- The tragedy that hit our state last week ranks as one of the deadliest and costliest flash floods in US history. From 1980 through last year, flooding has killed hundreds of people nationwide and inflicted at least $203 billion in losses, according to data from the National Centers for Environmental Information. This tragedy has hit Texas and our nation hard. We have heard from many clients this week, and we are grateful for the outpouring of well wishes and prayers. Luckily, no family members within the DRL Group were impacted; however, we all know people who are good friends who were. Thank you once again for your thoughts and prayers; it means a lot.
- US consumer borrowing increased in May at the slowest pace in three months, driven by a pullback in credit card and other revolving debt outstanding. The slowdown in borrowing coincides with a moderation in household spending during the month. This is a result of a pickup in concerns about the economy and labor markets, we are sure of.
- The June 17-18 FOMC meeting minutes will shed light on the committee’s division over the appropriate path for policy rates. The updated Summary of Economic Projections (SEP) showed nearly as many participants anticipated “no rate cuts” this year as expected two rate cuts. This continues to underscore the lack of consensus among policymakers as they assess progress on inflation, which should not come as a surprise.
- Volatility in the equity markets will remain in focus in the near term, in our opinion, given the Fed’s patient approach and mean reversion of yields. However, the reset in implied volatility has diminished the risk-reward returns, making returns more challenging to achieve. The bottom line is that we will continue to see the market move based on rate and tariff talk, and one cannot proceed without the other being clarified (tariffs).
- It appeared that the University of Notre Dame would be exempt from a Republican proposal to tax college endowments. However, a loophole for religious schools was removed from the final tax bill, leaving the Indiana-based school to pay a higher levy on its $ 20B endowment. As we have been discussing, higher education papers have come under fire from the current administration’s policies.
- With a July cut effectively off the table, markets are scaling back expectations for a near-term policy pivot. MUNIs continued to be supported by strong seasonal tailwinds as steady reinvestment flows, manageable supply, and front-end outperformance continue to underpin a firm market tone. Yields continue to be elevated on MUNI’s however they have seemed to top out at the 4.9% range on longer-dated paper.
- As we saw, President Trump indicated he will impose tariffs of 25% on goods from Japan and South Korea beginning August 1. This gives a narrow 3-week window to open their markets up to American products. The markets are reacting negatively to this, and tariffs will continue to dominate the news.
- Bostic continues to advocate for a “wait and see” approach regarding changes to monetary policy amid economic uncertainty. He continues to express concern over tariff-related price increases that may lead to inflation. I suspect we will see this tone at the July meeting, and if the tariff issue is not “put to bed” over the next few months, we could see it at the fall meeting as well.
- Headline numbers from the June jobs report took the pressure off the FED to consider lowering rates this month. We, along with others, as indicated, see a cut in the Fall. US employers added 147,000 jobs last month, exceeding the estimate, while the unemployment rate ticked lower to 4.1%. Overall, these numbers were not a huge surprise, and very few were expecting a rate cut in July to begin with.
Securities offered through NewEdge Securities, LLC, member FINRA and SIPC. The DRL Group is not a subsidiary or control affiliate of NewEdge Securities, LLC. NewEdge Securities, LLC. has no affiliation to BondDesk Trading LLC or BondTrader Pro, or Tradeweb Direct, Bondpoint, TMC, Market Axess or any ECN.
Yield to call (YTC) is not indicative of total return; this yield is valid only if the security is called. Bonds may or may not be called, or be callable on multiple dates or, in other cases, called any date following the first call date, so yield to call is based on the earliest stated call date. Discounted bonds may be subject to capital gains tax. Bonds may be subject to OID (Original Issue Discount). Prices and availability may change at anytime without notice.
Do not buy bonds based on the Yield to Call (YTC). Insured bonds are issued for timely payment of principal and interest only. Insured bonds do not cover potential market loss and are subject to the claims paying ability of the insurance company.
Non-rated (NR), With-Drawn (WR), or below investment grade bonds, lower rated bonds, carry a greater potential risk of default & should be considered by sophisticated investors only.
This document is for informational purposes only and does not replace or serve as a substitute for your official monthly statement generated by NFS. Please refer to your official statement for accurate and comprehensive account details.
Bonds may be subject to capital gains tax. This summary is for informational purposes only and is not an offer or solicitation for the purchase or sale of any security or a recommendation or endorsement of any security or issuer. NewEdge Securities, LLC. and DRL Group make no representation about the accuracy, completeness, or timeliness of this information. Bonds could also be subject to the DeMinimis Rule, please consult with your tax advisor for further clarification.
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