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An Alternative To Money Market Funds

July 2022

MARKET OVERVIEW
June is behind us and what a difficult month it was!! Through June 30 all of the major averages continued their downward slide for 2022. As of June 30, the Dow Jones industrial Average continued to be the best performing index, down 15.31% year to date. Meanwhile, the S&P 500 declined by 20.58% and the Nasdaq declined 29.51% year to date through June 30. The best performing sector continues to be energy with the sector up 31.9% year to date as of June 30.

ECONOMIC SUMMARY
Last Friday’s Nonfarm Payroll Report (NFP) was surprisingly strong as 372,000 jobs were added. The U-3 unemployment rate held firm at 3.6% while the U-6 rate declined from 7.1% to 6.7%%. The revisions for the April and May figures dropped by a combined 74,000 vs. prior reports. The Labor Participation Rate dipped slightly from 62.3% in May to 62.2% in June.  Average Hourly Earnings rose 0.3% and up 5.1% year over year. The next NFP report will be released August 5.

FEDERAL RESERVE
The Federal Reserve met June 14-15 and as widely expected, raised rates by 75 basis points. The Fed will likely raise rates by another 75 basis points at the July 26-27 meeting. The strong jobs report on Friday led many market observers to cast  doubt about recent recession fears. Thus, many economists believe the strong jobs report will push the Fed to an additional rate increase at the September 20-21 meeting.

STOCKS TO WATCH
On Friday July 8, Elon Musk announced he was pulling his $44 billion bid to acquire Twitter (TWTR). Musk said multiple provisions of the agreement had been breached. TWTR’s Board of Directors countered claiming they will seek court action in Delaware to enforce the $54.20 per share all cash deal agreed to between the parties. At this point, we do not know if Musk is truly walking away or if this is part of a strategy to lower the deal price prior to completion.

2022 has been a difficult year for the merger arbitrage community. Besides the Twitter fiasco, two other large deals are trading well below the agreed upon takeover price. For example, on January 18 Microsoft (MSFT) announced it was acquiring Activision (ATVI) for $68.7 billion ($95 per share in cash). ATVI closed @ $78.13 on Friday. Meanwhile, On May 26, Broadcom (AVGO) announced it was acquiring VMWare (VMW) for $61 billion in a cash and stock deal valuing VMW @ $142.50 per share. VMW closed @$113.60 on Friday. Regulatory scrutiny has cast doubt on whether either of these deals will be completed.

My weekly radio show is on holiday and will return in September on WWPR 1490 AM. My prior radio shows and newspaper columns are archived here.

If you are unhappy with the returns now offered by money market funds, feel free to contact us. As of July 5, our fund is up over 17% for 2019.

Disclaimer

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