Market News Commentary - From The Desk of David Loesch 12.31.2020

• The $3.9 trillion U.S. municipal bond market is on track to finish 2020 with returns of about 5.2%, marking the seventh straight year of gains and showcasing the rebound from a record selloff in March as fears about the pandemic’s fiscal fallout rattled investors.
• Initial jobless claims fell to 787,000 last week, from a revised 806,000 the prior week. That was better than the 835,000 consensuses. Bloomberg Economics said the figure might rise over the coming weeks. Continuing claims eased to 5.2 million from a revised 5.3 million, also better than expected.
• A measure of home prices in 20 U.S. cities rose in October by the most since 2014 as ultra-low mortgage rates and increased buyer appetite for more space depleted housing inventory. The S&P CoreLogic Case-Shiller index of property values climbed 7.95% from the same month the previous year; data released Tuesday showed. The median forecast in a Bloomberg survey of economists called for a 6.95%-year-over-year advance. Home prices rose 1.6% from the previous month, more than projected and the most since April 2013.
• The prospects for boosting stimulus payments for most Americans to $2,000 are fading fast in the Republican-controlled U.S. Senate even with GOP leaders under pressure from President Donald Trump and congressional Democrats. The partisan clash over the payments also is entangling another piece of year-end business in the Senate -- a vote to override Trump's veto of a crucial $740.5 billion defense policy bill. Senator Bernie Sanders is attempting to delay the defense legislation unless Senate Majority Leader Mitch McConnell relents and allows a vote on a standalone bill on the bigger stimulus checks. On Tuesday,  McConnell blocked Democratic leader Chuck Schumer's attempt to set up a vote on a House-passed bill that would increase the payments to $2,000 from the $600 -- the amount in the pandemic relief measure Trump signed into law on Sunday. As the chances for quick action on bigger stimulus checks faded, U.S. stocks pulled back from record highs, with the S&P 500 Index falling 0.2%.
• A New Hampshire Retirement Community will default on $73M muni bonds: a continuing care retirement community in Keene, NH, will not make an interest payment on about $73 million municipal bonds due January 1, according to a securities filing.
• Redemptions should continue to be heavy in 2021, and I also expect to see Mutual funds on the MUNI side continue to take in cash from investors as we move through the first half of 2021. If we do have defaults (more than average) in the high-yield sector, as mentioned above, this could spook investors in all asset classes, which could cause net redemptions; we will have to watch this closely.

David Loesch

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