An Alternative To Money Market Funds
October is behind us and what a difficult month it was! The major indices all suffered a decline during the month. The markets rallied strongly during the first week of November as it appears our federal government will remain divided once 2021 begins. Pres.Trump has not conceded defeat and is in the process of contesting the election results in court. The US Supreme Court may be forced to ultimately decide the winner of the 2020 Presidential election.
Last Friday’s Nonfarm Payroll Report showed the economy continues its strong recovery as nearly 638,000 jobs were created in October. This was above the estimate of 530,000 jobs. The U-3 unemployment rate fell to 6.9% compared to 7.9% in September. The U-6 rate, a broader measure of the employment picture widely followed by economists, fell to 12.1%, down from 12.8% a month ago. Meanwhile, the closely watched labor participation rate rose to 61.7%, up from 61.4% last month. The final 2020 monthly employment report will arrive December 4.
The Federal Reserve concluded its two day meeting November 5. As expected the Fed made clear it would take whatever steps were needed to enable the economy to continue its recovery. Fed Chairman Jerome Powell encouraged Congress to agree on a stimulus package citing the high unemployment rate in a number of industries. He also made clear the current near zero rate environment will likely stay for several more years. Please note the final Fed meeting of 2020 will take place December 15-16.
As a result of the near zero rate environment, borrowers will continue to be rewarded while our savers will be punished. 2020 has seen corporate debt issued at a record amount as companies are able to sell debt at all time low yields using the proceeds to either refinance existing debt, expand, add to their cash levels or do stock buybacks. This trend is likely to continue well into next year as well.
Both Exxon and Chevron maintained their quarterly dividends after announcing the details on October 28. Exxon’s 87c quarterly dividend is payable December 10 to holders as of November 12. Chevron’s $1.29 quarterly dividend is also payable December 10 to holders as of Nov 18. Both firms are “Dividend Aristocrats” having raised their dividends for at least 25 consecutive years. In addition, both companies are offering significant dividend yields. As of November 6, Exxon was yielding 10.62% while Chevron was yielding 7.25%.
My weekly radio show airs each Friday at 12.30 PM EST on WWPR 1490 AM. The show can also be heard live on the station’s website (www.1490wwpr.com). My prior radio shows and columns are available in our Archived Radio Show section.
If you are unhappy with the returns now offered by money market funds feel free to contact us.