It is hard not to reference Shakespeare at this like this. After all, he really covered it all. I was trying my best to come up with a citation from one of the Henry plays. Yet, I keep coming back to Lear. I have visions of Lear wandering around the foggy moor with impaired visions beseeching his daughters for some positive contact. After a period after the tragic events of this week, the President has now come to terms with the fact that the transition must take place.
There will continue to be a period to review and reflect on the despicable events at the capital that have taken place this past week. Investigations may yield some results in terms of what must be done to prevent such an event in the future.
After an initial period where there was not much of a reaction, the ten-year Treasury is holding over the 1% mark. We should not anticipate slipping below the mark for some time if at all. Municipal yields have increased only marginally in the aftermath of the assault on our working symbol of government by the people.
We must now turn our attention to what is to come. The democratic wins in Georgia means that it should be easier for President-Elect Biden to roll out his agenda priorities in a somewhat quicker fashion. With Payroll Employment declining by 140,000 nationwide in December, more work needs to be done.
The uptick in Covid-19 hospitalizations and deaths must be the key priority in the first 100 days. But there are so many priorities that they are challenging to rank order. One of the key items for the municipal market continues to be the probability of new State and Local federal aid.
The state and local budgeting process is well underway at this point. Some of the pressure to produce measures to balance budgets would be alleviated with some knowledge about what federal aid will likely be forthcoming. The timing of a greater appreciation of the probability may not be ideal given all the competing priorities. Reasonable assumptions may need to be the order of the day.
One would expect an increased measure of volatility in this environment in the municipal market. However, supply is light for the moment and positive inflows continue to be added to the mutual funds.
Some of President-Elect Biden’s picks for cabinet positions will lead to some jockeying for position at the state and local level with the Governor of Rhode Island and the Mayor of Boston identified for posts.
It also appears that the market is becoming more comfortable with a greater Democratic presence and influence in our government leadership.
There has been some early talk about probable increases in taxes at the federal level. What becomes a key companion consideration is how likely are state and local taxes to increase.
We should also think about what may transpire with fees and charges. The upcoming hearings on MTA fare hikes should be instructive in this regard.
I will hold back on providing commentary in a vacuum until we have more concrete proposals from the new administration. And, yes, I hope those proposals include pouring more concrete.
John Hallacy
John Hallacy Consulting LLC
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