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Fund Commentary

 
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Prime Obligations Portfolio

as of 9/30/17

Fund Commentary

The absence of inflation seems to be puzzling many of the leading central banks, and the Federal Reserve (Fed) is no exception. However, Fed Chair Yellen nevertheless prepared the markets in September for the likelihood of a December rate hike. According to Yellen, “it would be imprudent to keep monetary policy on hold until inflation is back to 2%.” In addition, the Fed announced that its balance sheet normalization process would begin in October. Fed Vice Chair Stanley Fischer unexpectedly announced his resignation effective in mid-October. The longer-term outlook and future leadership of the Fed remains uncertain as there are multiple vacancies on the board, including potentially the position of Fed Chair. It was not known whether President Trump would reappoint Yellen to a second term when her term expires early next year. Trump plans to make a decision within the next month.

The Portfolio provided a return of 0.29% in the third quarter. We continue to position the Portfolio conservatively with a neutral duration strategy. Liquidity and principal preservation remain our primary objectives.

The economy continues to make strides. Second-quarter gross domestic product (GDP) growth was revised up to 3.1%. The labor market with the exception of wage inflation continues to strengthen. Consumer confidence is near the highest level it has been in over 15 years. However, the effects of Hurricane Irma and Harvey should cause some of the economic data to be messy in the coming months, and growth should take a hit before recovering after rebuilding.

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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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