Taxable Money Market Commentary
by Senior Portfolio Manager Patricia Larkin
This is Patricia Larkin with a Money Market Commentary for August, 2015.
July’s nonfarm payroll report showed employers adding 215,000 jobs. This was a bit short of the consensus of 225,000 but was still indicative of an economy in a modest expansion. The unemployment rate remained unchanged at 5.3%. Many other indicators of consumer sentiment, including home and auto sales, continued to point to the moderate growth pattern continuing for the 3rd quarter.
Following its meeting on July 29, the Federal Reserve’s Open Market Committee voted unanimously to maintain the current near-zero interest rate policy. However, individual members of the Committee have indicated that an interest rate increase would be appropriate during the remaining part of 2015 if the employment situation improves further and the Committee is reasonably confident that inflation will move back above 2% over the medium term.
International events continue to complicate the Fed’s decision. While an immediate crisis for Greece seems to have been avoided as the other members of the currency union and Greece have reached a deal on yet another bailout, in the long run, it is likely that actual haircuts on Greek debt will have to be taken. The newest wrinkle for the Fed is the move by the Chinese government to devalue its currency in the face of slowing economic growth and a sharp fall in their stock market. While this may not stop the Fed from moving later this year, it could cause them to wait longer than currently expected.
The August employment report, to be released on September 4, is likely to be the most pivotal economic release in many years. A strong or even middle of trend number will give the Fed the option to increase rates at its September 17 meeting. Conversely, a weak number combined with falling oil and commodity prices will likely cause the Fed to wait even further to tighten policy. In this 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.