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An Alternative To Money Market Funds

March 2017

February is behind us and what a month it was! The stock market has continued its enormous rally that began with the election of Donald Trump as President on November 8. All three major indices have reached record highs. Notably, the Dow Jones Industrial Average has rallied more than 2,000 points or 13% since President Trump’s election day victory.

The bond market has also had a strong rally. The yield on the 10 Year US Treasury dropped below the 2.30% level last month. Earlier this year, several bond market strategists predicted the yield on the 10 Year US Treasury would soon be above 3% based on the view the Federal Reserve would aggressively raise rates in 2017. The Fed next meets March 14-15 and they are expected to stand pat at this meeting. Other meetings scheduled for this year are set for May 2-3, June 13-14, July 25-26, September 19-20, Oct. 31 - Nov. 1 and December 12-13.

One of the reasons cited for the rally in the bond market is the political uncertainty in Europe. On March 15, the Netherlands will hold its general election. France will hold its general election on April 23 while Germany will hold its general election on September 24. Depending on the outcome of these elections, the future of both the Euro currency and the European Union is in doubt.

There were a number of developments in Mergers & Acquisitions last month. Verizon and Yahoo finally resolved their differences and Verizon will now acquire Yahoo’s core business for $4.48 billion. Aetna and Humana, along with Cigna and Anthem, saw their mergers blocked in federal court. Carl Icahn disclosed he had taken a stake in Bristol Myers hoping to put the company in play. Any deal would likely be expensive as Bristol Myers currently has a market capitalization of more than $90 billion.

Kraft Heinz made and then quickly withdrew its proposal to acquire Unilever after an outcry by Unilever workers and politicians in Europe. Kraft Heinz is known for its aggressive cost cutting and is led by the Brazilian private equity firm 3G. Hillary Clinton’s Son-in-Law Marc Mezvinsky worked at 3G previously and later co-founded the hedge fund Eaglevale Partners. Last month we learned that Eaglevale ceased operations shortly after Hillary Clinton lost the Presidential election.

Several major retailers reported better than expected results during February despite Amazon’s surging online sales. TJX, Kohl’s, Home Depot, Walmart and Macy’s all reported better than expected results despite the gloomy outlook for the sector. In fact, TJX, Walmart, Kohl’s and Home Depot all increased their dividends while Target is expected to do so this year as well. Both Target and Walmart have increased their dividends for more than 40 consecutive years.

My weekly radio show on WWPR 1490 AM airs at 12.30pm each Friday. The show can also be heard live on the station’s website (www.1490wwpr.com). My prior radio shows and news columns are available on my firm’s website (www.amescapmgmt.com).

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