AN ALTERNATIVE TO MONEY MARKET FUNDS
By Don Ames, Sarasota Family Office Association
April is behind us and what a month it was!! Both the S&P 500 and the Dow Jones Industrial Average reached record levels as the bull market continues to run into early May. As of the close of trading on May 7, both the Dow Jones Industrial Average (DJIA) and S&P 500 traded at new record levels. Year to date through May 7, the DJIA is up 13.63%, the S&P 500 is up 12.69% and the Nasdaq is up 6.70%.
Last Friday’s Nonfarm Payroll Report was surprisingly weak as the Labor Department reported that just 266,000 jobs were added. Briefing.com had forecast 1.1 million jobs would be added. Bonds initially rallied on this disappointing news as the yield on the 10 Year US Treasury dipped to 1.49%. By the end of trading last Friday, the yield had climbed back to 1.57%. The U-3 rate of unemployment rose slightly to 6.1% as economists noted that supply chains were encountering shortages of supplies. For example, auto workers have been idled due to semiconductor chips now in short supply. These chips are needed to build automobiles.
The Fed concluded its two day meeting April 28. Fed Chairman Jerome Powell made clear the Fed will continue with its accommodative policy. The next Fed meeting of 2021 will take place June 15-16 while the next Nonfarm Payroll Report will be released June 4. It will be interesting to see what revisions are made to last Friday’s weak report. Another weak report could end the talk of the yield on the 10 Year US Treasury rising above the 2% level in the near term.
On April 28, President Biden unveiled his expansive and expensive infrastructure plan. Due to the significant tax increases associated with the plan, it is highly doubtful his plan will receive any GOP support. If that remains the case, Biden’s only hope of passage will be by the reconciliation process which only requires simple majorities in both the House and Senate. The plan is already meeting resistance among House Democrats from high tax states such as New York, California, New Jersey, Illinois, et al. They insist the SALT deduction must be restored to get their support. As a result, a much smaller bill may emerge in order to secure passage. Keep in mind the entire House is up for reelection next year.
In a story receiving scant media coverage, POLITICO reported on April 19 that former Trump Attorney General William Barr and Trump Supreme Court appointee Amy Coney Barrett both agreed to multi-million dollar book deals. The Washington, D.C. establishment has long used book deals as a means of currying favor so it will be interesting to watch what develops here. I will do my best to keep you posted.