Taxable Money Market Commentary
by Senior Portfolio Manager Patricia Larkin
This is Patricia Larkin with a Money Market Commentary for June, 2015.
The release of the May employment report by the Labor Department helped to assuage fears of a continuing slowdown in the U.S. economy. Non-farm payrolls grew by a better than expected 280,000 in May following a minimally revised 221,000 figure in April. In addition, reports on purchasing managers and the monthly auto sales figures showed significant strength. Auto sales for May were strong, running at an annual pace of 17.6 million, a level not seen since 2006. These results have gone a long way to offset concerns following the release of the revised first quarter GDP of -0.7%. Many observers, including Federal Reserve officials, have indicated that they believe the dip in activity during the first quarter was primarily driven by transitory factors.
The prospect of a 2015 interest rate hike by the Federal Reserve was bolstered by the May job figures. However, any tightening move by the Fed will require sustained economic growth as well as signs that inflation is moving, or will be moving, toward the Fed’s 2% inflation target. Many members of the Fed’s Open Market Committee have stated that they believed that waiting too long to raise rates presented lower risks than raising rates too soon. Members will have to have the data in hand that makes them confident that a rate increase is the right move at the right time.
As if the Fed’s job weren’t difficult enough, the fragile state of the worldwide economy complicates things further. While it is standard practice for the International Monetary Fund to provide its outlook on world economies, including the U.S., the IMF took the unusual step of urging the Fed to postpone any rate increase until at least 2016. While the Fed, of course, has no requirement to listen to the IMF, it does highlight the difficulties the Fed faces. In this very fluid financial environment, we intend to follow our long-held conservative credit philosophy while seeking to maintain appropriate levels of liquidity.
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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.
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 its affiliates. The views expressed are subject to change rapidly as economic and market conditions dictate of Dreyfus or, 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.