Wednesday,
May 5, 2021

Market recap

Dow Jones

34,133.03

19.80 (+0.06%)

S&P 500

4,164.66

-28.00 (-0.67%)

Nasdaq

13,633.50

-261.61 (-1.88%)

Pandora

$30.37

+$1.36 (+4.69%)

Pfizer

$39.95

+$0.12 (+0.30%)

CVS

$81.09

+$3.40 (+4.38%)

Amid evolving news + uncertainty surrounding COVID-19, your financial needs are our top priority. For more information on COVID-19 and your finances click here.

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Top Story

Pandora’s Plans for Lab Grown Diamonds

Pandora Launches Sustainable Collection

Pandora (PANDY), the world’s largest jewelry maker, is rolling out its first collection featuring diamonds grown in a lab. The collection is called Pandora Brilliance and includes necklaces, earrings, and rings. It is launching in the UK first with a global rollout expected later this year

The company said the diamonds have the same physical characteristics as mined diamonds. They are graded on cut, color, clarity, and carat before being sold. Prices for items in the collection start at $350.

Diamonds and other gems grown in labs are seen as a traceable and ethical alternative to using mined stones. They are appealing to a growing number of consumers interested in purchasing products from sustainable supply chains.

Jewelers Focus on Sustainability

Pandora has been working to make its supply chain more sustainable for some time. Last year the company announced it will only use recycled gold and silver in its jewelry by 2025. The Pandora Brilliance collection was made with more than 60% renewable energy. By the time it launches globally, Pandora expects the diamonds to be produced with 100% renewable energy.

"They are as much a symbol of innovation and progress as they are of enduring beauty and stand as a testament to our ongoing and ambitious sustainability agenda," Pandora CEO Alexander Lacik said of the collection.

Pandora’s rival, Tiffany & Co. (TIF) is also making it easier for consumers to track the stones they purchase as customers become more aware of ethics and sustainability in the mining industry. The company has launched a program which allows customers to research where stones in their jewelry were mined and set.

Consumers Want Green Gems

Pandora does not currently sell a high volume of diamond jewelry products. Out of the 85 million pieces it sold last year, only 50,000 had diamonds in them.

Still, with its size and mainstream customer base, the company’s move to use lab grown diamonds is significant. Pandora wants to bring diamonds to the mainstream in a sustainable fashion. Younger consumers in the US, China, and India say sustainability is a big part of their decision process when they make purchases. Companies which invest in sustainable supply chains now could benefit in the long term as these younger consumers grow up and purchase more jewelry.

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Ad-Supported Streaming Services Impact Marketing Strategies

Consumers Willing to Watch Ads for Free Content

The streaming TV-driven advertising market is exploding as more ad-supported services come online.

In 2021 advertisers in the US are expected to spend $11.36 billion on commercials for streaming TV. That is a significant increase from $8.1 billion in 2020.

The surge is a result of consumers’ willingness to sit through commercials in order to access content for free. Several new services including PlutoTV and Tubi, which is owned by Fox (FOXA), are free to watch. A handful of other ad-supported platforms including Discovery’s (DISCA) Discovery+, Paramount’s (PGRE) Paramount+, and NBCUniversal’s Peacock charge a small monthly fee. WarnerMedia is launching a version of HBO Max which is also ad-supported.

Ad-Supported Platforms Gain Market Share

Ad-supported streaming services are gaining traction with consumers. As of the end of January, ad-supported streaming TV services accounted for 26% of the US market, which is up from 24% a year earlier. The market is also getting significantly more crowded and competitive.

The increased competition is good for consumers but poses challenges to advertisers, which are struggling to figure out how to place their commercials. Companies can purchase ads directly from streaming services or can use an ad-buying platform to buy spots across hundreds of streaming apps.

Challenges for Advertisers

The current state of the streaming TV ad market is reminiscent of the cable TV industry in its early days. Advertisers spent money running ads on new channels without knowing if they would be successful. Despite the current challenges, advertisers are enthusiastic about the possibilities for advertising on streaming services. Streaming services make it easier to target certain demographics at specific times, which can be difficult to achieve with cable TV.

The ad-supported streaming market is rapidly gaining ground. But streaming companies are looking ahead and wondering if consumers will spend as much time watching their content as businesses reopen and more in-person entertainment options become available. These changing trends also raise questions about whether consumers will continue to be willing to sit through ads in exchange for free content.

Biden’s Tax Plan May Lead to a “Marriage Penalty” for Top Earners

Tax Hikes for Wealthy Americans

President Joe Biden’s tax proposal, which would raise taxes on the top 1% of wealthiest Americans, could lead to what’s referred to as a “marriage penalty.” A marriage penalty occurs when a couple pays more in taxes when they file together than if they were to file individually.

Under the proposal, single filers with more than $452,700 in income and couples filing jointly earning more than $509,300 would face a tax increase. The highest tax rate would be raised to 39.6% from 37%.

The White House said the change will only impact the top earners in the country. But a small percentage of married individuals earning less than $400,000 each could still feel the impact under some specific circumstances. For example, if each half of a couple makes $260,000 annually, they may pay higher taxes filing jointly than if they filed individually.

Less Than 1% of Households at Risk

If the tax proposal is approved, the marriage penalty would apply to less than 1% of US households. But for those impacted, there are some steps to take which can help avoid a tax surprise next year.

Financial planners say married couples may consider saving more in tax-deferred accounts like a 401(k) or IRA. Making charitable donations and other deductions may also reduce the impact.

It is also important to pay attention to the timing of the tax law. If it goes into effect in 2022, self-employed individuals may want to consider recognizing a portion of their 2022 income at the end of 2021. It is always best to consult a tax professional for your own unique situation.

The Plan Is Not Finalized

The prospect of higher taxes is causing some individuals to make financial changes now, but it could take time for Biden’s proposal to become a law. Details may also change before it passes, so others are waiting to make significant changes.

President Biden is proposing several changes to the tax code which would impact the wealthiest Americans to help fund the infrastructure proposal and other initiatives. It’s worth noting that none of the details of these changes are yet set in stone.

Not-So-Breaking News

  • Pfizer (PFE) made $3.5 billion in first-quarter revenue from its COVID-19 vaccine. Sales of its vaccine accounted for close to one fourth of its $14.6 billion income in Q1.
  • CVS Health’s (CVS) first-quarter sales surged as more consumers came into its stores for COVID-19 vaccinations and tests. Earnings of $2.04 per share and revenue of $69.1 billion topped Wall Street’s targets. The drug store operator also raised its forecast for the year.
  • Yesterday, S&P Dow Jones launched three cryptocurrency indexes which track Bitcoin and Ethereum prices. The price of Bitcoin has climbed over 93% so far this year. Ethereum recently hit an all-time high and has gained 350% year-to-date.
  • SmileDirectClub (SDC) shares plummeted after the orthodontics company revealed it suffered a cyberattack last month which caused a systems outage. The company said the attack cost it as much as $15 million in revenue.
  • Expedia (EXPE) is selling its corporate travel unit, Egencia, to American Express Global Business Travel. Terms of the deal were not disclosed. Expedia will become a shareholder in Egencia once the transaction closes.
  • How do you pay taxes on cryptocurrency? Learn all you need to know about how the IRS treats crypto and how it is taxed.

Financial Planner Tip of the Day

“Buying crypto isn’t a taxable event, but selling crypto and purchasing goods and services with crypto is. For federal tax purposes, virtual currency (crypto) is treated as property, with the same tax rules as other property transactions like stocks.”

Brian Walsh, CFP® at SoFi

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