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Fund Commentary

 
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Prime Obligations Portfolio

as of 12/31/17

Fund Commentary

As widely expected, the Federal Open Market Committee (FOMC) raised the federal funds target range by 25 basis points (0.25%).

Jerome Powell was tapped as the next Federal Reserve (Fed) Chair when Yellen’s term ends in February. It is anticipated that Powell would continue on the same monetary policy path in much of the same manner as Yellen.

Although the makeup of the Fed will be different in 2018, the “dot plot” submitted by current FOMC members in December reflected three rate hikes in 2018 and inflation at 1.9%. Market expectations continue to rise for a potential March hike. However it is not known if the Fed would continue increasing rates if the 10-year Treasury remains near current levels. The Fed may be okay with a flattened yield curve, but an inverted yield curve may cause the Fed to pause, especially with inflation reading below their 2% mandate.

President Trump signed sweeping tax reform for both individuals and corporations with only Republican support.

Unemployment fell to 4.1% in the fourth quarter, while the participation rate held steady at 62.7%. Wage inflation continued to be low. Consumer confidence was high. Lower inflation readings continued to puzzle the Fed.

We continue to position ourselves conservatively with a neutral duration strategy. Liquidity and principal preservation remain our primary objectives.

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An investment in the Money Market Funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. Although the Funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Funds.

Please carefully read the summary prospectus or prospectus and consider the investment objectives, risks, charges and expenses of Northern Institutional Funds before investing. Call 800-637-1380 to obtain a summary prospectus or prospectus, which contains this and other information about the Funds.

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