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An Alternative To Money Market Funds

February 2024

MARKET OVERVIEW
January  is behind us and what a great start to the year we have seen!! After a strong 2023 for the major indices, the market has continued to power higher. As of the end of January, the S&P 500 rose 1.7%, the Dow Jones Industrial Average (DJIA) rose 1.3% and the Nasdaq rose 1.0%. February has continued this momentum with the S&P 500 and DJIA both closing on Friday at record highs.

Some items of note: On January 12, Microsoft (MSFT) passed Apple (AAPL) as the market cap leader in the S&P 500. AAPL indicated weak smartphone sales in China will persist. META reported strong earnings and announced its first ever dividend.  US Steel (X) has continued to drift lower as doubts grow that Nippon Steel will be able to complete its acquisition of X due to strong political and union opposition

ECONOMIC SUMMARY
Last Friday’s Nonfarm Payroll Report (NFP) was stronger than expected as 353,000 jobs were added in January, well above the estimate of 175,000. The unemployment rate remained at 3.7% marking the 24th straight month that the jobless rate stayed below 4%. The December jobs added figure was revised upward by 117,000. The U-6 rate rose slightly to 7.2%. The Labor Participation Rate held steady at 62.5% while wages grew 4.5% year over year. The next jobs report will arrive on March 8.

FEDERAL RESERVE
The Fed’s initial meeting of 2024 was held January 30-31. Fed Chair Powell made clear the Fed is determined to see the inflation rate approach its desired 2% level before it begins cutting rates. The Fed Funds rate held steady at 5.25 - 5.50%. Friday’s strong jobs report should end any hopes of a Fed rate cut when the Fed meets again March 19-20.

STOCKS TO WATCH
Disney (DIS) announced last week it will hold its annual meeting on April 3. DIS  is a Delaware corporation. Under Delaware law, a Delaware corporation must hold its annual meeting no more than 13 months after its last meeting. The last DIS annual meeting was held on April 3, 2023, 12 months prior to this year’s meeting. Thus, DIS is in compliance with Delaware law.

DIS is facing a proxy battle with shareholder activist Nelson Peltz and his partner, Jay Rasulo, a former DIS executive. They are seeking two seats on the 12 member DIS Board of Directors. Another dissident group, Blackwells, is seeking to have its 3 nominees elected to the DIS Board. DIS will have a difficult time keeping these dissidents from obtaining Board representation. DIS does not have a controlling shareholder. Vanguard is its largest shareholder holding only 8% of the total DIS shares outstanding. DIS shares have underperformed the market for a number of years. As a result, many event driven funds have piled into DIS shares seeking a significant return. If Peltz and Rasulo or any of the Blackwells nominees receive the needed shareholder votes at the annual meeting, they get Board seats. The decision will solely be made by DIS shareholders who own shares as of the February 5, 2024 record date.Stay tuned!!

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.

 

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