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TD Ameritrade Holding Corp AMTD

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Economic Moat




Federal Open Market Committee Maintains Rates at Zero, Doesn't Expect First Hike Until After 2023

Eric Compton, CFA Senior Equity Analyst

Analyst Note

| Eric Compton, CFA |

The Federal Open Market Committee issued its latest statement on Sept. 16 and, unsurprisingly, held the federal-funds rate at 0.0%-0.25%. The vote was technically not unanimous, with Robert Kaplan (Dallas Fed) and Neel Kashkari (Minneapolis Fed) voting against the action, however, their votes weren’t against holding the federal-funds rate at the current level but rather were votes for slightly different nuances to the overall statement. All things considered, there remains no debate that rates ought to be at zero for now. As we had talked about in our last note regarding the FOMC (July 29), and as had been made official in the Fed’s official updates to its policy statements (released Aug. 27), the FOMC updated the language in its latest release, which should largely allow rates to remain lower for longer. Specifically, the FOMC now states that, “with inflation running persistently below this longer run [2%] goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time.” The FOMC also stated that it expects rates at zero will be maintained until, “labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.” This leaves the FOMC plenty of room to maintain rates at zero for some time, and the committee will not be likely to preemptively raise rates to combat inflation, which had been a strategy in the past. This also gives the committee plenty of room to define “maximum employment” in ways that again allow for rates to stay lower for longer.

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Company Profile

Business Description

TD Ameritrade is a leading retail brokerage and advisor services firm. Its largest shareholder is Toronto-Dominion Bank, which beneficially owns more than 40%. The firm offers trading in stocks, bonds, options, and other asset classes. Recently, TD Ameritrade derived approximately 55% of its revenue from interest-rate-related income and fees, 35% from commissions and transaction fees, and 10% from investment product and other revenue. Practically all of the company's revenue is generated in the United States. TD Ameritrade has a pending merger with Charles Schwab that is expected to close in the second half of 2020.

200 South 108th Avenue
Omaha, NE, 68154
T +1 800 669-3900
Sector Financial Services
Industry Capital Markets
Most Recent Earnings Jun 30, 2020
Fiscal Year End Sep 30, 2020
Stock Type High Yield
Employees 9,056