Why Analysts Love Charles Schwab


Jul. 6 2018, Updated 10:31 a.m. ET

Ratings for Charles Schwab

In the second half of 2018, the factors that could impact brokerage companies’ (VFH) ratings are market volatility, rising disturbances in global trade, and the Federal Reserve’s decision regarding interest rates. With ongoing trade wars, the Fed could opt to increase interest rates at a slower pace in the second half of the year.

In July, Charles Schwab (SCHW) has six “hold” ratings and one “sell” rating of the 20 analysts covering the stock. Eight analysts have given it a “strong buy,” and five have given it a “buy.” In the second quarter, brokerage companies are expected to see lower trading revenues sequentially, primarily due to lower volatility.

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The impact of trade wars

At the end of the second quarter, the Trump administration restricted China from investing in the US technology sector. These escalating trade tensions could adversely affect the equity markets. Lower markets could impact the performances of Charles Schwab, E*TRADE Financial (ETFC), TD Ameritrade Holding (AMTD), and Interactive Brokers Group (IBKR) since their margin loan balances could be negatively impacted.

But Charles Schwab could see a rise in inflows in its money market funds moving forward, primarily because of investors’ preferences for less risky assets. Global tensions might prompt retail investors to liquidate equity holdings if trade wars negatively impact the equity markets.


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