A BNY MELLON COMPANY

Insights & Ideas

Taxable Money Market Commentary

by Senior Portfolio Manager Patricia Larkin

Patricia Larkin

This is Patricia Larkin with a Money Market Commentary for May, 2016. 

  • U.S. economic growth slowed during the first quarter of the year with the Commerce Department estimating that the gross domestic product expanded by just 0.5%, down from the 1.4% growth recorded during the last quarter of 2015. Much of the softness was caused by a sharp slowdown in business spending, especially in mining and oilfield related equipment as slumping commodity prices took a toll on capital expenditures.

  • The monthly employment report also showed signs of a slowdown with nonfarm payrolls for April increasing by only 160,000, well below the consensus forecast of 200,000. While the headline number was disappointing, there was some good news in the report with the workweek increasing by one tenth to 34.5 hours and average hourly earnings up by 0.3%.

  • The Federal Reserve (the Fed) held interest rates steady following their April 27th meeting. The Fed acknowledged that the economy appeared to have slowed, but they also stated that labor market conditions had improved and households’ real income had risen at a solid rate. However, inflation continued to run below the Fed’s 2% medium term target as earlier declines in commodity prices worked their way through the system. The Fed, and market participants, will be watching incoming data closely to determine if or when any further policy changes would be appropriate.

  • Many private sector forecasters, as well as the Fed fund futures market, have been pushing out the date of any expected tightening as the year has progressed. At the same time, many Federal Reserve officials have been stressing that the Fed remains data-dependent in that each Open Market Committee meeting is a “live” meeting, meaning a policy change could be announced. While not ruling out a June rate increase, we do believe that the current economic softness as well as lack of inflationary pressures make a second half of 2016 rate increase a much more likely outcome.

The statements expressed in this commentary are those of the author as of the date of the article and do not necessarily represent the views of Dreyfus or its affiliates. The views expressed are subject to change rapidly as economic and market conditions dictate, and the statements in the commentary should not be construed as an offer to sell or a solicitation to buy any security. The commentary is provided as a general market overview and should not be considered investment advice or predictive of future market performance. Contact Dreyfus or your advisor for more current information.

Investors interested in Dreyfus mutual funds should consider the investment objectives, risks, charges and expenses of the fund carefully before investing. To obtain a prospectus, or a summary prospectus if available, that contains this and other information about a Dreyfus fund, contact your financial representative or call 1-800-DREYFUS. Please read the prospectus carefully before investing.

An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of an investment at $1.00 per share, it is possible to lose money by investing in a money market fund. Yield fluctuates and past performance is no guarantee of future performance.