Barron's on Money-Market Funds
Barron's writes "Money-Market Funds Are as Appealing as Ever. Just Don't Back Up the Truck." The article states, "Money-market funds have a lot going for them right now. Not only do they offer safety from turbulent markets, but investors can also earn an attractive 3.45% yield, according to Crane's index of the 100 largest money-market funds. That's down from 3.58% at the start of the year, but stable for the past few months and quite a bit higher than most investors expected for midyear. The outlook at the end of February was that the Federal Reserve would lower interest rates three times through mid-2027, which would have led to a drop in money-market fund yields. But the start of the Iran war led to higher energy prices and a jump in inflation expectations, reducing the odds that the Fed would lower rates. The central bank's next meeting is June 17, and investors' expectations are that rates will remain stable. Later this year, there may even be a hike." They quote Matthew Bartolini, global head of research strategists at State Street Investment Management, "The base case assumption that the return you were going to get from money funds would be lower has been flipped on its head." The piece tells us, "His firm launched the State Street Prime Money Market (MMK) exchange-traded fund in February. It yields 3.61% and allows for intraday trading, something that investors with portfolios made up of ETFs were looking for in a money-market fund. BlackRock also launched a money-market fund around the same time: the iShares Prime Money Market ETF (PMMF), which now yields 3.63%. Meanwhile, the yield on the S&P 500 index has fallen to just 1.1% as stock prices have risen a lot faster than dividend growth in recent years." It adds, "Given the recent interest-rate and stock market volatility, it isn't surprising that investors have clung to the safety of money-market funds. Total money-market fund assets remain near a record at $7.9 trillion for the week ended on June 10, according to the Investment Company Institute. The recommendation to 'T-Bill and Chill,' by DoubleLine CEO Jeffrey Gundlach in October 2023 remains as current as ever." See also, Bloomberg's, "Money-Market Funds Are Hot Right Now. Here's Why."
