Broker Check

Market News & Commentary - From The Desk Of David Loesch 06.30.2022

June 29, 2022
Share |
  • I suspect we will continue to see rate volatility in the 2H of this year as markets contend with stagflation fears and the growing risk of a recession. Ultimately many think the yield curve will flatten and possibly invert. The FED should continue to increase rates; however, the question will be at what pace. Some are now thinking it will be 50bps in July. I continue to believe it will be 75bps. The slowdown in consumption will be a welcome site by the FOMC members as they see it helping slow the generalized price increases.  
  • BOA predicts a turnaround is ahead in our markets. The bank's MUNI strategist sees "strong Muni rate market performance in the summer" as they cited the rally in T-Bills. Bonds are advancing on concern that the FED will tighten too much, triggering an economic slowdown. A stable or bullish Treasury market would be the prerequisite for returning a more constructive Muni rate performance. BOA said this criterion was met last week. Morgan Stanley, BlackRock, and Nuveen have also stated the same. I would continue to be cautious; however, more and more Broker-Dealers indicate that MUNI markets are oversold. 
  • Belle Haven Investments, at a conference on Friday, also indicated the MUNI market has been oversold and poised for a rally. They site a chance of recession along with the poor performance this year, seeking yields moving down over the next few months while getting into a "normal" trading pattern. I have seen fund outflows declining, and many believe we will see inflows pick up over the next 30 days.
  • Visible supply begins the week $10.6B below the average of $12.3B; again, this is not a surprise; we will see less issuance as we move through the next few months.
  • Two weeks have passed since the 75bps move. The factors which drove that move, high energy prices and inflation expectations, have reversed. Crude has fallen back to Early May levels, and many believe the CPI numbers will also drop this month. These developments some feel should bolster the case of the FOMC to downshift rate hikes from 75 to 50bps in July. Significant data revisions in energy pricing are not new; some would claim inaccurate data contributed to the FED's misreading of the economy in the 1970s. What is different today is that the FED is trying to correct the economy too quickly while perhaps not paying attention to the data quality.

 

 

David Loesch

dloesch@drlgroup.net

www.drlgroup.net

605-B Park Grove

Katy, TX 77450

866.664.4040 (toll-free)

281.398.8600 (direct)

281.398.8607 fax

 

This report has no regard to the specific investment objectives, financial situation, or particular needs of any specific recipient. This report is based on information obtained from sources believed to be reliable, but no independent verification has been made, nor is its accuracy or completeness guaranteed. This report is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Opinions expressed herein are subject to change without notice. The division, group, subsidiary, or affiliate of NewEdge Securities, Inc., is under no obligation to update or keep the information current. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. NewEdge Securities, Inc. accepts no liability for any loss or damage of any kind arising out of the use of this report. Please contact your tax advisor regarding the suitability of tax-exempt investments in your portfolio. Income from municipals may be subject to state and local taxes and the Alternative Minimum Tax. Corporate and Municipal securities are subject to gains/losses based on the level of interest rates, market conditions, and credit quality of the issuer. As with any security, there is an inherent market risk possibility as to principal if the security is not held to maturity. The non-rated bonds (NR) should be considered for investment by knowledgeable and sophisticated investors. Additional information will be made available upon request.

 

 

Securities are offered through NewEdge Securities, Inc., a registered Broker-Dealer, Member FINRA/SIPC.

 

The DRL Group is not a registered entity or a subsidiary or control affiliate of NewEdge Securities, Inc.

 

 Bonds are subject to market and interest rate risk if sold prior to maturity. Prices and availability may change at any time without notice. Insured bonds are subject to the claims-paying ability of the insurance company.

Reminder: E-mail sent through the Internet is not secure. Do not use e-mail to send us confidential information such as credit card numbers, change of address, PIN numbers, passwords, or other important information. Do not e-mail orders to buy or sell securities, transfer funds, or send time-sensitive instructions. We will not accept such orders or instructions. This e-mail is not an official trade confirmation for transactions executed for your account. Your e-mail message is not private in that it is subject to review by the firm, its officers, agents, and employees. Unless expressly stated in this e-mail, nothing in this message should be construed as a digital or electronic signature.