Here we are, looking ahead to the national election now just one month away. While I try to stay away from political commentary in my letters to you, I will encourage you to VOTE if you are able. Our country needs our thoughtful engagement on the issues now more than ever.
There are a couple of items to call to your attention this month. First of all, you will notice a change in the money market fund we use in your portfolio. We have transitioned from the Northern Institutional Prime Obligations Fund to the Northern Institutional U.S. Government Select Portfolio. This was done in preparation for the new rules for money market funds going into effect on October 14, 2016.
The Securities and Exchange Commission (SEC) has set new rules for certain types of money market funds. Under the new rules, prime institutional funds, including the Northern Institutional Prime Obligations Fund you were invested in, will no longer have the price fixed at $1 per share, but the price will fluctuate daily based on the daily market value of the fund’s holdings. In addition, the fund could put limits and fees on redemptions in times of market volatility.
U.S. Government money market funds, however, are not subject to the fluctuating value but can continue to have the stable $1 per share you expect from your money market fund. In addition, the government funds will not be subject to the redemption restrictions and liquidity fees. For these reasons, we made the move to the U.S. Government money market fund.
Second, in last month’s letter I commented on the fact that market volatility was virtually non-existent in the month of August. Well, it’s back. We expected it, especially when there is such worry, gloom and doom in the commentary we see. Barry Ritholtz, a Bloomberg View columnist, had an interesting alternative perspective in his column today. After pointing out that, yes, there is a long list of worries for stocks to overcome, he noted there is always a “wall of worry” for stocks to overcome. He then noted that since 1970, however, the fourth quarter of the year usually has been the best quarter for stocks. “Bloomberg News noted that since 2009, the fourth quarter has seen gains in the S&P 500 that average 6.7%.”*
We can’t say if this will hold true in 2016 and we make no prediction about it. We will continue to work our investment plan for your portfolio, keeping an eye on the present and a focus on the long-term.
Ann Wiesbrock, CFP®