ARTICLES

An Alternative To Money Market Funds

January 2023

MARKET OVERVIEW
December is behind us and what a difficult year it was!! This was the worst year for stocks since 2008. 2022 was also the first year since 2018 where all of the three major indices ended the year in negative territory. The Dow Jones Industrial Average ended 2022 down 8.78%, the S&P 500 fell 19.44% and the Nasdaq dropped 33.10%. The energy sector was the only sector to finish in positive territory for 2022 while all of the other major sectors finished in the red in 2022.

ECONOMIC SUMMARY
Last Friday’s Nonfarm Payroll Report (NFP) was strong as 223,000 jobs were added, well above the estimate of 200,000 jobs. The U-3 unemployment rate fell to 3.5%. Meanwhile, the U-6 rate fell to 6.5% last month. The Labor Participation Rate increased slightly to 62.3% while Average Hourly Earnings rose slightly to 4.6% in this month’s report, year over year. The next NFP report arrives on February 3.

FEDERAL RESERVE
The Federal Reserve meets 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 December 14 that the Fed approved a half point increase in the Federal Funds rate. This half point increase pushed the overnight rate to a targeted range of 4.25% - 4.50%. 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.

STOCKS TO WATCH
The best performing sector in 2022 was the energy sector. In fact, it was the only sector to have finished with a positive return for the year, up over 59% according to Fidelity’s website. For the first week of 2023, both Brent crude and WTI declined by 8%. Concerns about a global recession in 2023 has helped drive crude oil prices lower over the 2nd half of 2022.

This past week, Saudi Arabia, the world’s largest oil exporter, lowered prices for the Arab light crude it sells to Asia to its lowest level since November 2021. Surging Covid cases in China and a slowdown in the Chinese economy, the 2nd largest in the world, led to declines in both Brent crude and WTI. At the close of trading on Friday January 6, Brent crude closed @ $78.57 while WTI crude closed @ $73.77.

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.