Markus Andrews

Cash generally refers to relatively risk-free money, like that held in high-yield savings accounts or money market funds.
Interest rates on cash rose to their highest level in years as the U.S. Federal Reserve raised borrowing costs aggressively starting in 2022.
The Fed cut interest rates in September and more cuts are expected. Cash earnings are expected to fall, too.

Erik Von Weber

The U.S. Federal Reserve cut interest rates in September, the first in a string of cuts expected at least into 2025. Earnings on cash are expected to decline as a result — likely leading investors to ask what they should do in response.
From a financial planning perspective, cash generally refers to money held in relatively risk-free assets, like a high-yield bank savings account or money market fund.

Cash is a kind of safety valve in investor portfolios, perhaps serving as an emergency fund or a reserve for near-term income needs in retirement.
Interest rates on such assets are expected to “fall closely in tandem with what the Federal Reserve does” with its interest-rate policy, said Ryan Dennehy, principal and financial advisor at California Financial Advisors in San Ramon, California. The firm ranked No. 13 on the 2024 CNBC Financial Advisor 100 list.

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Investors saw interest rates on cash rise to their highest level in years as the Fed aggressively increased borrowing costs starting in March 2022 to tame pandemic-era inflation.
For example, many money market funds are paying roughly 4% to 5% in annual interest, following a lengthy period after the 2008 financial crisis during which their rates had languished near rock bottom.
Now, the Fed has begun cutting rates to take pressure off the U.S. economy since inflation has subsided. Fed officials cut their benchmark rate by half a percentage point in September. They forecast another half point of cuts through 2024, and 1 percentage point of additional cuts in 2025.

Of course, while expected, it’s not a given the Fed will continue to reduce borrowing costs.

Gear cash to your goals, not interest rates

Investors can make some moves on the margins to boost earnings on excess cash, assuming Fed officials continue on their current trajectory, advisors said.
However, they shouldn’t abandon their overarching financial plan and put that money at an elevated risk of loss, advisors said.
“Your cash allocation really needs to be geared toward your personal financial planning goals rather than what the interest rate environment might be doing,” said Fatima Iqbal, an investment advisor and senior financial planner at Azzad Asset Management in Falls Church, Virginia, which ranked No. 58 on the FA 100.

Conventional wisdom suggests investors hold at least three to six months of expenses in cash-type holdings for emergencies, for example, Iqbal said.
This thinking shouldn’t change in light of falling rates, advisors said. In other words, they shouldn’t subject their cash to more risk if they may need it in the near term.
Additionally, cash often accounts for a relatively small portion of an investment portfolio, “so even with fluctuating interest rates, the impact to the overall strategy is minimal,” said Jeremy Goldberg, portfolio manager and research analyst at Professional Advisory Services in Vero Beach, Florida. The firm ranked No. 37 on the FA 100.

Consider locking in high rates with excess cash

That said, investors can consider reallocating any excess cash toward assets that are still relatively low risk and more likely to pay a higher return, advisors said.
That might include locking in an interest rate now in a federally insured certificate of deposit or U.S. Treasury bond, said Victoria Trumbower, a certified financial planner and managing member at Trumbower Financial Advisors in Bethesda, Maryland, which ranked No. 31 on the FA 100.
“If I have an opportunity to lock in something a little bit longer [in duration] and I’m pretty confident the client won’t want to sell it tomorrow, we’re willing to do that,” Trumbower said.

Dennehy, of California Financial Advisors, recommended a similar strategy for households with excess cash.  
Rather than holding a three-, six- or nine-month Treasury bond or CD, for example, investors can perhaps consider a duration of two or five years, Dennehy said.
The virtue of such a strategy is investors would guarantee their interest rate, if they were to hold their bond or CD to its full term. Money market funds, by comparison, have a variable interest rate that will fluctuate with Fed policy, Dennehy said.
When choosing one versus the other, investors essentially make a bet on the speed and trajectory of future Fed rate cuts, Dennehy said.
“Keep in mind, for the better part of the last decade, with money market funds and high-yield savings accounts you were earning less than 1% interest,” he said. “Any amounts over 1% now is great, relatively speaking.” More

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Rostin Behnam, chairman of the Commodity Futures Trading Commission, is speaking at DC Fintech Week in Washington, D.C. on Wednesday morning.

The agency is in a critical period: The CFTC sought to block financial exchange Kalshi from offering contracts that allow people to bet on the outcomes of U.S. elections. The agency lost that suit in September, and an appeals court lifted a temporary injunction that barred Kalshi from offering contracts bidding on elections.
The CFTC is appealing the ruling.
“The position of the commission has actually been pretty consistent for the better part of a decade, that we don’t believe listing event contracts on political elections is legal,” Behnam said in a Bloomberg Television interview Tuesday. “But while we have this ongoing legal challenge, we’ll allow them and we’re going to do what we can to protect the integrity of the markets.”
The CFTC has also been grappling with the rapid evolution of digital assets and the need for Congress to take the first steps toward establishing a regulatory framework to ensure consumer protections.
“What has concerned me most throughout the expansion of this digital asset class is that while everyday Americans fall victim to one digital asset scam after another, there remains no completed legislative response,” he said July in testimony before the U.S. Senate Committee on Agriculture, Nutrition and Forestry.

“Federal legislation is urgently needed to create a pathway for a regulatory framework that will protect American investors and possibly the financial system from future risk,” he added.
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Enrollment of first-year college students is down from a year ago, particularly at four-year schools that serve low-income students, according to a new report.
Although more students are eligible for federal aid this year, problems with the new Free Application for Federal Student Aid, along with rising college costs and ballooning student debt balances, are still major concerns.

Al Seib | Los Angeles Times | Getty Images

Although more students are eligible for federal financial aid, fewer high schoolers are pursuing a four-year degree. Increasingly, college is becoming a path for only those with the means to pay for it, many studies show. 
Although undergraduate enrollment is up overall, the number of new first-year students sank 5% this fall compared with last year, with four-year colleges notching the largest declines, according to an analysis of early data by the National Student Clearinghouse Research Center.

“It is startling to see such a substantial drop in freshmen, the first decline since the start of the pandemic,” Doug Shapiro, the National Student Clearinghouse Research Center’s executive director, said in a statement.
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“But the gains among students either continuing from last year or returning from prior stop outs [or temporary withdrawals] are keeping overall undergraduate numbers growing, especially at community colleges, and that’s at least some good news,” he said.
The declines in first-year student enrollment were most significant at four-year colleges that serve low-income students, the report also found. At four-year colleges where large shares of students receive Pell Grants, first-year student enrollment plummeted more than 10%.

More students qualify for federal financial aid

The new Free Application for Federal Student Aid is meant to improve access by expanding Pell Grant eligibility to provide more financial support to low- and middle-income families.

As a result of changes to the financial aid application, more students can now qualify for a Pell Grant, a type of aid awarded solely based on financial need.
New data from the Department of Education shows that 10% more students are on track to receive Pell Grants this year, including 3% more current high school seniors.
But overall, the number of Pell Grant recipients is down significantly. In fact, the number of Pell Grant recipients peaked over a decade ago, when 9.4 million students were awarded grants in the 2011-12 academic year, and sank 32% to 6.4 million in 2023-24, according to the College Board, which tracks trends in college pricing and student aid.

Federal aid is not keeping up with costs

Also, those grants have not kept up with the rising cost of a four-year degree. Currently, the maximum Pell Grant award rose to $7,395 — after notching a $500 increase in the 2023-34 academic year.
Meanwhile, tuition and fees plus room and board for a four-year private college averaged $58,600 in the 2024-25 school year, up from $56,390 a year earlier. At four-year, in-state public colleges, it was $24,920, up from $24,080, the College Board found.

Experts have continuously warned that ongoing problems with the new FAFSA have resulted in fewer students applying for financial aid, which could also contribute to declining enrollment.
“The changes from FAFSA simplification were supposed to increase the number of Pell grant recipients. This was before all of the chaos ensued,” said higher education expert Mark Kantrowitz.

Last year, 45% of college applicants reported frustrations with the process and 12% said they ultimately chose a community college, technical school or other alternative because of their FAFSA experience, according to an exclusive look at Jenzabar/Spark451′s upcoming college-bound student survey. The higher education marketing firm polled more than 5,400 recent high school graduates in September.
Rising college costs and ballooning student debt balances are still a major concern, causing more students to question the return on investment, experts also say. 
“There is growing skepticism and paranoia about the value of a degree,” said Jamie Beaton, co-founder and CEO of Crimson Education, a college consulting firm. 
Meanwhile, the number of students pursuing shorter-term accreditations is growing rapidly, with enrollment in certificate programs up 7.3%, according to the National Student Clearinghouse Research Center.
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Traders work on the floor of the New York Stock Exchange (NYSE) on October 22, 2024 in New York City.
Spencer Platt | Getty Images

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Here’s what CNBC TV’s producers were watching as the Dow and S&P 500 slipped for a second day, and what’s on the radar for the next session.

The 10-year Treasury yield

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The 10-year Treasury yield in 2024

Starbucks

We’ll continue to follow Starbucks all day Wednesday.
The stock is down 4% in extended trading. The coffee chain issued preliminary quarterly results, with full details coming next week.
The company is suspending guidance for fiscal 2025.
Starbucks is seeing sliding same-store sales.
The company did raise the dividend to keep investors interested in the stock. Starbucks said it would boost its dividend to 61 cents per share, up from 57 cents.

McDonald’s

CNBC will also closely follow another big restaurant chain on Wednesday: McDonald’s.
The Centers for Disease Control and Prevention reported it was alerted to 49 E. coli cases linked back to McDonald’s Quarter Pounder burgers. Most of the illnesses are in Colorado and Nebraska, but affected people turned up in eight other states: Oregon, Montana, Wyoming, Utah, Kansas, Missouri, Iowa and Wisconsin.
McDonald’s told the CDC that it has stopped using fresh slivered onions and quarter-pound beef patties in several states.
Shares are down about 6% in after-hours trading.
McDonald’s hit a new high Monday.
It is far too early to compare the two, but Chipotle went through problems with E. coli back in 2015. It took years for the company to fully recover in terms of stock price and reputation.

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McDonald’s shares in 2024

Boeing

On Tuesday, CNBC TV’s Phil LeBeau spoke with Jon Holden, president of IAM 751 — the striking machinists’ union. He did not guarantee workers would ratify the deal.
Boeing is up about 5% in a week.
It is 40% from the 52-week high hit in December.
On Wednesday, LeBeau will speak with Boeing CEO Kelly Ortberg in the 9 a.m. hour, Eastern.
The stock is down 10.6% in the past three months. 

Coca-Cola

On Wednesday, CEO James Quincey will be on in the 10 a.m. hour with CNBC TV’s Sara Eisen.
Coca-Cola will release its quarterly report before the bell.
The stock is up 7% in the past three months.
Coca-Cola is 5.5% from the September high.

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Coca-Cola shares in the past three months

AT&T

The communications company reports before the bell.
AT&T is 3.75% from the September high.
It is up about 16% in the past three months. 

GE Vernova

The stock hit a high last week. It’s fallen 1.75% since then.
GE Vernova reports in the morning. It is up 65% over the past three months.
The stock started trading April 2. It is up 95% since then.

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GE Vernova in the past three months

Tesla

The EV maker reports after the bell.
The stock is 20% from the July high.
Tesla is down 13% over the past three months.

IBM

The “old tech” giant reports after the bell Wednesday.
IBM is up 26% in three months, and it’s 2% from last week’s high.

Knight-Swift Transportation

CNBC TV’s Frank Holland is watching as the trucking company reports Wednesday after the bell.
Knight-Swift is up 5.6% since last reporting three months ago.
It is 13.4% from the February high.

United Rentals

Another big industrial reports after the bell Wednesday.
United Rentals rents out big construction equipment.
The stock is up 15% in the past three months.
It hit a new high last week and is down 1.6% since then.

ServiceNow

Another big tech company releases its quarterly numbers Wednesday.
ServiceNow is up 21% in three months.
The stock is 3% from last week’s 52-week high mark. More

Philip Morris shares clinched fresh all-time highs.
The stock is once again being viewed as a growth company due to the success of the Zyn oral nicotine pouches.

In this photo illustration, ZYN nicotine cases are seen on a table on January 29, 2024 in New York City. 
Michael M. Santiago | Getty Images

Philip Morris International shares reached record highs Tuesday after the tobacco company’s Zyn brand reported soaring demand.
Shares of the Connecticut-based company jumped to $131.97 at session highs, marking a new intraday record. The stock notched an all-time closing high and saw its biggest one-day gain since October 2008.

Tuesday’s record comes after the company touted an eye-popping increase in shipments of its Zyn oral nicotine pouches. It’s the latest milestone in the stock’s breakout this year as Wall Street catches wind of how the product has captured consumer interest.
The stock saw little action between 2013 and 2023 with investors viewing it as a dividend play in a stagnant industry. Now, traders are seeing the stock as a growth name — thanks in large part to the success of Zyn since Philip Morris acquired the brand through its deal with Swedish Match two years ago.
“The No. 1 U.S. smoke-free brand continued to see very strong underlying momentum,” finance chief Emmanuel Babeau told analysts on a call Tuesday.

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Philip Morris

Zyn demand in the U.S. has primarily driven shipments of Philip Morris’ oral products up nearly 40% in the first nine months of 2024, compared with the same period of the prior year.
Part of that growth is due to easing supply constraints for the product. Shipments of Zyn cans in the U.S. rose more than 41% in the third quarter from the same three-month period in 2023. Philip Morris expects Zyn shipments to match demand “at some point” during the fourth quarter, Babeau said.

Growth is also taking place internationally, with total nicotine pouch volume outside America soaring almost 70% between the third quarters of 2023 and 2024. Zyn is now available in 30 markets after the brand’s recent expansions into Greece and the Czech Republic.
Philip Morris also noted Zyn as main driver of net revenue for the business as a whole. The company issued better financial results than analysts polled by FactSet expected on both lines for the third quarter, while also raising its full-year earnings per share outlook.
Zyn has become a symbol of the shift among tobacco companies toward alternatives to traditional cigarettes. Philip Morris announced earlier this year that it would invest $600 million to build a new production facility for Zyn in Colorado.
Shares of Philip Morris have climbed nearly 40% in 2024. That would mark the best year on record for the company, which was separated in 2008 in part because of smoker lawsuits. Philip Morris kept the international cigarettes business which was still growing. Shares of Altria, which kept the U.S. cigarettes unit, have struggled since, still far below an all-time high reached in 2017. More

ETF Strategist

Exchange-traded funds can help reduce annual tax bills for investors relative to mutual funds.
ETF managers can generally avoid distributing capital gains taxes to shareholders.
The tax savings apply to investors in nonretirement accounts. Those holding U.S. stocks tend to benefit most.

Christopher Grigat | Moment | Getty Images

Investors can generally reduce their tax losses in a portfolio by using exchange-traded funds over mutual funds, experts said.
“ETFs come with tax magic that’s unrivaled by mutual funds,” Bryan Armour, Morningstar’s director of passive strategies research for North America and editor of its ETFInvestor newsletter, wrote earlier this year.

But certain investments benefit more from that so-called magic than others.

Tax savings are moot in retirement accounts

ETFs’ tax savings are typically greatest for investors in taxable brokerage accounts.
They’re a moot point for retirement investors, like those who save in a 401(k) plan or individual retirement account, experts said. Retirement accounts are already tax-preferred, with contributions growing tax-free — meaning ETFs and mutual funds are on a level playing field relative to taxes, experts said.
The tax advantage “really helps the non-IRA account more than anything,” said Charlie Fitzgerald III, a certified financial planner based in Orlando, Florida, and a founding member of Moisand Fitzgerald Tamayo.
“You’ll have tax efficiency that a standard mutual fund is not going to be able to achieve, hands down,” he said.

The ‘primary use case’ for ETFs

Mutual funds are generally less tax-efficient than ETFs because of capital gains taxes generated inside the fund.
Taxpayers who sell investments for a capital gain (i.e., a profit) are likely familiar with the concept of paying tax on those earnings.
The same concept applies within a mutual fund: Mutual fund managers generate capital gains when they sell holdings within the fund. Managers distribute those capital gains to investors each year; they divide them equally among all shareholders, who pay taxes at their respective income tax rate.

More from ETF Strategist

Here’s a look at other stories offering insight on ETFs for investors.

However, ETF managers are generally able to avoid capital gains taxes due to their unique structure.
The upshot is that asset classes that generate large capital gains relative to their total return are “a primary use case for ETFs,” Armour told CNBC. (This discussion only applies to buying and selling within the fund. An investor who sells their ETF for a profit may still owe capital gains tax.)

Why U.S. stocks ‘almost always’ benefit from ETFs

U.S. stock mutual funds have tended to generate the most capital gains relative to other asset classes, experts said.
Over five years, from 2019 to 2023, about 70% of U.S. stock mutual funds kicked off capital gains, said Armour, who cited Morningstar data. That was true of less than 10% of U.S. stock ETFs, he said.
Capital gains aren’t bad; they’re investment profits. But ETF managers often avoid taxes on those profits whereas mutual funds don’t, due to differences in how they can trade.
“It’s almost always an advantage to have your stock portfolio in an ETF over a mutual fund” in a nonretirement account, Armour said.

U.S. “growth” stocks — a stock subcategory — saw more than 95% of their total return come from capital gains in the five years through September 2024, according to Morningstar. That makes them “the greatest beneficiary of ETFs’ tax efficiency,” Armour said.
Large-cap and small-cap “core” stocks also “benefit considerably,” with about 85% to 90% of their returns coming from capital gains, Armour said.
About 25% to 30% of value stocks’ returns come from dividends — which are taxed differently than capital gains within an ETF — making them the “least beneficial” U.S. stocks in an ETF, Armour said.
“They still benefit substantially, though,” he said.
ETF and mutual fund dividends are taxed similarly. ETF dividends are taxed according to how long the investor has owned the fund.

Actively managed stock funds are also generally better candidates for an ETF structure, Fitzgerald said.
Active managers tend to distribute more capital gains than those who passively track a stock index, because active managers buy and sell positions frequently to try to beat the market, he said.
However, there are instances in which passively managed funds can trade often, too, such as with so-called strategic beta funds, Armour said.

Bonds have a smaller advantage

ETFs are generally unable to “wash away” tax liabilities related to currency hedging, futures or options, Armour said.
Additionally, tax laws of various nations may reduce the tax benefit for international stock ETFs, like those investing in Brazil, India, South Korea or Taiwan, for example, he said.
Bond ETFs also have a smaller advantage over mutual funds, Armour said. That’s because an ample amount of bond funds’ returns generally comes from income (i.e., bond payments), not capital gains, he said.
Fitzgerald says he favors holding bonds in mutual funds rather than ETFs.
However, his reasoning isn’t related to taxes.
During periods of high volatility in the stock market — when an unexpected event triggers a lot of fear selling and a stock market dip, for example — Fitzgerald often sells bonds to buy stocks at a discount for clients.
However, during such periods, he’s noticed the price of a bond ETF tends to disconnect more (relative to a mutual fund) from the net asset value of its underlying holdings.
The bond ETF often sells at more of a discount relative to a similar bond mutual fund, he said. Selling the bond position for less money somewhat dilutes the benefit of the overall strategy, he said.

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New tax changes for 2025 announced by the IRS may affect tax liabilities for families.
The refundable portion of the child tax credit will be $1,700, unchanged from 2024.
Other changes to the earned income tax credit, adoption credit and annual gift tax exclusion may also affect parents.

Momo Productions | Digitalvision | Getty Images

Child tax credit for 2025

The refundable portion of the child tax credit — a tax break parents can take for qualifying children — will be $1,700 for 2025, which is unchanged from 2024. That figure represents how much families may claim even with zero tax balance on their tax returns.
The maximum child tax credit of $2,000 per child under 17 is available to parents with up to $400,000 in modified adjusted gross income if they are married and filing jointly, or under $200,000 if they are single. Those figures are also unchanged from 2024.
Notably, the terms of the current child tax credit are set to expire at the end of tax year 2025. At that time, the child tax credit is scheduled to drop to a maximum $1,000 per child.

However, lawmakers on both sides of the aisle have touted proposals to make the credit more generous.
The new changes for 2025 are standard adjustments for inflation so taxpayers don’t face higher tax liabilities, according to Alex Durante, economist at the Tax Foundation. The terms still reflect the Tax Cuts and Jobs Act of 2017.
“But the year following, 2026, families should be expecting to see higher tax liabilities unless Congress votes to extend these tax provisions that were implemented in 2017,” Durante said.

Earned income tax credit for 2025

A tax credit for low- to middle-income individuals and families — the earned income tax credit, or EITC — will have higher maximum amounts in 2025.
The earned income tax credit helps qualifying individuals and families reduce the amount of tax they owe, while also potentially providing a refund, according to the IRS.
In 2025, the maximum EITC amount will be $8,046 for qualifying taxpayers with three or more eligible children. That is up from $7,830 for tax year 2024.
The maximum amount available for qualifying taxpayers with two eligible children will be $7,152, up from $6,960 in 2024; one qualifying child, $4,328, compared with $4,213 in 2024; and no qualifying children, $649, up from $632 in 2024.

To qualify for the tax credit, individuals and families must be under certain thresholds for adjusted gross income — defined as total income excluding any eligible deductions.
In 2025, the maximum AGI to qualify for the EITC for married couples with three or more children will be $68,675, up from $66,819 in 2024; and for single, head of household and widowed filers with three or more children it will be $61,555, adjusted from $59,899 in 2024. The EITC is also subject to phaseout thresholds.
Taxpayers are also limited to how much investment income they can have in order to qualify for the earned income tax credit. In 2025, that threshold will go to $11,950, up from $11,600 in 2024. If investment income is above $11,950 in 2025, taxpayers will not qualify for the credit.

Adoption, gift tax exclusion changes

Other changes announced by the IRS may also affect families.
The maximum adoption credit for a child, including those with special needs, will apply to qualified expenses of up to $17,280 in 2025, up from $16,810 in 2024.
The annual exclusion for gifts will go up to $19,000, up from $18,000 in 2024. If taxpayers give $19,000 to each of their children in 2025, the annual exclusion will apply to each gift. More