ARTICLES

An Alternative To Money Market Funds

August 2023

MARKET OVERVIEW
July is behind us and continued the very strong stock market rally since 2023 began. The Nasdaq has been the big winner, up 37.07% as of July 31. This performance was the best for the Nasdaq in 40 years. Meanwhile, the S&P 500 has risen 19.52% for the first 7 months of the year while the Dow Jones Industrial Average rose 7.28% through July 31. The stock market received a jolt on Tuesday (August 1) when Fitch downgraded the sovereign debt of the US from AAA to AA+.  Fitch cited the deep political divisions in the US along with the mounting debt, nearly $33 trillion.

ECONOMIC SUMMARY
Last Friday’s Nonfarm Payroll Report (NFP) was strong as 187,000 jobs were added, slightly below the estimate of 200,000 jobs. Note that this month’s figures are the lowest number of jobs since Covid peaked in 2020. Nevertheless, the US economy is currently enjoying a 30 month streak of monthly job gains. The U-3 unemployment rate dipped to 3.5% while the U-6 rate dipped slightly to 6.7% last month. The Labor Participation Rate held steady with the prior month’s 62.6% level while Average Hourly Earnings rose 4.4%, year over year. The next NFP report arrives on Sept. 1

FEDERAL RESERVE
The Fed met on July 25-26 and increased rates by a quarter point. Fed Funds is now in the range of 5.25% - 5.50%, a 22 year high. The Fed next meets Sept 19-20. Next week’s CPI report on Aug 10 and PPI report on Aug 11 will be widely watched to see if inflation continues to cool

STOCKS TO WATCH
The automobile industry has spent billions of dollars building electric vehicle “EV” factories in the hope that these new models will persuade the public to give up their fuel vehicles “FVs” and transition to EVs. Recent developments indicate that the public is not being persuaded.

On Monday July 17, Ford cut the price of its F-150 EVs by $10,000 in order to stimulate demand. When Ford released its quarterly results on July 27, it acknowledged that sales of its F-150 EV had dropped 28% year over year while sales of its Mustang Mach E-EV fell 21%, year over year. Ford also increased its loss forecast for its EV business by 50%, from $3 billion to now $4.5 billion with billions more in losses forecast for the next few years. Ironically, Ford’s FV models are selling so well that Ford increased its earnings guidance for 2023 to a range of $11 - $12 billion on its July 27 quarterly earnings call.

Meanwhile Mazda announced last month it would end production of its MX-30 EV after 2023 ends. Through June of this year, only 66 of these vehicles were sold in the US!! So, unless demand for EVs quickly gathers steam, automakers around the globe will be facing enormous losses on their EV initiative.

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.

Disclaimer

The material contained in this website is for your private information. We are not soliciting any action upon it. The opinions expressed here are our present opinions only. The material is based upon information which we consider to be reliable. No representations are being made that it is accurate and complete and thus should not be relied upon as such. Past performance is neither an indication nor guarantee of future performance.