Delayed Agenda Items
It has become abundantly clear that many agenda items and decisions that should be made are being postponed until after the election. On one level this stance is quite understandable. Legislators and governors want to be seated before action is taken on these topics.
Delaying coming to some end point on the war with Iran has a cost. It may not be hundreds of millions a day any more that is off budget, but the cost is real. Finding the way forward with the war in Ukraine is getting to have the parties talking again but the drones and other arsenal items continue to be launched. Support for Ukraine has been under pressure as our available stockpile is winnowed down.
It appears that the administration is preparing for some escalation in the war efforts, but the period has been announced to be after the midterms. When is an endless war declared?
Oil has once again found the $100+ level. At the same time, Treasury rates have moderated with the ten-year maturity at the 5.0% level. Tech firms have been trading off due to concerns that go beyond just rates.
Inflation remains the primary focus for the Fed with the recent reading at 3.7%. The other part of the mandate employment has remained in a manageable range. At this time of year, one would expect some layoff announcements to take place. AI does not appear to be the primary motivator.
The reauthorization of the transportation bill is also scheduled after the election. Many projects will not be undertaken until there is more certainty that they will be provided once the bill is passed. December is the timeframe but action on this bill may too be extended.
The federal budget will need much more work after the election. Guns and butter are becoming less achievable than ever before.
Municipal Matters
The recent run of higher rates has served as a modest damper to municipal volume. A new reading will be out today but a level of $14 billion is on the lighter side. Now that rates have moderated once again, I would expect volume to accelerate. The last six weeks of the calendar year always experience heavier volumes regardless of the interest rate environment.
It is good to see that the Virgin Islands has some proposed legislation to put its finances on a better path. The cardinal rule is not to bond for operations. However, if no action is taken the alternative is not very appealing. We just need to ponder how events have unfolded in Puerto Rico for insight into the matter.
The recent volatility in the equity markets will likely have some influence on capital gains behavior. For a select subset of states, the impact will be great. Perhaps, a year end rally will provide the tonic.
John Hallacy
John Hallacy Consulting LLC
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