An Alternative To Money Market Funds
October is behind us and what a month it was!! Last month, all of the major indices reached all time highs and this rally has continued into November. In fact, at the close of trading November 5, all three of the major indices had again reached intra day all time highs.
Last Friday’s Nonfarm Payroll Report (NFP) was quite strong. 531,000 jobs were added in October, well above the estimate of 450,000 jobs. The U-3 unemployment rate dropped to 4.6% from the 4.8% level one month ago. The closely watched U-6 rate also dropped, falling to 8.3% from 8.5% in September. One damper on the strong report was the Labor Participation Rate which held steady at 61.6%. In January 2020, it reached a Trump era high of 63.4%. October marked the 14th straight month where more than 100 million Americans were not in the labor force. Clearly, there is room for improvement as employers continue to seek workers for their millions of job openings. Note the final 2021 NFP report will be released on Friday, December 3.
The Fed concluded its 2 day meeting November 3. As expected, Fed Chairman Jerome Powell made clear the Fed would begin its tapering program later in November. He indicated the Fed will reduce its bond buying program by $15 billion each month consisting of a decline of $10 billion in Treasuries and $5 billion in mortgage backed securities. At present, Powell’s Fed is purchasing $120 billion of these securities each month. By the way, the Fed’s final meeting of 2021 will take place December 14-15.
Exxon Mobil (XOM) raised its dividend on October 27 to 88c per quarter, a slight raise from the previous payout of 87c. XOM has now raised its dividend 39 straight years. XOM shares ended trading the first week of November at $65.02 with a yield of 5.41% based on the new payout. On October 29, XOM reported its quarterly earnings of $1.57/share on revenue of $73.79 billion. In addition, XOM also announced a new $10 billion share buyback program over the next 2 years.
The energy sector continues to be the best performing sector of 2021, up over 50% for the year. Oil prices show no signs of declining. OPEC+ (OPEC and Russia) rejected President Biden’s request to increase production on November 4. The global economy is reopening with the end of the Covid pandemic in sight. Thus, the supply demand imbalance could easily push Brent crude oil above $100 per barrel. Many analysts who follow oil and gas also believe natural gas is likely headed well above the $7 level as Winter approaches in North America, Europe and Asia. This is great news for investors holding shares in the American oil majors such as XOM and Chevron (CVX).
My weekly radio show is now on holiday and should return soon on WWPR 1490 AM. My prior radio shows and columns are available here.
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