- We should see a strong January and a decent finish this year, with pricing moving down over the last couple of days. I believe these moves are attributed to tax loss selling and think they will only last for a while. January historically has been a strong month for our markets. In January, $17B bonds are scheduled to mature, and another $3B will be called. Not including any interest, investors will most likely reinvest a solid $20B back into the market.
- The next FED meeting will be on 1/31; therefore, we have a long runway to trade. We all know the FOMC will increase rates; however, the big question is how much. I suspect 50bps. However, should they move that to 25bps, you would continue to see a rally in our markets as we move into February. As building slows, spending is contracting, and PPI/CPI numbers slow, you could see a minor rate move…. this will be determined by the economic numbers, which will be coming out mid-month.
- Visible supply continues to slow, coming in at $1.5B this week, well below the $9.95B average. This number has come down significantly this year, topping $14.5B mid-year. This number tells you the overall flow will be slow, and paper will be hard to come by. With January numbers looking strong for capital coming into accounts, we suspect the rally should continue through the month.
- Many economists think there is a 7 in 10 likelihood the U.S. economy will sink into a recession next year, slashing demand forecasts and trimming inflation projections in the wake of massive rate hikes. The probability of a downturn in 2023 climbed from 65% odds in November, higher than six months ago. I am unsure if this will happen; however, MUNIs do well in this environment as many will want a "risk off" trade in their portfolios. It will be interesting to see how the overall “soft landing” plays out if it does.
- Homebuilder sentiment fell every month in 2022. It sank in December to a level not seen in over a decade outside the pandemic amid elevated mortgage rates and high construction costs. The National Association of Home Builders/Wells Fargo gauge dropped 2 points this month to 31, the lowest level since June 2012, excluding the onset of the Covid-19 pandemic, figures showed Monday. The uninterrupted slide this entire year represents the longest stretch on record. This year's rapid climb in mortgage rates crushed buyer demand for homes. At the same time, higher costs for materials and labor have made it more expensive to build. The combination has weighed on builder sentiment and new construction.
- According to U.S. Census Bureau data, state tax revenues increased 6.7% to $322.9 billion in the third quarter compared to last year. Tax receipts rose $20.3 billion from last year and fell $144 billion, or 31%, from the previous quarter. Among the ten biggest states by tax revenue, Texas increased the most, up 18% from the year-earlier quarter to $21.8 billion, while California fell the most, down 5.2% to $51.6 billion. We have been buyers of Tax Backed paper and continue to be. I suspect many states will show "steady" tax revenues for 2023, making MUNIs an attractive asset.
605-B Park Grove
Katy, TX 77450
This report has no regard for the specific investment objectives, financial situation, or needs of any particular 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 (N.R.) 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.