ARTICLES

An Alternative To Money Market Funds

January 2024

MARKET OVERVIEW
December is behind us and what a great month it was!! It capped off a truly amazing year, a year which began with many economists predicting a recession in 2023. Well, this feared recession never arrived and a strong year ensued. For the year, the Dow Jones Industrial Average was up 13.70%, the S&P 500 was up 24.23% and the Nasdaq was up a remarkable 43.42%.

ECONOMIC SUMMARY
Last Friday’s Nonfarm Payroll Report (NFP) was better than expected as 216,000 jobs were added in December, slightly above the estimate of 170,000. The figures for October and November were revised down by 71,000 jobs. The U-3 unemployment rate held steady at 3.7% while the U-6 rate rose slightly to 7.1%. The closely watched Labor Participation Rate dipped slightly to 62.5%. The next jobs report will arrive on February 2.

FEDERAL RESERVE
The Fed’s final scheduled meeting of the year was held Dec 12-13. Fed Chairman Powell made clear that the Fed was done raising rates. He indicated that the Fed would begin cutting rates in 2024 as inflation approaches the Fed’s 2% target. Last Friday’s stronger than expected NFP jobs report led many traders to cool their optimism regarding when rate cuts would begin and the actual number of rate cuts that will take place this year. Prior to the release of Friday’s NFP report, many on Wall Street were predicting a total of 6 rate cuts in 2024. Note that the first Fed meeting of 2024 will take place Jan 30-31.

STOCKS TO WATCH
Last month, on December 18, US Steel (X) announced it agreed to be acquired by Japan’s Nippon Steel for $55 per share in an all cash transaction valuing X at $14.9 billion, including the assumption of debt. Nippon Steel is the 4th largest steel company in the world and the largest in Japan.

Shortly after the deal was announced, both Democrat and Republican lawmakers blasted the transaction on fears of X coming under foreign control. The powerful United Steelworkers union also ripped the transaction as an increasing amount of global steel production would be made by foreign owned entities. Global steel production totals nearly 2 billion metric tons. Chinese firms are the leader with over 54% produced, according to the World Steel Association.

For those shareholders who owned the shares when the deal was announced, it may be prudent to sell the shares soon. 2024 is a Presidential election year. There is going to be enormous political pressure to block this deal. It is highly unlikely another bid will emerge that is superior to Nippon Steel’s $55 per share all cash offer. So selling X shares is highly recommended.The 52 week high for X of $50.20 was reached on December 18, the same day the deal was announced.

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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