Municipal Bonds

The pandemic has delivered a global growth shock, but in doing so, it has accelerated the timeline for several mega trends that we have been actively investing in, such as productivity enhancement (robotics, automation, and software), e-commerce, electronic payments, and health care.

A key lesson of 2020 is the importance of staying invested even during times of high volatility. We believe that an appropriately risk-targeted, globally diversified portfolio is as important as ever. Maintaining an optimally risk-controlled portfolio is most desirable.

As we enter credit repair, we are wary of using the global financial crisis as a benchmark for the path to recovery. We see several key reasons that suggest this time will be different.

Even with today’s low yields, credit barbell strategies can still meet their objectives of downside protection, upside participation and efficient income.

The P/E for the S&P 500 is about 25, near historic highs. Credit spreads in both developed and emerging markets are tight. Real government bonds yields are negative. Companies have repurchased own shares at record levels for almost 10 years, reducing outstanding stock of marketable securities. Asset price volatility has been extraordinary. Contrast that with market fundamentals: the U.S. economy entered recession in February; total hours worked in May were 12.5% below Q1 average; total wages paid were down 8.5%; and governments have provided cash transfers and guaranteed loans to support incomes.

It’s all about the pandemic. Rising cases in a number of states fueled fears of a second wave of infections and a more protracted economic recovery.

Pricing dislocations and adjustments between companies, industries, regions and asset classes due to the impact of COVID-19 offer opportunities for select hedged strategies, according to K2 Advisors.

If you missed Part-1 of our series on the “Theory Of MMT Falls Flat When Faced With Reality,” start there. In Part-2, we complete our analysis of the theory and the potential ramifications. The premise of our discussion was this recent explanation of “Modern Monetary Theory” by Stephanie Kelton. As discussed previously, economic theory always sounds much better than how it works out in reality.

The protracted low-yield environment has left many investors with insufficient returns to meet their goals: how can credit help? Here we highlight where we see 5 credit opportunities.

American ingenuity is something to take pride in this weekend as we (safely) celebrate the Fourth of July.

The sharp decline in interest rates this year has created the opportunity to realize tax savings on appreciated fixed income positions even when clients are in a high tax bracket.

As states ease their COVID-19 lockdown measures, rising case numbers have put pressure on equity markets.

One simple statistic can help high-yield investors gauge how their bonds may perform down the road.

After a decade of steady growth and rising asset prices, economies and financial markets were rocked by the COVID-19 pandemic. The global health crisis forced most governments to lock down their communities, halting economic activity almost overnight and causing financial markets to reprice lower at an unprecedented speed.

Companies are coping with diverse challenges through the coronavirus crisis. Investors who integrate environmental, social and governance (ESG) factors into their research can gain important insights on how businesses are adapting—and how future return potential might be affected.

The Federal Reserve became one of the top holders in some of the world’s largest credit ETFs less than two months after stepping into the market.

The more affluent middle-aged set still has lots of cash to invest, since it remained mostly unmoved by the frenzy led by Robinhood day traders in April and May.

Valid until the market close on July 31, 2020.

The S&P 500 closed June with a monthly gain of 1.84% after a gain of 4.53% in May. All three S&P 500 MAs are signaling "invested" and three of five Ivy Portfolio ETFs — Vanguard FTSE All-World ex-US ETF (VEU), Vanguard REIT Index ETF (VNQ), and Invesco DB Commodity Index Tracking (DBC) — are signaling "cash".

Many investors are looking for emerging signs of a return to normalcy from the coronavirus crisis. While there are many indicators to choose from, we’ve assembled a group of signals, with the help of big data, that may point the way.

In the municipal bond market, the issuance of green bonds has provided an attractive solution for investors interested in socially responsible investments while also receiving the tax-exempt income benefit municipal bonds offer. Franklin Templeton’s Municipal Bond team provides an overview of green bonds, including potential benefits and risk considerations.

Markets have rallied on hopes for an economic recovery as coronavirus-imposed lockdowns are eased across the globe. The rebound has been helped by oversold investor sentiment, but with sentiment back to neutral, so too is our strategists’ market outlook.

He argues stretched corporate balance sheets and overly rosy economic projections make it too early to dive back in.

Historically low bond yields threaten the diversification value of bonds in the traditional 60/40 allocation.

Incredible as it may sound to nearly all observers – once they learn what MMT says – its basic economic tenets are agreed to by most knowledgeable economists. The dispute is not really over its core economic model; it is over fears of its perceived political implications.

Admiral James Bond Stockdale was the highest-ranking United States military officer in the “Hanoi Hilton” POW camp during the Vietnam War. His jet was shot down in 1965, and after parachuting into a small village, he was taken as a prisoner of war.

In a post-coronavirus investment world, Jeff argues that investors should be rethinking the role of fixed income in portfolio construction and ask themselves if they are at risk of investing without a parachute?

Chief Investment Officer Terri Spath’s latest commentary.

A “perfect storm” of surging government debt levels, plunging real bond yields, rising coronavirus cases and deteriorating economic forecasts pushed the price of gold to an eight-year high this week, and some analysts now project the metal to top its all-time high within the next 12 months.

In short, a demand-driven recession can’t end until demand returns. It doesn’t necessarily need to be the same kind of demand. Indeed, it probably won’t be. But something must restore consumer spending. A lot of entrepreneurs are spending late nights (and days) trying to figure out how to restore consumer spending.

Elga lays out two main reasons to be optimistic on Europe – and European assets.

For most US governors, June typically brings political fireworks when state legislatures hammer out final budgets for the next fiscal year.

The health crisis creates opportunities to unite historically disparate investor groups to help build economic and market sustainability and resiliency.

A simple mix of stocks and short to medium-term bonds is probably a better bet than investments widely peddled as inflation protection.

It’s part of the growing global trend of environmental, social and governance investing to put money in ventures that benefit society, but these fund managers think it also just makes business sense.

Pundits, prognosticators, and even investment boards often make misleading declarations that an asset class is broken, that its prospects for earning investors a reasonable future return are very dim. These proclamations can lead to investors’ abandoning these assets to chase recent winners.

Recent underperformance has led some to declare the death of value investing, but don’t be so quick to dismiss it.

Regular readers of our content know that we have been building the case for several years now on why gold deserves a place in diversified portfolios.

While technicals for the asset class remain a headwind in the near-term, bank loans may provide an attractive opportunity and relative value.

Just as any propaganda needs a certain germ of truth to grow from, so do bubbles. The FANGAM are incredible companies (germ of truth), and they function better in the virus-infested world (another germ of truth). But at the core, their existence is grounded in the world that is built of atoms, not bytes.

Investors should consider these various investments—cautiously. Given the challenging economic outlook and high level of uncertainty, we believe bouts of volatility are possible, albeit not to the level witnessed in February and March.

Rick Rieder, Russ Brownback and Trevor Slaven contend that in the tug-of-war between the considerable economic damage stemming from the coronavirus and subsequent lockdowns, and the fiscal and monetary policy responses put in place, the latter factor is being underestimated by markets. Further, the instruments used by investors in previous years won’t be what’s required for the time ahead.

The US Federal Reserve (Fed) recently announced it would purchase individual corporate credit bonds. David Mann, our Head of Capital Markets, Global ETFs, makes a case for using smaller ETFs to accomplish that goal.

Fed Funds futures are predicting that the Federal Reserve will lower their benchmark Fed Funds rate below zero by mid-2021. Will this really happen?

We are, in short, hitting the road as if it was 1957 again, implicitly heading for herd immunity — and substantially more excess deaths — until a vaccine turns up.

As the economy reopens from COVID-19 restrictions, a question looms: What will colleges and universities look like come fall? Will students return to a more normal on-campus learning experience, some form of online experience, a combination of both … or will they simply not return?

Get the ins and outs of green bonds in this two-part series. Let’s start with the basics.

In this latest survey, 68 leading bond and currency managers considered valuations, expectations and outlooks for the coming months.

U.S. stocks have managed a remarkable advance in the past several weeks as optimism outweighed concerns about the economic recovery and worsening Covid-19 cases. Has this been appropriate or irrational? Howard Marks shares his thoughts on the recent rally in asset prices in his latest memo.

Coronavirus cases and hospitalizations are spiking again in several countries, including the U.S. California had its biggest one-day jump in infections. Arizona, Florida and Texas are also turning into new hotspots.

Given fears of a COVID-19 resurgence and US election uncertainties looming, many investors are wondering what comes next for policymakers in terms of supporting the economy. Our Fixed Income CIO Sonal Desai weighs in on the possibility of negative US interest rates or other measures.

Economies and markets whipsawed in the first half of 2020. Here’s what we expect for the rest of the year.

Municipal bonds—especially higher-quality issues—bounced back after a rough March. But not all munis have rallied. We see potential among overlooked mid-grade issues.

Emily presents key takeaways on the exercise of green bond impact reporting.

Returns for most fixed income asset classes are positive so far this year, but the numbers mask the rocky road markets have traveled since January.

Looking to generate income from your nest egg? Make sure you don’t get it all from just one basket. Karen explains two funds designed to provide income that aren’t over reliant on any one source.

Target-date portfolios that use carefully chosen defensive equities are best equipped to protect from coronavirus market turmoil and volatility in general.

Back in March, I predicted that the total U.S. economic response to the COVID-19 crisis would be at least $10 trillion.

Tim Wang and Julia Laumont of Clarion Partners dig into the state of the U.S. commercial real estate market and where they are finding bright spots of opportunity.

The common characterization of US-China relations as a new Cold War is wrong. Instead, the most recent spike in tensions between the two countries – the second time this has happened since US President Donald Trump took office in 2016 – is primarily motivated by political considerations ahead of the November US presidential election.

A brief monthly update on what's happening in the municipal bond market.

The latest Conference Board Leading Economic Index (LEI) for May was up 2.8% from the April final figure of 97.1.

Over the course of history, during world wars, pandemics, financial crises, and deep recessions, municipal bond defaults have been an extremely rare occurrence. There have been less than 700 rated municipal bond defaults in the over 100 years of public finance existence. As a point of comparison, we saw over 117 corporate defaults in 2019 alone.

Read Harold Evensky's latest NewsLetter.

As inflows soar and market dislocations vanish, America’s exchange-traded fund market is back to the boom times.

COVID-19 is triggering a new era of central banking. We believe this will play out just as powerfully in the euro area as elsewhere.

I want to begin today by sharing with you the latest question I am getting over and over from colleagues and friends. That question is: How have the stock markets rallied to record or near-record highs in light of the terrible economic news due to the coronavirus crisis?

Over the last several years, we have recognized what has been going on with negative or near negative interest rates in Japan, and is now bleeding into parts of Europe. We never imagined that those troubles from afar would be any more than banter amongst economists and financial doomsdayers. The reality of those environments have now made it to the shores of the good ol’ USA.

Investors often think of municipal bonds, which are sold by local and state governments to fund public projects like building new schools and repairing city sewer systems, as being totally tax-free—but that’s not always the case.

Having trouble helping your clients appreciate a balanced portfolio? These charts may help.

The selloff this week was “perfectly normal,” according to the math. Find out why it makes sense to have a long-term investment horizon.

Rob Amodeo, Head of Municipals at Western Asset Management, digs into the state of the muni-bond market, his outlook moving forward and what investors have to look for to find winners in the sector.

With so much monetary stimulus sloshing about, governments even have an eye on getting ahead of next year’s budget plans as well.

Why did stocks rise over the past month despite grim economic news? The Federal Reserve’s massive liquidity injection is one reason.

Equities suffered a heavy single-day decline amid rising jobless claims and continued coronavirus concerns.

Puerto Rico’s debt attracted investors throughout the U.S. for its higher yields and because the securities are tax exempt in all 50 states. Bondholders now wonder if they will ever get repaid.