ARTICLES

An Alternative To Money Market Funds

July 2023

MARKET OVERVIEW
June is behind us and marks the end of a very strong stock market for the first half of 2023. The Nasdaq was the big winner, up 31.73% during the first half. This performance was the best for the Nasdaq in 40 years. Meanwhile, the S&P 500 posted a first half gain of 15.91% while the Dow Jones Industrial Average rose 3.80% during the first half.

ECONOMIC SUMMARY
Last Friday’s Nonfarm Payroll Report (NFP) was strong as 209,000 jobs were added, slightly below the estimate of 240,000 jobs. Note that employment for the prior two months was revised down by a combined 110,000 jobs. For the first 6 months of the year, the US economy has added an average of 296,000 jobs per month. The U-3 unemployment rate dipped to 3.6% while the U-6 rate moved up slightly to 6.9% last month. The Labor Participation Rate held steady with the prior month’s 62.6% level. Meanwhile, Average Hourly Earnings rose slightly to 4.4% in this month’s report, year over year. The next NFP report arrives on August 4.

FEDERAL RESERVE
The Fed met on June 13-14 and decided to pause on its rate hikes. The Fed next meets on July 25-26 and a 25 basis point increase is widely expected. Next week’s CPI report on July 12 and PPI report on July 13 will be widely watched to see if inflation continues to cool

STOCKS TO WATCH
The major department store retailers have had a very difficult run over the past 5 to 10 years. Just take a look at the 5 and 10 year charts for retailers such as Macy’s (M), Kohl’s (KSS) and Nordstrom (JWN). Neither chart provides a pretty picture, a clear sign that the traditional retail model is broken.

In many ways, these retailers have become the suppliers for off-price retailers such as TJX (TJX) and Ross Stores (ROST). What is really surprising is how the market capitalization of both TJX and ROST just dwarfs the market cap of M, KSS and JWN. ROST ended trading on Friday with a market cap of $36.61 billion while TJX ended the holiday shortened  week with a market cap of $95.04 billion. In contrast, M ended the week with a market cap of $4.34 billion, JWN ended the week with a market cap of $3.13 billion while KSS ended the week with a market cap of $2.68 billion. It is hard to see how these traditional retailers such as M, KSS and JWN can narrow the market cap gap with off-price retailers like TJX and ROST. The model is broken in many investors’ eyes.

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

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.