ARTICLES

An Alternative To Money Market Funds

February 2023

MARKET OVERVIEW
January is behind us and what a strong start the market has enjoyed early in 2023!! After a difficult year in 2022, the market has rebounded strongly. As of the close of trading on Friday February 3, the Dow Jones Industrial Average is up 2.35% year to date, while the S&P 500 is up 7.73% and the Nasdaq, the best performer of the major indices, is up 14.72%. The two best performing sectors so far have been the Communication Services and Consumer Discretionary.

ECONOMIC SUMMARY
Last Friday’s Nonfarm Payroll Report (NFP) was quite strong as 517,000 jobs were added, well above the estimate of 187,000 jobs. The U-3 unemployment rate fell to 3.4%. Meanwhile, the U-6 rate ticked up slightly to 6.6% last month. The Labor Participation Rate increased slightly to 62.4% while Average Hourly Earnings rose slightly to 4.4% in this month’s report, year over year. The next NFP report arrives on March 3.

FEDERAL RESERVE
The Federal Reserve met for the first time in 2023 in a 2 day meeting over Jan 31 - Feb 1. All meetings this year will again take place over a 2 day period.  Fed Chair Powell announced on February 1 that the Fed approved a quarter point increase in the Federal Funds rate. The new overnight rate moved to 4.50% - 4.75% as a result of the new quarter point increase by the Fed. Even though signs have appeared to show inflation cooling, the belief is the Fed will continue to raise rates during 2023, taking the overnight rate above the 5% level. No reduction is expected this year, especially after Friday’s unexpectedly strong Nonfarm Payroll Report. The next Fed meeting will take place March 21-22.

STOCKS TO WATCH
Many market strategists have been cheered by the strong start to the new year. One reason why they are so optimistic about their market outlook is because the S&P 500 chart showed a “golden cross” had developed on Thursday, last week. A “golden cross” occurs when the 50 day moving average for an index, stock or commodity rises above its corresponding 200 day moving average. Besides the S&P 500 chart showing a “golden cross” has developed, it also occurred with the Transportation Index, another bullish sign.

Another reason why there is a great deal of optimism is found in a note by LPL Research. They found that since 1950, the S&P 500 has seen an average annual 12 month return of 10.5% after a “golden cross” has formed. They also found that when a “golden cross” has formed as the 200 day moving average is declining, as it is now, the average 12 month return for the S&P 500 jumps to 16.8%!!

My weekly radio show is now on holiday and should return soon on WWPR 1490 AM. My prior radio shows and columns are available on our website (www.amescapmgmt.com).

If you are unhappy with the returns 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.