An Alternative To Money Market Funds
June is behind us and what a month it was!! The S&P 500 rose 6.9% last month marking its best June performance since 1955. The rally continued into early July as the S&P 500, Nasdaq and Dow Jones Industrial Average each reached all time highs on July 3. The June Nonfarm Payroll Report released on July 5 put a temporary halt on the stock market rally. 224,000 jobs were added, well above the forecast of 165,000 jobs.
The strong report has led some market strategists to question whether the Federal Reserve will cut interest rates at the July 30-31 meeting. The dramatic drop in interest rates around the globe has led many to believe the Fed will need to begin cutting rates during the 2nd half of 2019 even if it stands pat at the July 30-31 meeting. The yield on the 10 Year US Treasury fell to a 52 week low of 1.95% on July 4.
Meanwhile, Japan, Germany and France now offer negative yields on their 10 Year sovereign debt while the yield on the UK 10 Year Gilt dropped to 0.67% on July 4. Just last month, Austria issued a new 100 year century bond with a stated yield of 1.17% that was heavily oversubscribed.
It appears rates around the world will continue to move lower. Christine Lagarde, Chairwoman of the International Monetary Fund, has been nominated to succeed Mario Draghi as President of the European Central Bank. She is considered to be quite dovish on interest rates. Pres. Trump’s newest Fed nominees, Christopher Waller and Judy Shelton, are expected to be dovish on rates as well.
Merger & Acquisition activity had a strong first half in 2019, the third strongest first half on record. The health care sector saw several large deals announced with Bristol Myers acquiring Celgene for $74 billion, Abbvie to acquire Allergan for $63 billion and Pfizer to acquire Array Biopharma for $11 billion. Two other major deals of note are the Occidental Petroleum buy of Anadarko and the merger of Raytheon and United Technologies. As of June 30, major Private Equity firms in Europe and North America were sitting on about $3 trillion in cash waiting to be deployed for new deals.
The first half of 2019 also saw significant activity in IPOs. The best performer has been Beyond Meat, up over 500% since it was priced @ $25/share in May. Other IPOs of note included UBER and LYFT, Zoom Video, PagerDuty and Crowdstrike. Slack chose a direct listing for its shares and its shares rose nearly 50% on its first day of trading.
My weekly radio show is on holiday and will return in September on WWPR 1490 AM. My prior radio shows and newspaper columns are archived here.
If you are unhappy with the returns now offered by money market funds, feel free to contact us. As of July 5, our fund is up over 17% for 2019.