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An Alternative To Money Market Funds

January 2025

 

MARKET OVERVIEW
December is behind us and what a difficult month it was!! The expected Christmas rally never really materialized as the S&P 500 gave back just about all of its gain after rallying on Donald Trump's win in the November election. As of December 31, the DJIA was up 12.88%, the S&P 500 was up 23.31% and the Nasdaq was up 28.64%.The VIX ended 2024 with a reading of 17.35.

Some items of note: Omnicom will acquire Interpublic Group in a stock for stock deal, Arthur J. Gallagher will acquire AssuredPartners to boost its middle market insurance business, GM is exiting its robotaxi business, Honda and Nissan are in talks to combine, Microstrategy was added to the Nasdaq 100, Macy’s and Kohl’s will close a number of stores due to slowing sales, Party City is closing its doors after more than 40 years of operations, Nordstrom will be acquired by Nordstrom family members and Mexican retailer Liverpool, President Biden blocked Nippon’s Steel’s takeover of US Steel, Paychex will acquire Paycor and Cintas will acquire UniFirst.

ECONOMIC SUMMARY
Friday’s Nonfarm Payroll Report was surprisingly strong as 256,000 jobs were added in November, well above the estimate of 165,000. Payrolls for the prior 2 months were decreased by 8,000 jobs reinforcing the belief that the weak October report was an outlier. Meanwhile, the unemployment rate edged lower to 4.1% marking the 8th straight month the unemployment rate has been at 4% or above. The Labor Participation Rate remained at 62.5% while the closely watched U-6 unemployment rate declined to 7.5% last month. The next employment report for 2025 will be released on February 7.

FEDERAL RESERVE
The Fed announced a 25 basis point cut in its base lending rate on December 18. This cut takes the range down to the level of 4.25% - 4.50%. The Fed will hold its first meeting of the year on January 28-29 and another 25 basis point cut is in doubt due to Friday's strong employment report...

STOCKS TO WATCH
It is no secret that activity in Mergers & Acquisition has been tame during the Biden Presidency. Under the leadership of FTC Chair Lina Khan and the U.S. Department of Justice Antitrust Head Jonathan Kanter, numerous announced transactions were blocked. In fact, in what many viewed as unprecedented, the FTC sued to block the acquisition of the Subway sandwich chain by the Private Equity firm Roark Capital. Ultimately, this deal was completed.

The incoming Trump administration is expected to be more business friendly than the outgoing Biden administration. One sector where many analysts expect to see deal activity is the banking sector. According to Bloomberg, as of March 2024, there were over 4,500 FDIC insured banking entities in America. Clearly, there is room for consolidation here.

My weekly radio show is now on holiday and should return soon on WWPR 1490 AM. My prior radio shows and columns are available on our website (www.amescapmgmt.com).

If you are unhappy with the returns offered by money market funds, feel free to contact us.

 

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