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An Alternative To Money Market Funds

June 2022

MARKET OVERVIEW
May is behind us and what a difficult month it was!! Through May 31, all of the major averages continued their downward slide for 2022. As of May 31, the Dow Jones industrial Average continued to be the best performing index, down 8.51% year to date. Meanwhile, the S&P 500 declined by 13.3% and the Nasdaq declined 22.78% year to date through May 31. The best performing sector continues to be energy with the sector up over 55% year to date. As of May 31, the utilities sector was the only other sector with a positive return, up 3.3% year to date.

ECONOMIC SUMMARY
Last Friday’s Nonfarm Payroll Report (NFP) was strong as 390,000 jobs were added. The U-3 unemployment rate held firm at 3.6% while the U-6 rate actually increased a tick to 7.1%. The revisions for the March and April figures dropped by a combined 22,000 vs. prior reports. The Labor Participation Rate rose slightly to 62.3% from 62.2% in April.  Average Hourly Earnings rose 0.3%. The next NFP report will be released July 8.

FEDERAL RESERVE
The Federal Reserve’s next meeting will take place June 14-15. It is widely expected that the Fed will raise rates by a half point at this meeting and again at the July 26-27 meeting. The strong jobs report on Friday led many market observers to caution that an additional half point increase could be approved at the September 20-21 meeting.

STOCKS TO WATCH
On Thursday June 2, Microsoft (MSFT) cut its 4th quarter earnings forecast for both profit and revenue. MSFT cited the strong US Dollar as the reason for the anticipated shortfall. Two days earlier, on May 31, Salesforce (CRM) also trimmed its full year revenue outlook because of the strong US Dollar. CRM now sees its full year revenue declining from $32-32.1 billion down to $31.7-31.8 billion. MSFT now sees its revenue declining to $51.94-52.74 billion from its earlier forecast of $52.4-53.20 billion.

These 2 announcements will likely serve as a prelude to other S&P 500 companies revising their outlook due to the strong dollar. The US Dollar closed on Friday at $1.07 against the Euro. Many forex dealers expect the US Dollar and Euro to reach parity by the end of the year. The EU economy is in recession due in large part to the impact of Russia’s invasion of Ukraine. The EU is highly dependent on Russia for its oil and gas needs and prices for these commodities have surged due to the conflict.

My weekly radio show is now on holiday and should return soon on WWPR 1490 AM. My prior radio shows are available here and columns here.

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