An Alternative To Money Market Funds
August 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 September. As of the close of trading on August 31, the Dow Jones Industrial Average (DJIA) was up 15.53% year to date, while the S&P 500 was up 20.41% and the Nasdaq was up 18.40% year to date.
Last Friday’s Nonfarm Payroll Report (NFP) was quite disappointing. 235,000 jobs were added, well below the Econoday forecast of 740,000. The U-3 unemployment rate dropped from 5.4% to 5.2%. The U-6 rate declined to 8.9% from 9.6% in July. The Labor Participation Rate held at 61.7%, unchanged from July. Let's see if the employment figures improve when the next NFP report is released on October 8.
The Fed’s annual Jackson Hole conference was held virtually this year due to the Pandemic. As expected, Fed Chairman Jerome Powell made clear the Fed would continue its accommodative policy. He indicated the Fed will consider tapering its bond buying but Friday’s Nonfarm Payroll Report may delay any plans to taper for a while. The Fed will next meet on September 21-22.
Last month, Amazon stunned the retail industry with news it plans to open brick and mortar department stores. According to the Wall Street Journal, some of the first stores will open in Ohio and California. For several years, many Wall Street analysts wrote about the decline and ultimate demise of the traditional brick and mortar retail sector. In fact things were so gloomy that an ETF (EMTY) was launched in November 2017 to track the decline of traditional retailers. EMTY is designed to increase in value when the share prices of the 43 retail stores in its index decline. The opposite has actually taken place as many of the retailers in the EMTY index have had strong rallies this year. As of the close of trading on September 3, EMTY is down 32.77% year to date.
Former Macy’s CEO Terry Lundgren told CNBC “I’m actually surprised that it’s taken Amazon this long to come out with this announcement. Amazon does half of the online business in America, but they recognize that the large majority of business still takes place in physical stores and they want their share of that.” Lundgren said that 40% of apparel purchased online gets returned. So without a brick and mortar presence, Amazon and other online retailers miss out on a number of opportunities to generate additional revenue with shoppers in the store.
Besides exchanging the merchandise, these shoppers may be inclined to make additional purchases while in the store as compared with the online shopper.
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.
If you are unhappy with the returns now offered by money market funds feel free to contact us.