Last Wednesday, the SEC approved amendments on money market fund (MMF) rules. My colleague, Seth Roman, a portfolio manager who specializes in the sector, summarized the areas of reform as they relate to institutional and retail money market investors. I thought I’d share that with you here.
The Yellen Fed is wary of tightening too soon. It wants to see significant improvement in labor markets. (We’re seeing it.) It also wants to see evidence that U.S. inflation has formed a bottom. This precondition for a tighter Fed policy is also being fulfilled – CPI inflation has been steady and slow…but not slowing.
U.S. Economic Activity Looks Good
- Initial unemployment claims dropped to 284k, the first reading this cycle below 300k and the lowest since early 2006. These are boom-time readings, not recovering economy readings.
- CPI came in at 2.1% y/y; Core was 1.9%.
- About 200 S&P 500 companies have reported so far; more than 70% (slightly better than average) have beaten consensus.
- The Chicago Fed National Activity Index, a gauge of economic activity, was slightly above-trend.
- The Markit U.S. manufacturing PMI softened a bit, to 56.3…still strong (50 is break-even).
- The Richmond Fed’s manufacturing index (zero is break-even) rose from 4 to 7–solid; hiring was notably strong.
- The Kansas City Fed manufacturing index rose from 6 to 9, lifted by durable goods producers and employment. Rising quit rates particularly among machinists and welders were cited.