AN ALTERNATIVE TO MONEY MARKET FUNDS

AN ALTERNATIVE TO MONEY MARKET FUNDS

By Don Ames, Sarasota Family Office Association

February is behind us and what a month it was!! All of the major indices reached record highs last month before entering a correction phase. As of March 5, the Dow Jones Industrial Average was up 2.91% year to date while the S&P 500 was up 2.29% and the Nasdaq was up 0.25%. Note the Nasdaq briefly turned negative for 2021 last week signaling a sector rotation was underway.

Last Friday’s Nonfarm Payroll Report was surprisingly strong as the Labor Department said 379,000 jobs were added. The U-3 unemployment rate dipped to 6.2% while the U-6 rate, a broader measure of the employment picture widely followed by economists, remained at 11.1%. Meanwhile, the closely watched labor participation rate held steady at 61.4% last month. David Rosenberg of Rosenberg Research noted the average work week declined to 34.6 hours from 34.9 hours last month. The $1.9 trillion stimulus package expected to become law shortly will likely lead to strong employment growth as 2021 moves along. Let’s see how the jobs picture looks like when the next monthly report is released April 2.

The next Fed meeting of 2021 will be March 16-17. Last week, Fed Chairman Jerome Powell spoke at a reception hosted by the Wall Street Journal. He made clear the Fed will remain accommodative for the foreseeable future. These comments led Scott Minerd, Guggenheim Investments’ Chief Investment Officer, to declare the US could be on the verge of a dramatic move lower in yield on the 10 Year Note and 30 Year US Treasury Bond even as these yields have risen quickly over the past 6 months. Mr. Minerd actually sees rates going negative next year due in part to the large debt the US is now facing, nearly $28 trillion. The weak US Dollar has also been a factor in the recent jump in yields. Foreigners face a currency risk as part of their investment in Treasuries so they need a higher yield to compensate them for the currency risk they face.

Gamestop and Tesla recently made news again. Gamestop announced its CFO Jim Bell is leaving the firm March 26. Inexplicably, he and other members of senior management did not issue a secondary offering while the shares were trading above $400 during the recent “Reddit

Rebellion” where heavily shorted shares surged due to a short squeeze. Tesla’s shares hit an all-time high of $900.40 on January 25. As of the close of trading on March 5, Tesla shares showed a decline of nearly 35% from its all-time high. Tesla is facing growing competition in the electric vehicle market from the major American and European automakers, as per Morgan Stanley.