Insights & Ideas

Taxable Money Market Commentary

by Senior Portfolio Manager Patricia Larkin

Patricia Larkin

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

  • The monthly employment report continues to be the highlight of the economic calendar with solid gains continuing. March’s report showed an increase in nonfarm payrolls of 215,000, bringing the first quarter’s total to a gain of 628,000. The Institute of Supply Management survey also showed strength with the index rebounding above the 50 mark to 51.8 from 49.5 in February with the prices paid and new order components also showing sizable upticks.

  • Federal Reserve (the Fed) Chair Janet Yellen made headlines when, in a speech before the Economic Club of New York, she suggested that caution in raising rates is “especially warranted.” This was in contrast to statements made by other Federal Open Market Committee (FOMC) participants which had hinted that a further rate hike could be on the table for the April 27 FOMC meeting. The one consistent theme from virtually all of the Fed speakers was that future policy moves would be “data dependent.” This raises the stakes on each new piece of incoming economic data, both domestic and foreign. It also implies the need for stability in financial markets worldwide.

  • The political calendar also grows in importance as the year progresses. The unpredictability seen so far and the possibility of an open convention makes business decision-making even more difficult as forecasts of tax rates, health care costs and other major topics remain uncertain. The possibility of a Brexit vote in the United Kingdom is also a concern given the tight financial and banking linkages between London and the United States.

  • Money market reform is also moving closer to full implementation. Institutional shareholders are in the process of finalizing their cash investment strategies in a post-reform world. Prime money market fund managers will likely be increasing cash levels and shortening weighted average maturities as we move through the second quarter.

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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