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An Alternative To Money Market Funds

April 2025

MARKET OVERVIEW
After a difficult February, March turned out to be even worse. As of March 31, the Dow Jones Industrial Average was down 1.28%, while the S&P 500 was down 4.59% and the Nasdaq was down 10.42%.

Some items of note: DoorDash, TKO Group Holdings, Williams Sonoma and Expand Energy joined the S&P 500 on March 24. Departing the S&P 500 were Teleflex, Borgwarner, Celanese Corp.  and FMC Corp. Palantir, Intuitive Surgical and ServiceNow joined the S&P 100 replacing Dow Chemical, Kraft Heinz and Ford Motor. Rocket Mortgage announced it was acquiring both Redfin and Mr. Cooper, Applied Materials increased its quarterly dividend 15% and announced a new $10 billion stock repurchase plan, Oracle announced better than expected quarterly results, Southwest Airlines announced it was ending its free checked bags policy, Nissan named Ivan Espinoa as its new CEO, Verizon’s shares declined as its Chief Revenue Officer signaled weaker than forecast results while several airlines and retailers did the same.

ECONOMIC SUMMARY
Friday’s Nonfarm Payroll Report was stronger than forecast as 228,000 jobs were added versus the estimate of 140,000. The unemployment rate rose slightly to 4.2% marking the 11th straight month the rate has been at 4% or higher. Meanwhile, the U-6 rate dipped to 7.9%. Average Hourly Earnings rose by 0.3% for the month, in line with the forecast. In addition, the closely watched Labor Participation Rate rose slightly to 62.5% in March. The next Nonfarm Payrolls Report is scheduled to be released on Friday, May 2.

FEDERAL RESERVE
The Fed kept rates steady at its meeting back on March 18-19. The economy remains strong, as evidenced by last Friday's employment report, so there does not appear to be a reason to provide added stimulus to the economy. The Fed next meets May 6-7. Meanwhile, the central banks of the United Kingdom, Canada and the European Union all cut rates by a quarter point at their most recent meeting.

STOCKS TO WATCH
The stock market is reeling from the recently announced tariffs by President Trump. The S&P 500 had its worst week since March of 2020 during the Covide pandemic, ending the week down 17% from it's all time high in February. The Nasdaq is down over 20% from its December all time high, a clear sign that the tech sector is now in a bear market. In another sign of investors’ concern, the CBOE Volatility Index (VIX) ended trading on Friday with a reading of 45.31, its highest closing level since April 2020.

On a positive note, the recent selloff has led to a rapid decline in interest rates. The yield on the 10 Year US Treasury briefly dipped to 3.90% before ending the week with a yield of 4.00%. If rates continue this downward move, the major homebuilders could see a significant rally. Two in particular are D.R. Horton (DHI) and Toll Brothers (TOL). Both firms build rental communities along with building homes for sale and now trade at less than 10x forecast earnings.

My weekly radio show is now on holiday and should return soon on WWPR 1490 AM. My prior radio shows and columns are available here.

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