An Alternative To Money Market Funds
July is behind us and what a month it was!! The Dow Jones Industrial Average, S&P 500 and the Nasdaq all reached record levels as the bull market continued to run into early August. As of the close of trading on July 30, the Dow Jones Industrial Average (DJIA) was up 14.14% year to date, while the S&P 500 was up 17.02% and the Nasdaq was up 13.85% year to date.
Last Friday’s Nonfarm Payroll Report (NFP) was quite impressive. 943,000 jobs were added, well above the forecast of 845,000. The U-3 unemployment rate fell a full half point, from 5.9% in the preceding month compared to last month’s rate of 5.4%. The U-6 rate dropped to 9.20% while the Labor Participation Rate rose to 61.7%, up slightly from the reading of 61.6% in the prior month. Let's see if the improvement continues when the next NFP report is released on September 3.
The Fed met on July 27-28. Fed Chairman Jerome Powell made clear at the subsequent press conference it would continue its accommodative policy. These comments seem to have soothed bond investors' fears as the yield on the 10 Year US Treasury fell below the 1.20% level. The annual Jackson Hole economic conference will take place August 26-28 while the Fed will next meet on September 21-22.
Current Fed Chairman Jerome Powell has been lauded by the Wall Street community and both Democrats and Republicans in Congress. But, there is concern he may not be nominated for a second term by President Biden. According to a report by the Wall Street Journal on August 2, both Senators Elizabeth Warren and Sherrod Brown indicated a change may be needed. On August 1, Bloomberg reported Fed Governor Lael Brainard is viewed as a leading candidate to replace Mr. Powell if he is not renominated. His term ends in early February.
Aon and Willis Towers abandoned their merger plans on July 26. Earlier last month, the Justice Department filed a lawsuit seeking to block the deal. This was a sign that the Biden regulatory environment will be much tougher than prior administrations regarding large corporate deals. Long gone are the giddy days of the Reagan era when “Bigness is not badness” was the widely accepted view.
Lina Khan took over as Chairwoman of the Federal Trade Commission on June 15. Jonathan Kanter was nominated last month by President Biden to serve as Assistant Attorney General for the Justice Department. His confirmation is considered quite likely. These two appointments are giving investment banking firms and merger arbitrage trading desks sleepless nights. These two groups depend on mergers and acquisitions for a significant amount of revenue each year. But these two appointments are going to make completion of large corporate deals very difficult.
My weekly radio show is now on holiday and should return in September on WWPR 1490 AM. My prior radio shows and columns are available here.
If you are unhappy with the returns now offered by money market funds feel free to contact us.