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An Alternative To Money Market Funds

August 2025

MARKET OVERVIEW
July continued the market’s strong rebound after a very difficult month of April. That strength has carried over throughout July with the S&P 500 and Nasdaq both reaching all time highs. August started on a rough note on fears over President Trump's tariff policies.

Some items of note: Coreweave will acquire Core Scientific in an all stock transaction, Merck is acquiring UK based Verona Pharma, Union Pacific is seeking to acquire Norfolk Southern in an attempt to create a giant among railroad firms, Bank of New York Mellon has been in talks to acquire Northern Trust, Couche-Tard has backed away from acquiring the parent company of 7-11, Italy’s Ferrero Group has agreed to acquire WK Kellogg in an all cash deal, Chevron has completed its acquisition of Hess, Pinnacle Financial will acquire Synovus in an all stock deal and HPE completed its acquisition of Juniper Networks.

ECONOMIC SUMMARY
Friday’s Nonfarm Payroll Report was much weaker than forecast as 73,000 jobs were added vs. the estimate of 100,000 jobs.The prior two months jobs figures were revised lower by a combined 258,000 jobs. The unemployment report rose slightly to 4.2% while the U-6 rate rose to 7.9%, up from 7.7% in June. The Labor Participation Rate dropped slightly to 62.2% while average hourly earnings rose by 3.9%. President Trump was furious with Friday's jobs figures. So later in the day, Erika McEntarfer, Bureau of Labor Statistics Commissioner, was fired by President Trump. He claimed this woman was deliberately manipulating the jobs figures to help boost Democrats. She was appointed to her post by President Biden. The Nonfarm Payrolls Report for August will be released on Friday, September 5.

FEDERAL RESERVE
The Fed kept rates steady at its meeting back on July 29-30. The economy remains strong, as President Trump insists. So, there does not appear to be a reason to provide added stimulus to the economy. Friday’s weak jobs report and other signs of a slowing economy may prompt the Federal Reserve to cut rates when it meets again on September 16-17. Meanwhile, the central banks of the European Union, Canada and the United Kingdom have all cut rates at several recent meetings while the Fed has stood pat. Fed Chairman Powell has indicated rates might have been cut sooner in the US if not for the concern about the impact of tariffs on inflation. But, oil prices have moved lower  which should help ease any inflation pressure.

STOCKS TO WATCH
During 2025, several brokerage firms and asset managers have touted European markets as offering significant value as compared with the US market. Note that last month, both Nvidia and Microsoft reached a market capitalization of $4 trillion. In comparison, there is not a single firm publicly traded in Europe with a market capitalization of at least $340 billion!! So, the US market remains the deepest, most liquid market in the world.

Last week, both Dow Chemical (DOW) and Whirlpool (WHR) slashed their dividends. This news from DOW was especially noteworthy since Dow has been paying dividends since 1912. But, the writing was on the wall. DOW was not earning its quarterly dividend of 70c per share for a while. So it was only a matter of time before the dividend was cut. These cuts by DOW and WHR highlight the risk of buying stocks because of their high dividend yields. Earnings really do matter.

On the other hand, Verizon (VZ) reported strong earnings last month. On July 21, VZ CEO Hans Vestberg stated in a CNBC interview that VZ will continue to pay down debt and buy back stock. In September, he will seek Board approval for a dividend increase marking the 19th consecutive year VZ has raised its dividend.

Among the reasons cited for VZ’s strong quarterly results, Mr. Vestberg noted the recently passed tax legislation which provides for 100% bonus depreciation. As national CPA firm Plante Moran noted “....any qualifying property placed into service on or after Jan. 19 will be eligible for this significant increase in deductibility. This can be very advantageous for those making large capital investments now and into the future.” VZ and other firms with large capital expenditures each year will see their cash flow grow strongly thanks to this legislation. Note that VZ will soon complete its acquisition of Frontier Communications. This deal will likely result in significant cost cutting, boosting VZ’s cash flow even more.

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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