of 3.6%. Job openings of 11.5 million are at record highs. We’ve almost fully recovered from the pandemic job…

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