To The Moon

Last week, the Fed held rates at 5.25%-5.50% at the July FOMC meeting. While officials issued a hawkish statement where the committee mentioned that it “does not expect it will be appropriate to” cut rate till it has “gained greater confidence” about disinflationary trajectory, Powell appeared to be more dovish, suggesting a potential initial easing in September. JPM anticipates the first cut at the upcoming FOMC meeting, followed by a quarterly frequency.

At the same time, labor markets continued to weaken.

Conference Board consumer confidence survey's labor market differential was revised downwards in June and further decreased in July, aligning with June's unemployment rate increase.

June JOLTS report showed a decrease in openings, hires, and quits, and a drop in the vacancy/unemployment ratio.

Initial claims for the week ending July 27 rose to 249k (consensus: 236k), while continuing claims increased to 1.877 million (consensus: 1.855mn). JPM economists noted that, after seasonal adjustments and accounting for unusual claim patterns in some states, initial claims are tracking worse than last summer, with continuing claims consistently higher.

Meanwhile, ISM manufacturing index fell to 46.8 (consensus: 48.8) in July, barely above its June 2023 cycle low, with the employment index dropping to its lowest since June 2020 at 43.4, reflecting softer demand and less labor demands.

While markets are pricing in a steeper rate cut trajectory post-July FOMC meeting, we expect CSOPUMM to continue to deliver stable yield in the near term. As of 20240802, the fund has gross yield of 5.53% and net yield at 5.14%. ^

Source: CSOP, Department of Labor, Bloomberg, as of 20240802. ^ Gross yield is based on annualized yield of underlying holdings. 7-day net yield is calculated based on calendar days and NAVs in 5-decimal.

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