Taxable MM Commentary

MONEY MARKET | June 2020

Taxable Money Market

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Patricia Larkin

Chief Investment Officer,
BNY Mellon CIS

May’s unemployment report was a major surprise with the U.S. economy adding 2.5 million jobs during the month. This gain widely exceeded virtually all forecasts and provided some much-needed optimism during the COVID-19 crisis. With that being said, the overall situation is still quite grim with the unemployment rate standing at 13.3% and over 20 million Americans out of work.

At its June 10 meeting, the U.S. Federal Reserve (the “Fed”) gave a downbeat outlook and vowed to use all of the tools in their arsenal to mitigate and ultimately begin to repair the damage done by economic dislocations, which continue to manifest themselves. The Fed held the overnight federal funds target rate in a range of between 0% and 0.25%. Chairman Powell indicated that the Fed has focused on its lending tools rather than any further change in monetary policy, stating, “We are not even thinking about raising rates.”

The Fed will be adjusting the lending programs it deployed to attempt to make the programs as widely used as possible while guarding against fraud and waste. Mr. Powell also encouraged political leaders to work together to increase fiscal stimulus that he viewed as a critical element in supporting a meaningful recovery.

With short-term interest rates on hold for the foreseeable future, investors will be focused on how the recovery unfolds as well as the credit implications of such a severe downturn. Political events will also be closely followed as the presidential election nears.

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.

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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.

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