Insights & Ideas

Taxable Money Market Commentary

by Senior Portfolio Manager Patricia Larkin

Patricia Larkin

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

  • The July employment report was a major relief to the markets, showing a much larger than forecast gain of 287,000 jobs. Following the dismal May report, which showed a revised gain of only 11,000 jobs, the newest report seems to confirm that May was an aberration and that moderate job growth continues. Other factors in the jobs report were also encouraging with average hourly earnings showing a year-over-year gain of 2.6%, and while the unemployment rate ticked up from 4.7% to 4.9%, most of the increase was caused by discouraged job seekers re-entering the job search market.

  • Most other economic indicators are also pointing to growth increasing from the 1.10% seen during the first quarter. The purchasing managers index, initial unemployment claims, auto sales and housing sales all seem to indicate growth slightly above 2.0% for the second quarter, in line with both the New York and Atlanta Federal Reserve (the "Fed") econometric forecasts.

  • The Fed took no action at its June policymaking meeting and in the minutes released on July 6 almost all Fed officials pointed to the May payroll numbers as raising concerns. While the June numbers should ease some of their concerns, there are numerous other factors that make any near-term increase in rates unlikely. The after-effects of the British vote to leave the European Union (EU) are still unclear. How the U.K. and European economies react to this vote will be a major factor in Fed, Bank of England and European Central Bank decisions on monetary policy for the foreseeable future.

  • While the June jobs report was a welcome sign, it is clear that the level of worldwide economic uncertainty has increased in the past few months. The U.S. election, money market fund reform, Brexit, the future of the EU itself and the continuing pressure on European banking institutions are all major issues that policymakers and money market participants will have to wrestle with in the coming months. With potentially no rate change on the horizon, we intend to follow a conservative stance as these issues unfold.

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.

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