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(NEW YORK) — Trading is set to begin for a new type of bitcoin fund that gives investors access to the crypto market without some of the hassle and fees of owning bitcoin outright.

Freshly approved by federal regulators, bitcoin ETFs — Exchange-Traded Funds — allow investors to buy an asset that tracks the price movement of bitcoin.

Fidelity, BlackRock and a host of other top investment firms have already begun to offer the product.

Bitcoin ETFs promise major potential gains but also notable downsides, presenting investors with a wide range of outcomes that will test their tolerance for risk, analysts told ABC News.

Investors could capitalize on a possible rise in the price of bitcoin if a flood of money into Bitcoin ETFs vaults the cryptocurrency into mainstream markets, they said.

However, investors should be prepared to weather the asset’s considerable volatility as well as uncertainty stemming from its association with issues of fraud and mismanagement in the wider crypto industry, they added.

“It’s going to be a volatile ride,” Bryan Armour, the director of passive strategies research at financial firm Morningstar, told ABC News. “You have to know that going in and make sure you’re okay with that.”

Some analysts said the new products could unleash a flow of investment and trigger a major spike in the price of Bitcoin, supercharging the most well-known and successful digital asset.

A Bitcoin ETF would elicit more than $14 billion of investment inflows within its first year on the market and as much as a 74% price increase over that period, Galaxy Digital, a crypto management and research firm, said in a report in October.

Some traditional institutions outside of the crypto arena have echoed that optimism, at least to a degree. Deutsche Bank forecasted price increases for bitcoin this year due in part to “greater institutional investment” in Bitcoin ETFs, according to a report reviewed by ABC News.

A run-up in price would follow some previous bull runs for bitcoin, including a rise of nearly 70% over the past six months. But the cryptocurrency has also undergone periods of major decline.

The price of bitcoin experienced a decline of at least 45 percentage points four times in the past five years, Armour said on Wednesday in a report for Morningstar.

The acceptance of Bitcoin ETFs among a wide swathe of investors could smooth out some of the volatility but that outcome may not come to pass, Armour told ABC News.

“If adoption becomes wider and the market becomes more mature, the price will become more stable,” Armour said. “For now, I don’t see it stabilizing.”

Setting aside their volatility, Bitcoin ETFs carry risks posed by the uncertain effects of fraud and mismanagement within the crypto sector, some analysts said.

The crypto industry entered this year bruised after a series of high-profile collapses and company scandals.

Sam Bankman-Fried, formerly one of the industry’s most prominent figures, could serve decades in prison after he was convicted on fraud charges in a federal trial. Changpeng Zhao, the founder and former CEO of major cryptocurrency exchange Binance, faces a jail sentence of up to 18 months after he pleaded guilty to federal charges of money laundering.

In a statement on Wednesday, Securities and Exchange Commission Chair Gary Gensler affirmed the agency’s decision to approve Bitcoin ETFs but offered a note of caution about cryptocurrency.

“We did not approve or endorse bitcoin,” Gensler said. “Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.”

James Butterfill, head of research at digital asset management firm CoinShares, rebuked concerns about bitcoin tied to potential manipulation or fraud.

The green light to trade Bitcoin ETFs gives them the “regulatory stamp approval,” Butterfill said.

Ultimately, investors considering Bitcoin ETFs should consider the role a potentially risky asset should play in their wider portfolio, analysts said.

“You shouldn’t allocate more to Bitcoin ETFs than you’re willing to lose,” Armour told ABC News.

Callie Cox, an analyst at the investment company eToro who tracks cryptocurrencies, said each individual should weigh Bitcoin ETFs within his or her own financial goals.

“You have your own hopes and dreams for your portfolio, so you should see how it fits,” Cox said.

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(WASHINGTON) — eBay will pay a $3 million criminal penalty for a campaign of harassment and intimidation undertaken by company executives that included anonymous home deliveries of a bloody pig mask, live insects and a funeral wreath, the Department of Justice said on Thursday.

The harassment targeted a Massachusetts couple for its online coverage of eBay, the DOJ said.

The San Jose, California, based online shopping firm was slapped with felony charges, including stalking, witness tampering and obstruction of justice, the DOJ added. The harassment took place roughly four years ago.

“eBay engaged in absolutely horrific, criminal conduct. The company’s employees and contractors involved in this campaign put the victims through pure hell, in a petrifying campaign aimed at silencing their reporting and protecting the eBay brand,” Acting U.S. Attorney Joshua S. Levy said in a statement.

eBay did not immediately respond to a request for comment.

From 2019 to 2020, Jim Baugh, eBay’s former Senior Director of Safety and Security, and six other employees on eBay’s security team targeted the couple for its role in publishing a newsletter about issues of interest to eBay sellers, the DOJ said.

Senior executives at eBay grew frustrated over the tone and content of the newsletter, as well as comments posted beneath the newsletter’s articles, the DOJ added.

In response, the DOJ said, Baugh and the other eBay employees carried out a campaign of harassment to intimidate the couple and change the tone of the newsletter.

The campaign included sending anonymous and disturbing deliveries to the victims’ home, and sending private Twitter messages and public tweets criticizing the newsletter’s content, the DOJ said.

eBay employees traveled to Natick, Massachusetts, to surveil the victims and install a GPS tracking device on their car, the DOJ added.

When Baugh learned of a police investigation into the harassment, he made false statements to the police and his team deleted digital evidence, the DOJ said.

eBay terminated all of the employees involved after an investigation.

“The company cooperated fully and extensively with law enforcement authorities throughout the process. EBay does not tolerate this kind of behavior. eBay apologizes to the affected individuals and is sorry that they were subjected to this. EBay holds its employees to high standards of conduct and ethics and will continue to take appropriate action to ensure these standards are followed,” the independent special committee formed by eBay’s board of directors to oversee the company’s investigation said in a statement at the time.

Ultimately, seven eBay employees were convicted for their role in the harassment campaign, many of whom served prison sentences. Bough was sentenced to 57 months in prison in September 2022, the DOJ said.

In addition to the fine, eBay agreed to retain an independent corporate compliance monitor for three years and improve its compliance process, the DOJ said.

“Today’s settlement holds eBay criminally and financially responsible for emotionally, psychologically, and physically terrorizing the publishers of an online newsletter out of fear that bad publicity would adversely impact their Fortune 500 company,” Jodi Cohen, special agent in Charge of the Federal Bureau of Investigation Boston Division, said in a statement.

“It also puts in place some much needed checks and balances to ensure an overhaul of eBay’s corporate culture,” Cohen added.

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(NEW YORK) — Consumer prices rose 3.4% in December compared to a year ago, accelerating markedly from the previous month and defying a smooth path down to normal levels, a report from the Bureau of Labor Statistics released on Thursday showed.

The Federal Reserve stands poised to dial back its inflation fight by cutting interest rates this year, but the latest inflation data could complicate those plans.

Interest rate cuts would ease borrowing payments for everything from credit cards to mortgages, but they risk stoking consumer demand and driving up inflation.

Prices last month rose faster than economists expected. The 3.4% rise of prices in December compared to a year ago sits more than a percentage point above the Fed’s target rate.

The price increases last month owed primarily to a rise in housing and energy costs, the U.S. Bureau of Labor Statistics said. Gas prices increased in December compared to a month prior, after having fallen considerably in November, the data showed.

Price increases for some food items continue to far outpace overall inflation. The price of beef rose nearly 9% in December compared to a year ago, while the price of crackers rose nearly 8% over that period. Prices for biscuits, rolls and muffins rose more than 4% in December compared to a year ago.

Some foods, however, declined in price. The costs of pasta and rice dipped slightly in December compared to a year ago. The prices of butter and breakfast sausage also declined over that period.

Core inflation, a measure that leaves out volatile food and energy prices, delivered better news. It climbed 3.9% in December compared to a year ago, cooling slightly from the previous month.

The inflation data arrives days after a jobs report for December showed hiring surpassed economist expectations, rebuking concern about a recession in the coming months.

The resilient jobs market aligns with optimism among many observers that the U.S. could avert an economic downturn, achieving a “soft landing” in which price increases return to normal levels while the economy continues to grow.

However, the robust economic performance may pose a challenge for the Federal Reserve as it tries to cool the economy and slow price increases.

Inflation stands well below last summer’s peak of over 9%, but remains well short of the Fed’s target rate of 2%.

The Fed risks a rebound of inflation if it cuts interest rates too quickly, according to some economists. An additional burst of economic activity for an already robust economy could hike demand and raise prices once again.

If the Fed maintains high interest rates for a prolonged period, however, the elevated borrowing costs could stifle business investment and consumer spending. Such an outcome could ultimately weigh on economic growth, corporate profits and employment.

Speaking at a press conference in Washington, D.C., last month, Fed Chair Jerome Powell urged caution about the outlook for the central bank’s effort to cool the economy and slow price increases.

“Inflation has eased from its highs and this has come without the significant increase in unemployment. That’s very good news,” Powell said.

“But inflation is too high, ongoing progress in bringing it down is not assured, and the path is uncertain,” he added.

Many market observers are expecting interest rate cuts as soon as a Fed meeting in March. As of last week, markets put the probability of a rate cut in March at 75%, said Ellen Zentner, chief U.S. economist and managing director at Morgan Stanley.

However, observers holding such expectations “may be in for a disappointment,” Zentner wrote last week, citing strong job gains that allow the Fed to keep rates high without fear of an imminent recession.

The cushion affords Fed policymakers “room to watch and wait,” Zentner added.

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(WASHINGTON) — The Department of Transportation has announced $623 million in grants to support electric vehicle (EV) charging infrastructure across the country.

“We’re at a moment now where the electric vehicle revolution isn’t coming, it is very much here,” Transportation Secretary Pete Buttigieg told reporters.

The grants will support 47 projects in 22 states and Puerto Rico, with an emphasis on rural areas and underserved communities. The funding will also lead to the construction of about 7,500 EV charging ports.

The decision comes as the Biden administration is setting a goal of installing 500,000 chargers nationwide by 2030. Sales of EVs have been rising but at a slower rate than past years, with consumers citing high vehicle prices and poor charging infrastructure for the lukewarm response to electric vehicles.

“This charging infrastructure is making sure that everyone from the local business owner to a freight truck operator can conveniently and reliably get where they need to go,” said Shailen Bhatt, the administrator of the Federal Highway Administration.

The projects include $10 million in funding for the New Jersey Department of Environmental Protection to build charging stations for people living in multi-family housing in disadvantaged and rural communities.

Another $15 million will go to the Maryland Clean Energy Center to build nearly 90 EV charging stations across the state at locations which may include Coppin State University, a historically Black university in Baltimore.

The County of Contra Costa in Northern California will also receive $15 million to build chargers at branches of the county’s local library system.

Energy Northwest will receive $15 million as well to install chargers across western Washington State and northern Oregon.

The Chilkoot Indian Association in the Alaskan Panhandle town of Haines will receive $1.4 million to build an EV charging station in the town. Haines, which touts thousands of visitors a year, says its one of the few in the region that is connected by road to Canada and the Alaska Highway.

“As a product of America’s industrial Midwest, I take very personally the importance of the fact that America led the world in the automotive revolution,” said Buttigieg on Wednesday. “We’re very much at the point of needing to assess whether [EVs] will, in fact, be made in America by American workers and whether the benefits will reach all Americans. President Biden’s policies are about making sure that the answer to both of those questions is yes.”

The funding for the grants comes from the Bipartisan Infrastructure Deal’s $2.5 billion discretionary grant program for charging and fueling infrastructure.

According to the Department of Transportation, since President Joe Biden took office, the number of electric vehicle models available to consumers has doubled, and by the end of the year, they expect it to double again. EV sales have quadrupled — 1.4 million were sold last year, making up about 9% of all passenger vehicle sales. More than four million EVs are on the roads.

Public charging ports have grown by about 70% and private companies have announced more than $155 billion in investments in EVs and the battery supply chain.

There are currently 170,000 chargers nationwide and the government is on track to meet Biden’s 2030 goal, Ali Zaidi, the White House national climate advisor, told reporters Wednesday.

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(NEW YORK) — Policymakers will pay close attention to the release of price data on Thursday as the Federal Reserve weighs dialing back its inflation fight with a series of interest rate cuts.

The Fed expects to slash rates later this year, which would ease borrowing payments for everything from credit cards to mortgages.

The central bank’s ultimate approach, however, will depend on the course of inflation, Fed Chair Jerome Powell said last month. The latest data will offer a glimpse at what that path could be.

Economists expect prices to have risen 3.2% in December compared to a year ago. That figure would stand more than a percentage above the Fed’s target rate and mark a slight acceleration from the previous month.

Core inflation, a measure that leaves out volatile food and energy prices, is expected to deliver better news.

Economists expect core inflation to have climbed 3.8% in December compared to a year ago, which would amount to a slight cooldown from the previous month.

The rate decision arrives days after a jobs report for December showed hiring surpassed economist expectations, rebuking concern about a recession in the coming months.

The resilient jobs market aligns with optimism among many observers that the U.S. could avert an economic downturn, achieving a “soft landing” in which price increases return to normal levels while the economy continues to grow.

However, the robust economic performance may pose a challenge for the Federal Reserve as it tries to cool the economy and slow price increases.

Inflation stands well below last summer’s peak of over 9%, but remains well short of the Fed’s target rate of 2%.

The Fed risks a rebound of inflation if it cuts interest rates too quickly, according to some economists. An additional burst of economic activity for an already robust economy could hike demand and raise prices once again.

If the Fed maintains high interest rates for a prolonged period, however, the elevated borrowing costs could stifle business investment and consumer spending. Such an outcome could ultimately weigh on economic growth, corporate profits and employment.

Speaking at a press conference in Washington, D.C., last month, Fed Chair Jerome Powell urged caution about the outlook for the central bank’s effort to cool the economy and slow price increases.

“Inflation has eased from its highs and this has come without the significant increase in unemployment. That’s very good news,” Powell said.

“But inflation is too high, ongoing progress in bringing it down is not assured, and the path is uncertain,” he added.

Many market observers are expecting interest rate cuts as soon as a Fed meeting in March. As of last week, markets put the probability of a rate cut in March at 75%, said Ellen Zentner, chief U.S. economist and managing director at Morgan Stanley.

However, observers holding such expectations “may be in for a disappointment,” Zentner wrote last week, citing strong job gains that allow the Fed to keep rates high without fear of an imminent recession.

The cushion affords Fed policymakers “room to watch and wait,” Zentner added.

Copyright © 2024, ABC Audio. All rights reserved.

(NEW YORK) — Spicy condiments from spreads to sauce have been dubbed a top food trend of 2024, but one brand is alerting consumers to toss out some of its products, as they could be dangerous for anyone with a wheat allergy.

Vesta Fiery Gourmet Foods, Inc. issued a voluntary recall on Monday for five of its bottled hot sauces with varying degrees of heat, as they contain “undeclared wheat.”

The Raleigh, North Carolina-based food manufacturer shared the news in a company announcement posted to the U.S. Food and Drug Administration website on Tuesday.

The recall impacts 1.5-ounce glass jars of Benny T’s Vesta hot sauces, including Benny T’s Vesta Ghost, Benny T’s Vesta Hot, Benny T’s Vesta Reaper, Benny T’s Vesta Scorpion and Benny T’s Vesta Very Hot.

“On 1/4/24 the firm was notified by the North Carolina Depart of Agriculture and Consumer Services that the label does not state the flour used is a wheat flour,” the company stated in its recall announcement, noting the “people who have an allergy or severe sensitivity to wheat run the risk of serious or life-threatening allergic reaction if they consume these products.”

Each of the five hot sauces in question have a use by date of December 2024 and were distributed nationwide between Oct. 1, 2023, to Jan. 4, 2024.

Click here for the full product details and label information of the affected products.

According to Vesta, the recalled products were packaged in glass jars and sold “primarily online, in retail stores and deli cases located throughout the United States.”

As of time of publication, no illnesses have been reported.

Consumers who have may have purchased these products are urged not to consume them or to discard the product.

Consumers with questions may contact Chris Tuorto at 919-656-7688, Monday – Friday, 8AM – 9PM EST.

A representative for Vesta Fiery Gourmet Foods did not immediately respond to ABC News’ request for comment.

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(NEW YORK) — The Securities and Exchange Commission on Wednesday gave its approval for some Bitcoin ETFs, just a day after a fake post on the agency’s account on X made a similar announcement and sent the value of Bitcoin soaring.

The price of Bitcoin vaulted skyward on Tuesday afternoon after the SEC appeared to deliver a major breakthrough for the cryptocurrency.

Minutes later, SEC Chair Gary Gensler punctured the euphoria, saying on X that a hacker had commandeered the agency’s account and sent out a fake message. The price of Bitcoin plummeted.

Some analysts say Bitcoin ETFs — Exchange-Traded Funds — could bring tens of billions of dollars of investment this year and catapult the price of Bitcoin.

In a statement on Wednesday, Gensler confirmed the decision but offered a note of caution about cryptocurrency.

After announcing that the SEC had “approved the listing and tradition” of some Bitcoin ETFs, Gensler added: “We did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.”

A Bitcoin ETF allows investors to buy into an asset that tracks the price movement of Bitcoin, while avoiding the inconvenience and risk of purchasing the crypto coin itself. But critics warn the investment product could do harm to investors exposed to the volatility and uncertainty of crypto.

Here’s what to know about Bitcoin ETFs and what’s at stake in their potential approval:

What is a Bitcoin ETF?

A Bitcoin ETF uses a decades-old trading method as a means of easing investment in digital assets.

An ETF amounts to a bucket of securities that gives investors a way to bet that an underlying asset will increase in price without purchasing that asset.

For instance, an ETF for gold allows individuals and institutions to put money on the price movement of the precious metal rather than buy, lug and store the physical item.

A Bitcoin ETF, in turn, gives investors access to the cryptocurrency market without facing the technical impediments and fees associated with navigating a crypto exchange.

Traders could find Bitcoin on traditional trading platforms and markets that many of them find trustworthy, assuaging concern about relatively young and scandal-ridden crypto technology.

Top investment firms like Fidelity and BlackRock are set to offer Bitcoin ETF products if they gain federal approval.

While nearly 90% of U.S. adults say they’ve heard at least a little about cryptocurrency, three-quarters say they aren’t confident about the safety and trustworthiness of current means for investing in the products, a Pew survey in April found.

What will happen after Bitcoin ETFs are made available?

Some analysts say the new products could unleash a flow of investment and trigger a major spike in the price of Bitcoin, supercharging the most well-known and successful digital asset.

A Bitcoin ETF would elicit more than $14 billion of investment inflows within its first year on the market and nearly $40 billion by the end of the third year, according to Galaxy Digital, a crypto management and research firm.

Standard Chartered Bank, a U.K.-based lender, offered a more bullish assessment, saying the financial instrument could induce as much as $100 billion worth of inflows by the end of this year, crypto outlet CoinDesk reported on Tuesday.

Under such a scenario, the price of Bitcoin could reach near $200,000 by the end of 2025, more than quadrupling the current value of the crypto coin, Standard Chartered Bank said, according to CoinDesk.

The price of Bitcoin has jumped nearly 70% over the past six months, in part due to anticipation of a surge if the Bitcoin ETF gains approval.

Critics of the financial instrument, however, say it could wreak significant damage to investors due to the volatility of Bitcoin as well as its potential use in illicit activities.

Dennis Kelleher, the CEO of nonprofit transparency group Better Markets, co-authored a letter to an SEC official last week warning of significant risk posed by the pending approval.

“It would be a grave if not historic mistake almost certainly leading to massive investor harm if the SEC approves the pending rule changes,” Kelleher wrote.

He added, “The massive and unrelenting fraud and manipulation in the bitcoin market means that approving these products would expose those investors to the very harms that the SEC exists to prevent.”

Why does this matter?

The crypto industry entered this year bruised after a series of high-profile collapses and company scandals.

Sam Bankman-Fried, formerly one of the industry’s most prominent figures, could serve decades in prison after he was convicted on fraud charges in a federal trial. Changpeng Zhao, the founder and former CEO of major cryptocurrency exchange Binance, faces a jail sentence of up to 18 months after he pleaded guilty to federal charges of money laundering.

Government approval for a Bitcoin ETF injects a much-needed jolt of good news for the ailing sector. But, as some critics fear, the financial product could widen the reach of crypto and pose further risk.

“We believe retail investors should wait to see whether these products can garner enough traction to see the light of day — let alone see convincing performance,” Manan Agarwal and Sabeeh Ashhar, analysts with financial services firm Morningstar, wrote in August.

Copyright © 2024, ABC Audio. All rights reserved.

(NEW YORK) — The price of Bitcoin vaulted skyward on Tuesday afternoon after the Securities and Exchange Commission appeared to deliver a major breakthrough for the cryptocurrency in a post on X.

Minutes later, SEC Chair Gary Gensler punctured the euphoria, saying on X that a hacker had commandeered the agency’s account and sent out a fake message. The price of Bitcoin plummeted.

The frenzy swirled around a long-awaited approval for a trading product called a Bitcoin Exchange-Traded Fund (ETF), which some analysts say could bring tens of billions of dollars of investment this year and catapult the price of Bitcoin.

On Wednesday, the SEC faces a deadline to decide whether Bitcoin ETFs are legal.

A Bitcoin ETF would allow investors to buy into an asset that tracks the price movement of Bitcoin, while avoiding the inconvenience and risk of purchasing the crypto coin itself. But critics warn the investment product could do harm to investors exposed to the volatility and uncertainty of crypto.

Here’s what to know about Bitcoin ETFs and what’s at stake in their potential approval:

What is a Bitcoin ETF?

A Bitcoin ETF uses a decades-old trading method as a means of easing investment in digital assets.

An ETF amounts to a bucket of securities that gives investors a way to bet that an underlying asset will increase in price without purchasing that asset.

For instance, an ETF for gold allows individuals and institutions to put money on the price movement of the precious metal rather than buy, lug and store the physical item.

A Bitcoin ETF, in turn, would give investors access to the cryptocurrency market without facing the technical impediments and fees associated with navigating a crypto exchange.

Traders could find Bitcoin on traditional trading platforms and markets that many of them find trustworthy, assuaging concern about relatively young and scandal-ridden crypto technology.

Top investment firms like Fidelity and BlackRock are set to offer Bitcoin ETF products if they gain federal approval.

While nearly 90% of U.S. adults say they’ve heard at least a little about cryptocurrency, three-quarters say they aren’t confident about the safety and trustworthiness of current means for investing in the products, a Pew survey in April found.

What would happen if Bitcoin ETFs are made available?

Some analysts say the new products could unleash a flow of investment and trigger a major spike in the price of Bitcoin, supercharging the most well-known and successful digital asset.

A Bitcoin ETF would elicit more than $14 billion of investment inflows within its first year on the market and nearly $40 billion by the end of the third year, according to Galaxy Digital, a crypto management and research firm.

Standard Chartered Bank, a U.K.-based lender, offered a more bullish assessment, saying the financial instrument could induce as much as $100 billion worth of inflows by the end of this year, crypto outlet CoinDesk reported on Tuesday.

Under such a scenario, the price of Bitcoin could reach near $200,000 by the end of 2025, more than quadrupling the current value of the crypto coin, Standard Chartered Bank said, according to CoinDesk.

The price of Bitcoin has jumped nearly 70% over the past six months, in part due to anticipation of a surge if the Bitcoin ETF gains approval.

Critics of the financial instrument, however, say it could wreak significant damage to investors due to the volatility of Bitcoin as well as its potential use in illicit activities.

Dennis Kelleher, the CEO of nonprofit transparency group Better Markets, co-authored a letter to an SEC official last week warning of significant risk posed by the pending approval.

“It would be a grave if not historic mistake almost certainly leading to massive investor harm if the SEC approves the pending rule changes,” Kelleher wrote.

He added, “The massive and unrelenting fraud and manipulation in the bitcoin market means that approving these products would expose those investors to the very harms that the SEC exists to prevent.”

Why does this matter?

The crypto industry entered this year bruised after a series of high-profile collapses and company scandals.

Sam Bankman-Fried, formerly one of the industry’s most prominent figures, could serve decades in prison after he was convicted on fraud charges in a federal trial. Changpeng Zhao, the founder and former CEO of major cryptocurrency exchange Binance, faces a jail sentence of up to 18 months after he pleaded guilty to federal charges of money laundering.

Government approval for a Bitcoin ETF could inject a much-needed jolt of good news for the ailing sector. But, as some critics fear, the financial product could widen the reach of crypto and pose further risk.

“We believe retail investors should wait to see whether these products can garner enough traction to see the light of day — let alone see convincing performance,” Manan Agarwal and Sabeeh Ashhar, analysts with financial services firm Morningstar, wrote in August.

 

Copyright © 2024, ABC Audio. All rights reserved.

(NEW YORK) — After a high-flying performance last year, the stock market has dropped at the outset of 2024. The turnabout has sent some investors looking for alternatives, including certificates of deposit, or CDs.

A CD is a type of savings account that offers a fixed interest rate over a given period of time. If depositors remove their funds before their agreed-upon end date, however, they incur a penalty.

Investor returns for CDs have soared over the past year in response to a near-historic series of interest rate hikes at the Federal Reserve.

That trend has made this lesser-known financial instrument more attractive than it has been in years, experts told ABC News. Since the Fed expects to cut interest rates this year, they added, interested investors should move quickly before potential gains diminish.

“Now is definitely a good time to look at getting into a CD,” Cassandra Happe, an analyst at personal finance firm WalletHub, told ABC News. “Because rates are so high.”

“Investors should definitely keep a potential rate cut in mind,” Happe added, noting that some forecasters expect the Fed to slash rates within the next few months.

CDs do carry downsides, however, experts added. The fixed interest rate promised by a CD means it lacks the possibility of enormous gains, unlike a riskier instrument such as the stock market.

The best interest rate available for a one-year CD stands at 5.66%, according to a list of rates compiled by WalletHub. The shortest term length available, three months, still returns interest of up to 5.55%, WalletHub found.

Interest rate hikes at the Fed improve returns for CDs because the adjustments allow banks to charge borrowers higher costs to take out loans, Reena Aggarwal, professor of finance and director of the Georgetown Psaros Center for Financial Markets and Policy, told ABC News.

“When interest rates are high, banks can make a loan — for example, a mortgage — at a higher rate,” Aggarwal said. “So they can afford to pay their depositors more.”

When banks raise interest rates for savings accounts, such as CDs, the financial firms entice customers to deposit money with them instead of a rival, which in turn bolsters the capital a bank holds on hand to generate profits through additional loans, Aggarwal added.

“It’s all about competition,” she said.

A major benefit of CDs stems from the iron-clad certainty of their returns, Yiming Ma, a finance professor at Columbia University Business School, told ABC News.

“You’re guaranteed your money,” Ma said.

Typically, long-term CDs spanning three or five years deliver higher interest rates than short-term CDs, since a wider time horizon requires investors to part with their funds for a longer period.

However, the market currently offers higher returns for short-term CDs rather than long-term ones, in part because forecasters expect interest rates to fall steadily over the coming years, experts said. That dynamic offers investors a relatively rare opportunity to generate elevated gains without waiting a long time, they added.

“This adds to the attractiveness of a short-term CD,” Ken Tumin, a senior industry analyst for savings at online loan company LendingTree, told ABC News.

Still, he added, a long-term CD may also be an attractive option right now for investors seeking gains over an extended period, since the returns on offer for these instruments could come down significantly if the Fed cuts rates.

“A long-term CD would be beneficial if rates do fall,” Tumin said, noting that investors who took action beforehand would be locked into the elevated fixed rates for several years.

While CDs carry advantages, investors should be aware of key trade-offs, experts said.

The fixed rate of CDs promises stability but precludes the chance of stellar returns. A one-year CD delivers a return of more than 5%. By contrast, the S&P 500 — the index that most people’s 401(k)s track — climbed 24% last year. Of course, the stock market risks significant losses, as well.

Meanwhile, since CDs impose a penalty for the early withdrawal of money, they pose a problem for investors who may need to call upon the funds before a selected end date.

“CDs are good as a safe and higher-return investment for funds that you don’t need to use immediately,” said Ma, of Columbia.

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(LOS ANGELES) — Fast food workers defied skeptics roughly a decade ago with the “Fight for $15,” a campaign demanding an industry-wide pay floor at more than double the federal minimum wage.

That aspiration spread across the low-wage workforce, helping to achieve a base pay of $15 per hour in six states and dozens of cities that play host to tens of millions of workers.

Fast food workers in California will soon attain a higher baseline: $20 an hour. The fresh standard could hold significant implications for workers nationwide, experts told ABC News.

Low-wage workers in California across industries will certainly see a raise as their employers compete against the pay offered by fast food companies, economists said.

The approach in California has elicited copycat campaigns in other states and may become a fixture of demands among low-wage workers engaged in union drives.

“This creates a new benchmark,” Ken Jacobs, co-chair of the Labor Center at the University of California, Berkeley, told ABC News. “We went through the Fight for $15 and now $20 is out there as a new target wage.”

The National Restaurant Association, an industry trade group, did not immediately respond to ABC News’ request for comment.

In September, California Gov. Gavin Newsom, a Democrat, signed into law the measure that established a $20 an hour minimum wage for some 500,000 fast food workers. The pay floor will go into effect on April 1.

The minimum wage overall for workers in California, by contrast, stands at $16 an hour.

The disparity in minimum pay between fast food employees and the rest of the workforce sets up a dynamic referred to as “spillover effects,” in which a pay increase for one set of workers drives up the wages of a different group, Paul Wolfson, a research fellow at Dartmouth College who studies the minimum wage, told ABC News.

“Anyone in California making less than the new minimum wage in fast food will say, ‘Hey, I can get a job at Wendy’s, McDonald’s, or Taco Bell and make more money,'” Wolfson said.

At risk of a failure to recruit and retain workers, California-based employers in other sectors will likely respond by raising wages, economists said.

Even more, the legislation could influence the pay of workers beyond California, they added.

First off, workers within commuting distance of the California border could travel to the state for a job that qualifies for the $20 an hour minimum or pose a credible concern for current employers about the possibility, some economists said.

“It could have small effects right along the border,” Jacobs said, acknowledging that few major population centers are located in the area alongside California, unlike the region surrounding New York.

The new minimum wage for fast food workers could deliver a boost for low-wage workers nationwide, meanwhile, if it adds momentum to similar campaigns in other states or helps unionizing workers demand $20 an hour in collective bargaining, economists and advocates said.

The California law, however, would not put direct pressure on low-wage employers located far from the state, since workers are unlikely to move a long distance for the pay increase.

“The main issue here is a political question,” said Jacobs. “In other states or cities, do we see governments enact similar policies?”

Such a push appears to have begun. Nursing home workers in Minnesota are set to receive a pay increase in August after a newly established statewide board sets standards for the industry.

A bill pending in the Illinois legislature would create such a board for workers who educate and care for young children. A Massachusetts measure would set a minimum wage for rideshare drivers.

The approach allows hundreds of thousands of fast food workers to bargain collectively over the terms of their work at large companies across a given sector, rather than be forced to form a union at a single workplace and negotiate with one employer at a time, Paul Sonn, state policy program director at the nonprofit National Employment Law Project, told ABC News.

The strategy circumvents difficulties faced by traditional union drives under U.S. labor law, Sonn added.

Starbucks workers, for instance, have organized more than 360 stores since 2021. But the union and Starbucks have yet to reach an agreement on a labor contract at any of the stores.

In a previous statement to ABC News, a Starbucks spokesperson faulted the union Workers United for a failure to meet with company representatives over contract bargaining.

If employers refuse to bargain with workers, Sonn said, the sector-wide approach offers them a way to attain a raise.

“This is a way for workers to improve their industries when their employers are getting away with stalling,” he added.

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