The average lifespan back in 1868 was approximately 38.3 years. People were shorter and thinner and suffered all manner of chronic and infectious diseases. Dr. Carl Reinhold August Wunderlich, a German physician, psychiatrist, and medical professor was running the hospital at Leipzig University at that time. In the process of observation and diagnosis, he took the axillary temperatures of 25,000 patients using a foot long thermometer that required 20 minutes to register. Based on the curves he patiently plotted, he determined that fever was not a disease but a symptom, and that the normal human body temperature is 98.6 degrees Fahrenheit. His is the measurement that we have since used to determine the gravity of illness in everyone from newborns to centenarians. But the human body has changed over the years and researchers have been disputing the Wunderlich axiom since the early 1990’s. The latest of two dozen modern studies is from Stanford University, where researchers finds that the new normal is closer to 97.5 degrees. But, as one might imagine, revising the cherished dictums on clinical thermometry is a not a speedy process.

In Wuhan, China and in clinics, hospitals and doctor’s offices around the word, degrees matter. Temperatures of 99.1 or higher are raising alarms as possible symptoms of a coronavirus that causes a lethal form of pneumonia. Dry cough, muscle pain and fatigue may also present over the course of a week before an infected person feels ill enough to seek medical care. At this writing, there are 4,585 confirmed cases in 18 countries and the death toll has reached 106. The rapid spread of the disease has spurred herculean efforts on the part of health professionals and chilling fears among travelers and investors who recall the spread of severe acute respiratory syndrome (SARS) in 2002 and the Ebola virus in 2014.

Global financial markets, which have already withstood the shocks of U.S.-Iran hostilities, the U.S-China trade conflict, the approach of Brexit, and the impeachment trial of a U.S. president in the first three weeks of the New Year, became roiled again on Monday. Even though health officials remind us that the influenza has resulted in 12,000 to 79,000 deaths annually since 2010, reports on the spread of a mysterious virus caused a one-day selloff in stocks on exchanges in Asia, the U.S. and Europe. Bloomberg reported that the slide wiped about $1.5 trillion off the value of world stocks in one week. The Dow erased the entire month’s gains and the Russell 2000 fell 1.5%. Oil prices fell 13% to $53.14 per barrel and gold gained $57.41 an ounce. Money quickly shifted to bonds and the dollar until Tuesday, when traders viewed the degree of global containment effort as likely to prevent a major economic loss. So far in 2020, the 2-year Treasury yield at 1.44% is up 12 basis points. The 10- and 30-year yields have plunged 31 basis points to 1.60% and 2.05%, respectively. Alongside governments, 10-year Baa-rated corporate bond yields have fallen 29 basis points and both the 10- and 30-year AAA municipal bond benchmark yields are down 26 basis points to 1.18% and 1.83%.

Markets focused on the possible implications of an epidemic in China leading to a global health emergency would otherwise be obsessed with Thursday’s Gross Domestic Product number, Friday’s British farewell to the European Union, wagers expected to total $6 billion on Sunday’s Super Bowl, and Wednesday’s meeting of the Federal Open Market Committee, the first such gathering of the year. Voters this year present as a few degrees more dovish, as the Fed Presidents from Kansas City and Boston relinquish their seats to the Fed Presidents from Cleveland, Philadelphia, Dallas and Minneapolis. There are still two vacancies for the Board of Governors and the nominees await Senate confirmation. Investors will watch the press conference and take the proverbial temperature of the Chair and Committee members on inflation, repurchase agreements, and the virus. Futures trading reflects only a 12% chance of a rate hike.

The municipal market is expected to see only $5.7 billion of new issues this week and the 30-day visible supply totals a mere $10.1 billion while redemptions and maturities are expected to add $25.8 billion of cash to the yearlong manhunt for tax-exempt and taxable municipal bonds. The largest financings happen to be for hospitals in Florida and New York, and there are several other health system issues in North Carolina, Indiana and Ohio on the slate. In the high yield space, the Port of Beaumont, Texas has a $265 million non-rated issue with tax-exempt and taxable series for the Jefferson Gulf Coast Project, Howard University is bringing a $145.4 million BBB-minus rated taxable refunding with a corporate CUSIP. And the California Enterprise Development Authority has a $9.2 million Ba2 rated financing for the Academy for Academic Excellence.

From the world of academia, Dr. Matthew Lieberman will be a keynote speaker at the 17th Annual HJ Sims Late Winter Conference next month in San Diego. Professor Lieberman holds degrees from Rutgers and Harvard and directs the Social Cognitive Neuroscience Lab at UCLA, one of the first labs to combine social psychology and neuroimaging. He measures and maps brain activity to demonstrate how we are wired to have a natural preference for switching from non-social to social tasks, how putting our feelings into words can have a soothing effect on those emotions, and how we might be able to help people who disagree come together without being disagreeable. He contends that our need to connect with others is just as important, if not more, than our basic need for shelter and food. So we invite you to hear his remarks, join us at the InterContinental Hotel, savor dinner at the San Diego Zoo, and enjoy a tremendous networking opportunity by registering at this LINK.

Government, business, academic, humanitarian and other leaders and dealmakers from 117 countries gather this week at the ski resort in Davos-Klosters, Switzerland for the 50th annual invitation-only meeting of the World Economic Forum. This year’s theme is “Stakeholders for a Cohesive and Sustainable World” and the thousand-odd journalists covering the events on the “Magic Mountain” will once again be taking the proverbial temperature of the global elite on topics such as cybersecurity, climate, e-commerce, inequality, reskilling, rural mobility, and the future of healthcare. The combined wealth of attendees, on a per-square-foot basis, will likely set a new record and the menu as well as the agenda will be a topic of lively debate. Half of the 70,000 meals for participants, staff and security will feature a plant-rich flexitarian plates such as broccoli mousse with toasted pignoli, and maple-smoked haloumi cheese with mint dust.

President Trump is delivering a keynote speech to the Forum at this writing. In his scheduled meetings with the Presidents of the European Commission, Iraq, Switzerland and Kurdistan, and the Prime Minister of Pakistan, he is accompanied by his Secretaries of Treasury, State and Commerce, his U.S. Trade Representative, and Deputy Chief of Staff for Policy Coordination. While they represent the nation overseas, the U.S. Senate has convened on Capitol Hill in Washington for only the third time in history to sit as a court of impeachment. The first day of the trial began on Tuesday afternoon with votes on rules to govern the proceedings. Senators will be living on snacks in the cloakroom for several weeks of marathon proceedings while reviewing the facts and reflecting the proverbial temperature of the nation on the charges against the President. At this point, no one expects conviction and removal, but the political process is back in progress and has been known to have some twists and turns.

The Chief Justice of the Supreme Court is a thousand feet away from colleagues concurrently considering a long calendar of unrelated cases while he is required by the Constitution to preside over an entirely separate branch of government, again for only the third time in history. The rest of the country nevertheless proceeds with more routine matters. At the Federal Reserve, the Open Market Committee prepares for its first monetary policy meeting of the year. The Treasury is auctioning $78 billion of 3- and 6-month bills and $80 billion of 4- and 8-week bills and planning to re-issue 20-year bonds. The Centers for Disease Control is immersed in identifying and preventing the spread of the deadly new Wuhan coronavirus. The Census Department has kicked off the decennial population count in rural Alaska. Democratic voters in Iowa are getting ready to caucus.

On Wall Street and at Davos, investors are sitting on a lot of cash but many are very confused about when and where to put it to work. Last year, it paid to buy almost anything. This year, there are new concerns about the sustainability of the 121-month U.S. economic expansion, the 30-year bond market rally, the 11-year bull market in stocks, and geopolitical tensions that spiked at the start of the new decade. It is unclear how much help central banks can be in a future economic downturn. Trade conflicts persist, even after the Phase 1 agreement was signed with China and the Congress approved the Administration’s new trade deal with Canada and Mexico. There is still plenty of uncertainty remaining with Brexit and not much apparent reward for taking risks in nearly any global sector. Rates remain at historic lows and asset prices are elevated across the board. Cash may be “trash” in the eyes of some fund managers, but 10-year sovereign bonds yields in Germany, the Netherlands, Switzerland and Japan are still negative as are many returns after adjusting for inflation.

At the midway mark in this first month of the year, the 2-year Treasury yield stands at 1.55% and the AAA municipal general obligation bond yields 0.90%. The 10-year Treasury yield is down 9 basis points on the year to 1.82% while the comparable high grade muni yield is 15 basis points lower at 1.29%. The 30-year Treasury yields 2.28%, down 10 basis points from the start of the year, and the 30-year muni yields 1.94%, 15 basis points lower. Baa corporate bond benchmark yields are down 13 basis points to 3.57%. The Russell 2000 Index is up nearly 2% to 1,699, oil prices are down 4.1% to $58.54, and gold prices have risen 2.3% to $1,557 an ounce. The normal ratios of stocks and bonds, municipal bonds and Treasuries, are askew. There are also increasing pressures for more socially conscious or green investing and attention to environmental credit risks and concerns about where markets are heading in this era of central bank interventions, high budget deficits and extraordinary debt levels.

At the 17th Annual HJ Sims Late Winter Conference next month in San Diego, we are fortunate to have Robert Genetski, as one of our keynote speakers. “Dr. G” is one of the nation’s leading classical economists who takes the voodoo out of the science and provides valuable insights on the impact of policy on growth. He is a Blue Chip interest rate forecaster who will endeavor to help us anticipate where we are heading as borrowers, investors, employers and citizens. We invite you to join us and participate by registering at this LINK.

The municipal bond market is still riding high thanks to favorable technical factors of supply and demand. Fund flows have been positive for 54 weeks; $5.1 billion of new investments in muni bond funds were made in the last two weeks. Bloomberg just reported that the last time tax-exempt yields were this low, Dwight Eisenhower was president and Elvis Presley was releasing his second studio album. Munis are outperforming the Treasury market and Muni-Treasury ratios in the 1-15 year range are at record 35-year lows. This week, the primary market calendar totals $7.1 billion, up from $5.4 billion last week. The high yield calendar includes nearly a dozen deals, including our $41.5 million revenue and refunding issue for Henry Ford Village, a continuing care retirement community with 852 independent living units, 96 assisted living units, and 89 licensed nursing care beds. The non-rated bonds are being issued by the Economic Development Corporation of the City of Dearborn, Michigan.

In Chinese folklore, the Jade Emperor decided that there should be a way of measuring time and settled on a 12-year calendar. To designate the years, he decided to host a competition for naming rights. On his birthday, he called for a swimming race and invited all animals to participate. The first twelve to cross a wide river would win a spot on his new zodiac calendar. So the great race began and the quick-witted Rat convinced the kind and powerful Ox to give him a ride on his back. The Ox moved rapidly into the lead but, just as he reached the river bank, the Rat jumped off and finished ahead of him, earning his position as the first zodiac sign. The peeved Ox was followed by the Tiger, Rabbit, Dragon, Snake, Horse, Goat, Monkey, Rooster, Dog and Pig, the final order of the zodiac.

Rats have long symbolized wealth and surplus in Chinese culture. They are said to be savers, but lack courage and can be stingy. Their love for hoarding can sometimes cause them to waste money on unnecessary things. Those born in the Year of the Rat are considered clever and industrious. The most recent Years of the Rat were in 2008, 1996, 1984, 1972 and 1960, half of which were good for stocks, half for bonds, none good for both. The next one begins on January 25, the Lunar New Year, which always occurs on the second new moon after the winter solstice. Feng shui grand masters see this year as the start of a new age. Many expect slowing growth, radical positions, impassioned protests, and more tension between countries. Some see great opportunities for wealth with best performances coming from energy, entertainment, land development, technology, and banking.

China’s Vice Premier Liu He, born in the Year of the Dragon in 1952, will be in Washington on Wednesday to sign a partial trade deal with President Trump, born in the Year of the Dog in 1946. The trade war between the two superpowers has generated much uncertainty for global investors for the last two years. And although markets cheer the accord, and relief to some businesses comes with the Phase One truce, for the time being tariffs continue to impact chemical makers, apparel retailers and auto parts manufacturers. A substantial percentage, perhaps close to two-thirds, of everything Americans buy from China will still be tariffed.

2020 in the Gregorian calendar is a leap year. It is a decennial census year, a presidential election year, and a year in which the United Kingdom and Gibraltar are scheduled to leave the European Union. Tokyo hosts the Summer Olympics, the World Expo opens in Dubai, and NASA launches a rover mission to study the habitability of Mars. The financial markets will focus on the eight scheduled meetings of the Federal Open Market Committee, beginning on January 28, but will also pay close attention to the Democratic primaries which start on February 3 and conclude with the convention in Milwaukee on July 16.

The new trading year began with the targeted U.S. MQ-9 Reaper drone airstrike that killed Iran General Qassem Soleimani followed by the deployment of 3,500 additional U.S. troops to the Middle East. Markets were roiled and investors fled to safe havens out of concern for retaliations and an escalation of conflict. Once Iran appeared to stand down, tensions very quickly faded and the U.S. rallies resumed. At this writing, the Dow is up 368 points since the start of the year, the S&P 500 is up 57 points, and the Nasdaq is up 301 points or 3.4%, while the Russell 2000 Index of small cap companies manufacturing or producing goods in the U.S. is basically flat at 1,668. Oil prices spiked briefly but have settled in the $59 range, down nearly 5% in 2020. Gold prices have gained $27 an ounce and stand at $1,549.

The bond market continues its 30-plus year-long rally, buoyed further by the temporary flight to quality. Although the 2-year Treasury yield is up 2 basis points on the year to 1.58% at this writing, the 10-year benchmark has fallen 7 basis points to 1.84% and the 30-year yield is down 8 basis points to 2.30%. $8.19 billion was added to high grade corporate bond funds in the opening week of 2020, and high yield funds reported inflows of $1.12 billion. Ten-year Baa corporate bond yields have dropped 11 basis points to 3.59%.

Municipal bonds are still on a tear. Yields, as measured by the AAA general obligation MMD scale, have compressed by another 10 basis points. The 2-year is at 0.94% and the 10-year at 1.35%. The 30-year benchmark at 1.98% is 105 basis points lower than where it stood one year ago. Continuing the 53-week pattern, municipal bond mutual fund inflows continue to set new records. Investors added an astonishing $2.89 billion into state and local government debt funds during the first, traditionally sleepy, week of January. More than $612 million was added to high yield funds.

During the first full week of issuance, $5.9 billion of bonds were issued and the high yield muni sector saw little activity. The California School Finance Authority sold $32.3 million of non-rated revenue bonds for Arts in Action Charter Schools that came with a 40-year final maturity priced with a 5.00% coupon to yield 3.67%. And the Build NYC Resource Corporation issued $9.3 million of non-rated revenue bonds structured with a 30-year term bond priced at 5.00% to yield 4.00%. This week’s $6.6 billion slate include a $23.5 million non-rated South Carolina Jobs-Economic Development Authority deal for Hilton Head Christian Academy. The 30-day visible supply of visible bonds totals $12.3 billion. On the cusp of a new calendar used by one quarter of the world’s population, we join in wishing all a Happy New Year.