Tuesday,
September 14, 2021

Market recap

Dow Jones

34,869.63

+261.91 (+0.76%)

S&P 500

4,468.73

+10.15 (+0.23%)

Nasdaq

15,105.58

-9.91 (-0.07%)

Apple

$149.55

+$0.58 (+0.39%)

Verizon

$54.62

+$0.39 (+0.72%)

Uber

$40.07

+$0.18 (+0.45%)

Amid evolving news surrounding COVID-19 and the economic reopening, your financial needs are our top priority. For more information,click here.

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Top Story

Apple’s Fall Product Launch

Just in Time for the Holidays: New iPhones

Apple (AAPL) is holding its fall product launch later today. The tech giant is expected to roll out new iPhones as well as updates to its AirPods and Apple Watches. Like last year, Apple is holding the event virtually due to the pandemic.

The iPhone maker’s fall event is always a big deal, garnering a huge amount of attention from consumers and the press. The timing of the event also tends to work in Apple’s favor as it sets the stage for the holiday shopping season. As it stands, Apple is seeing strong demand, particularly for its iPhones. In its second quarter, iPhone sales rose 50% year-over-year. Sales in its “other” category, which includes AirPods, were up 40% compared to last year.

All Eyes on iPhones

Consumers and investors will be carefully watching the iPhone launches. The category accounts for half of Apple’s sales. Last year Apple was forced to delay its iPhone 12 launch until October because of pandemic-related challenges. This year the company is back on track. Apple is expected to follow last year’s strategy in which it launched four iPhone 5G models priced between $599 and $1,099. The phones will not have any major overhauls, sporting the same screen sizes but with improved cameras.

Some are concerned that the lack of groundbreaking new products in this year’s launch will make it harder for Apple to maintain growth. However, the company argues that 5G is in its infancy and customers around the world will be eager to purchase 5G products.

Wireless Carriers Are Key to iPhone Growth

Wireless carriers which supply service for Apple hardware are currently battling for market share. They are offering perks to lure customers which could give Apple’s sales a boost. Verizon (VZ), AT&T (T), and T-Mobile (TMUS) are offering generous subsidies, covering a lot of the cost of new iPhones for customers as a way to encourage people to upgrade to their 5G services. The strategy is paying off for the carriers. AT&T said the offers have been profitable and it has no plans to curb these initiatives anytime soon. That bodes well for Apple as it rolls out a new slate of iPhones.

As Apple launches its products later today, it will be interesting to see how consumers, investors, and wireless carriers react.

Credit Card Utilization: What You Need To Know

The world of credit scores can make your head spin, but what we know for sure is that credit card utilization plays a big role in how companies compute your credit score. In fact, about 30% of your credit score is determined by your credit card utilization rate. That means a high credit card utilization rate can adversely affect your credit score.

The general guideline is that you should not exceed a 30% credit card utilization rate. Track your credit score for free in the SoFi app, where the factors affecting your score are broken out to make them easier to understand.


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House Democrats Propose $3.5 Trillion Plan

Tax Rate on Companies, Wealthy Individuals Set to Rise

House Democrats unveiled several proposed tax increases on corporate America and the nation’s wealthiest individuals. These tax hikes would pay for a $3.5 trillion bill aimed at expanding the social safety net and fighting climate change.

Under the plan, the tax rate for corporations would jumpto 26.5% from 21%. For the highest-earning households, the top marginal rate would increase to 39.6% from 37%, and anyone making over $5 million would be hit with a 3% surcharge. The capital gains tax rate would be lifted to 25%. The tax proposals, which still have to make their way through Congress, do not go as far as President Joe Biden had originally called for. He wanted the corporate tax rate to increase to 28% and the capital gains rate to rise to 39.6%.

Capital Gains Tax Could Be As Much As 28.8%

The proposed tax legislation would effectively raise the capital gains tax to as much as 28.8% when the new 25% tax rate is combined with a 3.8% investment-income tax already on the books. It would go into effect in the tax years that end after today. The House Democrats’ proposal is a bit of a relief for investors. Under Biden’s plan, the top tax rate would have been 43.4%.

The new rate applies to individuals earning $445,850 or more and married joint filers making over $501,600. The increase in the capital gains tax is estimated to raise $322.5 billion in the next ten years.

Tax Bill May Change During Debate

The House Democrats’ tax proposal has a long way to go before it would go into effect. It could look a lot different if and when it passes. Democrats hope to pass a bill in the next few weeks and will need the support of the full caucus in the Senate and nearly all the Democrats in the House.

While Democrats agree in principle about the need to spend more on social programs and climate change, expect a lot of wrangling from more centrist lawmakers who favor smaller tax increases.

Toast Aims to Raise $714 Million in IPO

Toast IPO Could Value It at $16 Billion

Toast, a startup that makes restaurant management software, is gearing up to raise $714.4 million in its upcoming initial public offering. The startup, which is selling 21.7 million shares priced at $30 to $33 per share, is expected to have a valuation of $16 billion.

The IPO comes as business for Toast has been booming ever since the pandemic. With restaurants shut down, Toast shifted its focus to helping restaurants manage delivery and accept contactless payments, which boosted its sales. In February the startup had a valuation of around $5 billion, counting TPG, Tiger Global Management, and American Express Ventures among its backers.

Toast Benefited During the Pandemic

Toast is among the startups to benefit from demand for online ordering, curbside pickup, and delivery. The company has been around for ten years and when it goes public will list on the New York Stock Exchange under the ticker “TOST.” Revenue at the startup is made up of recurring software-as-a-service income and payments revenue.

In 2020 Toast grew 24% but in the first half of this year growth has accelerated with sales up 105%. That implies Toast’s shift to focus on delivery and contactless payments is paying off. With business booming and sales growing, it makes sense why Toast is choosing now to go public.

IPO Market Red Hot in 2021

Toast is joining a growing list of startups which are gearing up to tap the public markets this year. Other big name software-as-a-service startups launching IPOs this year include Freshworks, Thoughtworks, and ForgeRock. All of the companies are sporting lofty valuations as they gear up to debut in a red-hot IPO market. So far in the first six months of this year 213 companies have gone public, raising a total of $70 billion. There are also about 87 companies looking to raise a combined $20 billion before the year’s end.

Toast is going public amid surging demand for IPOs and strong sales growth. It will be interesting to see if investors reward this startup once it makes its public debut.

Not-So-Breaking News

  • TransUnion (TRU) is spending $3.1 billion in cash to purchase Neustar, an IT services company. The acquisition helps the consumer credit-rating company diversify into a new area. TransUnion is buying Neustar from an investment group led by Golden Gate Capital.

  • Live Nation (LYV) is buying a 51% majority stake in Ocesa Entretenimiento, a Latin American promoter and the owner of Ticketmaster Mexico for around $444 million. The deal was originally signed in 2019 and the price of the purchase was $480 million, but the pandemic delayed the deal and lowered the price tag for the assets.

  • Virgin Galactic (SPCE) announced that it will put its first commercial research space mission on hold after a third-party manufacturer warned that a part in the flight control system could be defective. The flight was supposed to take place in late September or early October. This caused shares of the space tourism company to fall.

  • Coinbase (COIN) is gearing up to raise $1.5 billion in debt via a private offering. The notes will be due in 2028 and 2031. Coinbase said it wanted to take advantage of low-cost capital to bolster its strong balance sheet.

  • Uber (UBER) was dealt a blow after a Dutch court ruled that its drivers are employees and thus deserve more rights under the country’s labor laws. Uber had sought to keep drivers classified as contractors.

  • Carrying a balance on a credit card can make it challenging to get out of debt and can cost more in interest. Dig into the effects of carrying a balance, plus some tips for reducing credit card debt.

Financial Planner Tip of the Day

“The further away a person is from hitting their credit limit, the healthier their credit score will be, in most circumstances. A borrower’s debt-to-credit ratio, also known as the credit utilization rate, should ideally be no more than 30%. Higher utilization rates can negatively affect a person’s credit score. Paying revolving credit lines in full each month can have a positive impact on a person’s credit score because doing so essentially lowers the credit utilization rate.”

Brian Walsh, CFP® at SoFi

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