ARTICLES

An Alternative To Money Market Funds

September 2023

MARKET OVERVIEW
August is behind us and what a choppy month it was!! The stock market received a jolt on August 1 when Fitch downgraded the sovereign debt of the US from AAA to AA+.  Fitch cited the deep political divisions in the US along with the mounting debt, nearly $33 trillion. For the month, the S&P 500 declined 1.77%, the Nasdaq fell 2.17% and the Dow Jones Industrial Average fell 2.36%. Meanwhile, the Transportation Index and S&P 500 Index both fell below their 10, 20 and 50 day moving average. Thanks to a strong rally during the last days of August, the S&P 500 and Transportation indices both climbed back above their 50 day moving average.

ECONOMIC SUMMARY
Last Friday’s Nonfarm Payroll Report (NFP) was strong as 187,000 jobs were added, slightly above the estimate of 170,000 jobs. Payrolls for June and July were revised down a combined 110,000 jobs, in a sign the job market may be cooling. The U-3 unemployment rate rose to 3.8% from the 3.5% level in July while the U-6 rate also rose to 7.1% from the 6.7% level in the prior month. Meanwhile, the Labor Participation Rate rose by 0.2% to 62.8%. The next jobs report will arrive on October 6.

FEDERAL RESERVE
The annual Jackson Hole Economic Symposium took place August 24-26. Fed Chair Jerome Powell made clear the Fed will continue its fight to bring inflation down to its 2% target. After last Friday's jobs report, there is a growing belief the Fed will hold rates steady when it meets again on Sept 19-20.

STOCKS TO WATCH
Last Friday (Sept. 1), S&P Dow Jones Indices announced changes to the members of the S&P 500 Index. Lincoln National (LNC) and Newell Brands (NWL) will leave the index before the start of trading on Sep. 18. They will be replaced by Blackstone (BX) and Airbnb (ABNB).

The addition of BX is significant. Since the regional bank crisis back in March, many banks across America have tightened their lending standards making credit more difficult to obtain and definitely more expensive. Large private equity (PE) firms such as BX, KKR and Apollo Global Management (APO)  have stepped in to fill the void created by many American banks. Indeed, these firms do seek lending rates often in excess of 10%. But for firms in need of credit, this is the price that must be paid. Access to credit is essential for many businesses to continue operating. Thus, the major PE firms should profit handsomely from this opportunity.

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

If you are unhappy with the returns now offered by money market funds feel free to contact us.

Disclaimer

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