By Gayl Mileszko
Market Commentary
Anniversary Years
Boom. Bang. Thwop. Thud. Whack. Vavoom. Smack. Splat. These are some of the sounds that were ushered in with the new year. As we approach the one-year anniversary of his second inauguration, President Trump has not slowed his torrential pace of assault on the status quo. On his orders, Nicolas Maduro was captured at his home in Caracas and transported to New York to face narco-terrorism charges and the Navy seized a Russian-flagged oil tanker off the coast of Iceland. He insisted that the U.S. needs to “own” Greenland to prevent Russia and China from taking over, proposed a ban on corporate home purchases, announced a 10% cap on credit card interest rates, and placed a $5 million limit on defense contractor executive pay. He ordered Fannie Mae and Freddie Mac to buy $200 billion in mortgage-backed securities and vowed to implement aggressive housing reform. The Trump Administration withdrew from more than 65 international organizations, paused federal childcare and family assistance funds in five states, announced new childhood vaccination recommendations and federal dietary guidelines. Remarkably ambitious plans are underway for major American birthday celebrations to take place between Memorial Day and July 4.
We Grow Accustomed to the Unprecedented
Wall Street, shaking off its New Year’s Eve hangover, tried to absorb these events, any one of which by itself would be shocking in any other presidential term. But markets finally took a bit of a polar plunge when it was learned that the Federal Reserve was served with grand jury subpoenas by the U.S. Department of Justice on Friday night. The DOJ’s criminal investigation into Chair Jay Powell is as unprecedented as – well, as many of the Fed’s moves over the past two decades have been. Traders watched Jay Powell’s video response on Sunday in amazement. He said that the threat of criminal charges was a pretext related to the Fed setting interest rates based on economic assessments rather than presidential preferences, and the question of the Fed’s independence once again dominated the headlines and table talk. Stock futures and the dollar weakened, and gold prices climbed, until traders sobered up and realized that the likelihood of the Fed Chair being arrested and jailed for his June Senate testimony on building cost overruns is about the same as Mr. Trump taking his name off the JFK Center for the Performing Arts, the new planned class of battleships, the federal prescription drug website, the gold card visa for wealthy immigrants, or the new federal savings and investment accounts for children.
The Fed Subpoena Fiasco
The President has denied knowledge of the subpoena. The Wall Steet Journal editorial board spoke for the Street when they wrote on Monday morning: “In the annals of political lawfare there’s dumb, and then there’s the criminal subpoena federal prosecutors delivered Friday to Federal Reserve Chairman Jerome Powell. President Trump would do himself and the country a big favor by firing those responsible for this fiasco.” Fingers point to Bill Pulte, head of the Federal Housing Finance Agency, as the instigator. In any event, as has happened in virtually every Administration since the founding of the DOJ in 1870, its independence and credibility have again been brought into question and the Senate will block any nominees to the Fed until the legal matter is dropped for good.
Bond Markets Plow Forward
Bond markets did not benefit from any rush to havens this week, nor were they battered in this latest bout of headlines. Treasury and municipal bond yields have not moved an inch. The 2-year Treasury stands at 3.53%, the 10-year at 4.17% and the 30-year at 4.83%. However, in the first eight trading sessions of 2026, the 2-year yield has risen 6 basis points. The 2-year AAA muni general obligation benchmark yield, however, has fallen 15 basis points to 2.24%, the 10-year has dropped 9 basis points to 2.67% and the 30-year yield at 4.21% is down 3 basis points. Corporate bond issuance has been active with more than $102 billion of investment grade bonds and $11.7 billion of high yield bonds sold. Negotiated municipal sales so far total $9.6 billion, not enough new supply to meet demand from bondholders who just received $23.7 billion of principal and interest payments on January 1. In the high yield space, the Public Finance Authority sold $45.6 million of non-rated bonds for Live Well Senior Living, including 2060 term bonds priced at par to yield 7.15%. The National Finance Authority placed an $83.9 million non-rated transaction for Centurion Foundation Andrews Avenue Medical Center structured with a 2057 maturity priced at par to yield 5.625%. And Hamilton County, Ohio placed a $50 million non-rated deal for TriHealth due in 2055 with a 6.875% coupon priced at par.
Muni Issues Pricing
This week’s municipal calendar totals $11.3 billion and is expected to include a $105.6 million non-rated financing for Friendship Village of Kalamazoo. Underwriters and traders in the corporate and municipal bond worlds are working in a fast-changing environment where uncertainty rules. There are nine Treasury auctions and 16 Fed speakers on the circuit. The Supreme Court is about to rule on a number of hot issues, including tariffs, potentially adding a huge new injection of anxiety into the markets. There is talk of sending our troops to Iran, to Greenland, to Colombia. The regime in Iran appears on the verge of collapse and Cuba may be next. Fourth quarter corporate earnings are being released and the first are coming from banks being targeted with a cap on credit card interest rates, which currently average 20-23%. Inflation remains a significant problem despite the weaker than expected, fairly unbelievable inflation data just released. As a hedge against inflation, geopolitical unrest, and potential financial instability, silver prices have topped $90 an ounce for the first time and gold is once again at an all-time high. The Congress is making progress on spending bills but another shutdown looms on January 30 and debt, deficit, Medicaid, Social Security issues are unaddressed.
Get These Yields While You Can
All this anxiety and upheaval should lead bond investors to make a clarion call for higher yields. President Trump is testing the extent of presidential powers like no other in history. At last count, the Trump Administration Litigation Tracker finds 253 active cases pending against his executive actions; many will not be decided until after his term ends. Midterm elections take place 10 months from now, typically a referendum on the President, his policies, and achievements. Many corporate leaders and Main Street investors see a relatively strong economy with interest rates close to neutral. This week’s economic data shows building permits down a tick but private sector employment up along with average hourly earnings, new and existing home sales, lower mortgage rates, higher mortgage applications, resilient retail sales, higher producer prices. But investor expectations are for interest rates to come down this year. Fed futures trading reflects projections for 25 basis point cuts in June and September.
Two Dog Sleds
As our Vice President and Secretary of State meet with Danish and Greenlandic officials, Florida Congressman Randy Fine has introduced a bill to make Greenland our 51st state. President Trump argues that the Arctic is rapidly emerging as a major arena of global power competition and that Greenland is critical to U.S. and NATO security. He quipped that Greenland’s current defense consists of “two dog sleds.” We at HJ Sims begin this year, our 91st year in business, with a view that the best defense in these market conditions is a good offense We welcome the opportunity to review your plans, your portfolio, your concerns, and goals. Markets are closed on Monday, so reach out this week to get the conversation started. It is one that we would like to continue at our 23rd Late Winter Conference to be held at the Marriott Sanibel Harbour in Fort Myers next month.