Taxable Money Market Commentary

MONEY MARKET | March 2020

Taxable money market
commentary

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Patricia Larkin

Chief Investment Officer,
BNY Mellon CIS

While the February employment report shows significant economic strength, this has rightfully taken a back seat to the Coronavirus outbreak and the consequences for everyone’s health and the world economy as a whole. 273k new jobs were created versus expectations of 175k jobs. Additionally, the previous month’s data was revised upwards by 48k. The February unemployment rate fell to 3.5%.

The Dow Jones Industrial Average reached a high on February 12th of 29,551. By that and many other measures, the economy was exceptionally strong, and the Fed would likely keep the target federal funds rate unchanged for the foreseeable future. However, the continuing spread of Coronavirus worldwide gave rise to fears of a viral pandemic and an economic downturn. Institutions have responded to the crisis by halting all but essential travel in an effort to slow the spread of the virus. This has led to cancellations of business conferences, music concerts and many individual vacation plans. Corporations have begun using emergency back-up sites and splitting up staff to prevent the spread of Coronavirus.

In response to the stock market volatility, the FOMC did an emergency intrameeting 50 basis point rate cut on March 3rd to a range of 1.00% to 1.25%. While the FOMC acknowledged that lowering interest rates will not solve the current crisis it does signal that they stand ready and able to support the financial industry and keep the banking system functioning properly. Continued uncertainty has led the market to expect additional cuts in the federal funds rate in the near term.

As we are still in the midst of the crisis it is unclear what the resolution will ultimately be. Given the uncertainty, we will continue to adhere to our long-held conservative credit philosophy while maintaining appropriate levels of liquidity.

All investments involve risk, including the possible loss of principal. Certain investments involve greater or unique risks that should be considered along with the objectives, fees, and expenses before investing.

BNY Mellon Investment Management is one of the world’s leading investment organizations and one of the top U.S. wealth managers encompassing BNY Mellon’s affiliated investment management firms, wealth management organizations and global distribution companies. BNY Mellon is the corporate brand of the Bank of New York Mellon Corporation and may also be used as a generic term to reference the corporation as a whole or its various subsidiaries generally.

Views expressed are those of the advisor stated and do not reflect views of other managers or the firm overall. Views are current as of the date of this publication and subject to change.

This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular investment, strategy, investment manager or account arrangement. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Please consult a legal, tax or investment advisor in order to determine whether an investment product or service is appropriate for a particular situation. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. BNY Mellon Investment Adviser, Inc., Dreyfus Cash Investment Strategies and BNY Mellon Securities Corporation are companies of BNY Mellon. Dreyfus Cash Investment Strategies is a division on BNY Mellon Investment Adviser, Inc.  © 2020 BNY Mellon Securities Corporation, distributor, 240 Greenwich Street, 9th Floor, New York, NY 10286.

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