Fidelity Investments introduced an option that will automatically sweep clients' money into higher-yielding investment options for its brokerage and retirement accounts.
The firm, which manages nearly $8 trillion in client assets, said it will give clients the option to automatically invest their money in the Fidelity Government Money Market Fund, which had a 7-day yield of 1.91% as of Aug. 5, when they open their accounts. Fidelity also said it will still allow investors to pick lower-yielding options.
The company said its offering directly competes with offerings from Charles Schwab Corp., TD Ameritrade Holding Corp. and E*TRADE Financial Corp. Fidelity noted that the industry standard is to automatically put customer's cash into lower-yielding products.
Fidelity's product offering comes at a time when financial markets are seeing increasing volatility, especially in light of U.S. President Donald Trump's announcement that he will impose an additional 10% tariff on $300 billion of Chinese goods Sept. 1. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite Index all saw broad sell-off pressures on the news of intensifying trade tensions.
As of 12:22 p.m. ET on Aug. 8, the Dow is up 1.19% to 26,316.65, the S&P 500 added 1.57% to 2,929.30 and the Nasdaq Composite Index inched up 1.80% to 8,004.72. The yield on the 2-year U.S. Treasurys stands at 1.63%, while the yield on the 10-year U.S. Treasurys stands at 1.77%.
A recent trend in financial markets is the ballooning of the amount of negative-yielding government debt. Deutsche Bank estimates there are about $15 trillion of government bonds with a negative yield, or 25% of the market. Bond yields have turned lower as central banks try to inject more monetary accommodations to stimulate the economy. The European Central Bank, which has one of the loosest monetary policies, hinted it might cut rates in the future in the presence of weak economic data.
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