MONEY MARKET | November 2019

Taxable money market

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Patricia Larkin

Chief Investment Officer,
BNY Mellon CIS

The U.S. economy maintained its momentum during the third quarter, with GDP expanding by 1.9%, following a 2.0% gain in the second quarter. The real strength in the economy is being propelled by the American consumer, with personal consumption expenditures rising by 2.9% in the latest quarter.

The consumer’s confidence is driven in large part by continued strength in the jobs market. Nonfarm payrolls increased by a larger-than-expected 128,000 in October and the prior two months were revised upward by 95,000 jobs. While job growth is a bit slower than last year, it is still strong enough to keep the unemployment rate near 50-year lows.

While acknowledging the robust employment picture, the Federal Reserve (the “Fed”), at its October 30 meeting, voted to reduce the overnight federal funds rate by 25 basis points to between 1.50% and 1.75%. The Fed cited muted inflation pressures and global economic uncertainties as the prime reasons for the third interest-rate cut of the year. Importantly, Fed officials removed language in their post-meeting statement that had hinted at further rate cuts at upcoming meetings. This stance is in line with Chair Jerome Powell’s remark that he viewed these cuts as a mid-cycle adjustment rather than the start of a major rate-reduction program.

The uncertainties cited by the Fed are unlikely to disappear overnight. Even if a trade truce is announced between the U.S. and China, the disruptions already caused and the fear of a possible reigniting of trade frictions will hinder business decision-making for some time to come. The Fed may be on hold for a considerable period as investors and decision-makers reassess their outlook with the presidential election growing closer.

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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.

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.

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.  © 2019 BNY Mellon Securities Corporation, distributor, 240 Greenwich Street, 9th Floor, New York, NY 10286.