An Alternative To Money Market Funds
Sarasota Herald Tribune and Naples Daily News
November is behind us and the amazing stock market rally has continued into early December. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all reached record highs in November. Technology stocks have been the leading sector by far in 2017, up nearly 37%.
The Federal Reserve chose to stand pat at the October 31 - November 1 meeting. The Fed is expected to raise rates 25 basis points when they meet for the final time this year, December 12-13. On November 2, President Trump nominated current Fed Governor Jerome Powell to become the next Chairman of the Federal Reserve. Upon Senate confirmation, Mr. Powell will succeed Janet Yellen. He is expected to continue to pursue a low interest rate policy upon becoming Fed Chairman in February when Ms. Yellen’s term ends.
Both Brent Crude Oil and West Texas Intermediate (WTI) Crude Oil continued their move higher in November. On November 30 at their meeting in Vienna, OPEC and Russia announced they agreed to extend their production cuts through the end of 2018. Brent began December trading just shy of the $64 per barrel level while WTI traded above the $58 per barrel level. In June, some analysts predicted Brent and WTI crude oil would trade down to the low $30s.
In Merger & Acquisition news, Sprint and T-Mobile scrapped their merger plans, while Emerson Electric abandoned its pursuit of Rockwell Automation. AT&T and Time Warner are headed to court as the Justice Department has sued to block their deal. Buffalo Wild Wings agreed to be acquired by Arby’s Restaurant Group for $157 per share in cash. Meredith Corp. will acquire Time Inc. for $18.50 per share in cash. Chip maker Marvell Technology will acquire smaller rival Cavium for about $84 per share in cash and stock. Finally, Broadcom recently launched a hostile bid of $70 per share in cash and stock for Qualcomm.
The US House and Senate have approved separate bills to cut both corporate and individual tax rates. The bills now need to be reconciled in a joint Congressional conference and approved by both bodies before becoming law. Assuming the bill passes, the corporate tax rate would drop from 35% to 20%, a cut of 43%. UBS predicts that S&P 500 earnings will rise by 9.5% if the tax rate for corporations drops to 20%. The tax cut will be especially beneficial for companies that pay near the 35% rate or above. Large regional banks, railroads, retailers, oil and gas pipeline firms, health care providers and telecommunication firms stand to benefit the most.
My weekly radio show on WWPR 1490 AM airs at 12.30pm each Friday. My prior radio shows and newspaper columns are available on our website (www.amescapmgmt.com).
If you are unhappy with the returns now offered by money market funds feel free to contact us.