By Gayl Mileszko
Market Commentary
Losing My Religion
The title song from R.E.M.’s seventh studio album, Out of Time, never made it to No. 1 on the Billboard Hot 100 chart. But this song, penned 35 years ago by lead singer Michael Stipe, remains a staple of ‘90s rock radio. In 2020, it surpassed one billion views on YouTube. The lyrics, however, have confused fans from the outset. Since 1991, the singer/songwriter, whose family includes generations of Methodist ministers, has tried to explain that “Losing My Religion” has nothing to do with a loss of faith. In his native Georgia, and other parts of the South, the phrase is said to be an idiom for being at the end of your rope, losing your temper, your patience, your polite civility. Stipe said that his song was about doubt and unrequited love, about being frustrated when obsessed with someone who does not love you. It is an all-too familiar situation for millions around the world, producing millions of prayers for the impossible.
Prayers
Across the U.S., millions are praying for a swift end to this war with the regime in Iran, for the men and women wounded in service to our nation, for the families of those lost, for the people of Iran fighting for peace, freedom, and democracy, and for the innocent victims throughout the region. Many of these prayers are private, not taking place in houses of worship. The data show that Americans are in fact losing our religion. Surveys indicate that 81% of us believe in God or a higher power, but the percentage of us who belong to a church, synagogue or mosque fell below 50% for the first time in 2020. All told, only about 32% of us attend religious services at least once a month. Yet many of us live or work in communities with Lutheran, Jewish, Presbyterian, Catholic, Mennonite, Quaker Catholic, Jewish, Baptist, Presbyterian. Methodist, or Episcopal sponsors, and even more receive education, health care and other critically needed services from these caring, mission-driven, non-profit providers.
Religious Landscape
The U.S. Census Bureau collects an extraordinary amount of data on us but not any information on our religious affiliations. The Pew Research Center, however, makes periodic inquiries and its latest 2024 Religious Landscape Study found that 60% of respondents described themselves as Christians: 40% Protestant, 19% Catholic. Twenty-nine percent were unaffiliated, including the 5% that identified as atheist and 6% as agnostic. And seven percent belonged to religions other than Christianity: 2% were Jewish, and 1% each were Muslim, Buddhist, or Hindu.
Religious Freedom
America’s Founding Fathers would not be surprised by this mix in our 21st century populus. They themselves held diverse religious views but believed that a moral, religious citizenry was essential for a functioning republic. They agreed on promoting religious freedom while maintaining a strict separation of church and state. However, since 1956, the “In God We Trust” motto appears on our currency, in our courtrooms, in some school classrooms and on many license plates. And, even as we celebrate our 250th anniversary, the First Amendment and the intent of our revolutionary leaders, the drafters of the Declaration of Independence and Constitution, are still being probed and tested in cases involving presidential powers, religious charter schools, prayer on the football field, wedding cakes for gay couples, and health insurance coverage for abortion.
Revolutionaries
There are other revolutionaries top of mind right now in Iran, where the constitution mandates Shia Islam as the official religion. In practice, it has been a cult of terror. The theocracy celebrated its 47th, and hopefully last, anniversary on February 11. It was marked by televised domestic protests that were swiftly and brutally quashed with as many as 30,000 killed, and the arrival of new U.S. sanctions and aircraft carriers. The Islamist state’s leaders have long referred to America as its chief enemy, “the Great Satan,” and encouraged chanting “Death to America” for more than four decades. In 1984, the U.S. first designated the Islamic Republic as a state sponsor of terror and, in 2002, Iran was branded as part of the “Axis of Evil.”. Our Israeli allies have long viewed Iran as an existential threat, and seven U.S. administrations have condemned the regime’s human rights abuses, nuclear ambitions, and financial links to international terrorism.
Ramifications of Crossing the U.S. Line in the Sand
With respect to Iran, we, along with other nations, have attempted and lifted sanctions, exerted diplomatic pressure, held indirect talks, and declared trade embargoes. In 2016, the U.S. released an astonishing $1.7 billion in a foolhardy attempt to restrict nuclear development. Who can forget the reports of $400 million in foreign currency being loaded onto an unmarked cargo plane destined for Tehran? Two more such flights followed. Most recently, the Trump administration has asserted that Iran has rejected every opportunity to renounce their nuclear ambitions and that, despite talks with Omani mediators, Iran did not intend to negotiate in good faith. There are also unconfirmed allegations that Iran had received or planned to obtain a nuclear weapon from North Korea. So, after years of efforts building up to recent months of warnings accompanied by an increasing U.S. military presence in the region, on Saturday February 28 the U.S. and Israel launched an unprecedented series of precision targeted attacks on more than 130 Iranian cities in an operation dubbed “Epic Fury.”
No Modern Warfare Precedent
During the past decade, the U.S. has run several military operations in the Middle East including Desert Storm, Inherent Resolve, and Enduring Freedom. In the case of Epic Fury, most of Iran’s military leaders, ballistic missile facilities, drone launch sites, Revolutionary Guard command centers, air defense capabilities, and airfields were destroyed in an unprecedented shock-and-awe show of force that has sent a terrifying message to our adversaries around the world. In retaliation, Iran has launched missiles and drones targeting Israel and Gulf countries hosting U.S. forces. The United Nations, which has proven to be of no use or value in containing Iran’s terrorism over the decades, actually condemned the US-Israeli action as a violation of international law, and pointlessly called for a return to negotiations to prevent a wider conflict. Too late.
Oil and Gas
Many nations around the world are either openly or silently grateful for the long-desired elimination of the Iranian high command while publicly urging rapid de-escalation, primarily out of concern for oil and gas prices. With the war now expected to last eight weeks, oil prices have indeed risen: West Texas crude oil futures have climbed from $67.02 to $76.30 in this writing. As threats to shipping in the Straits of Hormuz persist, Brent futures have risen from $72.87 to $82.94. U.S. gasoline prices have risen by 22 cents a gallon, and now average $3.19. Qatar, one of the world’s largest LNG producers, halted production on Monday following Iranian drone strikes. Europe’s benchmark, the April 2026 Dutch TTF natural gas futures contract price, rose from $31.95 to $54.29 over the course of two days. In Washington on Wednesday, the Senate rejected a war powers measure to halt U.S. military action in Iran without congressional approval by a vote of 53-47. Note that the last time Congress formally declared war was in 1942.
Market Response
This year, the global financial markets have been volatile, rallying and selling off over everything from prospective U.S central bank rate decisions to artificial intelligence impact fears to a near daily series of major policy pronouncements from the Trump Administration. Iran has always been on the trader’s Wall of Worry, but this new war has leapt to the forefront of analyst and investor focus. Traders know that the goal of civilized nations has long been for regime change in Iran as well as Venezuela and Cuba, among others. Some have looked to prediction markets for clues on timing, but concerns have arisen over insider trading and those who seek to “profit from death.” Betting continues on the next supreme leader, when U.S. forces will enter Iran (odds favor that it will be or before March 31) the ceasefire date (on or before June 30), and whether the former shah’s son will return (not on or before December 31). At this writing, the Dow and S&P are down since the start of the war, while the dollar, oil, Bitcoin, and the Nasdaq are up. Although the Swiss franc is trading just one cent below its all-time high against the dollar, the other usual safe havens have not exactly proven to be havens since the bombing began: the 2-year Treasury yield at 3.53% has risen 16 basis points, the 10-year at 4.08% is 15 basis points higher, and the 30-year at 4.71% is up 10 basis points. Tax-exempt bond yields have climbed alongside governments. The 2-year AAA general obligation benchmark yield at 2.13% is up 10 basis points, the 10-year at 2.68% is up 16 basis points, and the 30-year at 4.26% is 9 basis points higher. Gold prices at $5,141 have fallen more than $137 an ounce.
This Week
Markets opened this week in turmoil, although investors have been braced for military action for months and are still being rocked by the Supreme Court’s ruling on tariffs and the potential impact of artificial intelligence and quantum computing on the future of business models, labor, investment returns, and financial market stability. Futures trading now reflects the probability that the Federal Reserve will pause on rate cuts until September and not reduce the target rate again until next March. The U.S. Treasury is proceeding with six regularly scheduled auctions this week, and key economic data on jobs, retail sales, consumer credit, and productivity is being released. U.S. citizens are being cautioned by our State Department about domestic as well as international travel, and some airspace is closed or restricted. The Department of Homeland Security is technically shut down since its funding expired on January 31, but most staff are deemed essential and they are on alert. Iran sent a communique to President Trump in the days before the strikes began threatening to activate “sleeper-cell terror’ inside the U.S. On top of that, the strategic arms reduction treaty with Russia which places curbs on deployment expired on February 5. No surprise, then: investor sentiment registers fear.
Focus on the Municipal Market
Treasury market swings impact all bond markets, municipals included. Risk-off trades in wartime, even if the expectation is for hostilities to be short lived, could bring more investors into the relative safety of tax-exempts. History shows that even major geopolitical conflicts exert less influence on bond markets than Fed policy shifts. But here, oil is a big consideration: if prices continue to rise, that will feed inflation and limit the Fed’s rate-cutting flexibility. We may see a haven rally if this war drags on, or some prices may continue to fall if investors stay on the sidelines at a time when the market is seeing record-high supply. February issuance at $43 billion increased by 22% over January’s, and year-to-date volume is running 4% above 2025. Investors are still net buyers of mutual funds and exchange traded funds; there have been $19 billion of inflows in 2026. And muni bondbuyers are pleased with investment performance so far. January and February index returns were both positive. Index returns on February 28 show that taxable munis are up 3.25%, high yield munis are up 2.48% and high grades are up 2.06%. Two months into the new year, munis are outperforming the three major equity indices, Treasuries, corporate bonds, preferreds and leveraged loans. That does not happen very often.
Recent Municipal Sales
Last week in the muni market, the Fayetteville Public Facilities Board in Arkansas brought a $30 million BBB financing for Butterfield Trail Village featuring 2060 term bonds priced with a 5.50% coupon to yield 5.31%. Florida’s Sarasota County Public Hospital District privately placed $80 million of 6.75% non-rated bonds due in 2056. And Missouri’s Lindenwood University along with Michigan’s Dorsey College and Dorsey School of Beauty came with a $30.4 million BBB-minus rated refunding through the Public Finance Authority; the 2040 maturity priced at 5.00% to yield 4.41%. This week, we expect a slate totaling $12 billion primarily comprised of high-grade bonds. HJ Sims traders are keeping an eye on munis that may be impacted by developments in the Middle East, including credits tied to energy, ports, airports and trade; we see as much opportunity as we do concern in these sectors, so please reach out to your HJ Sims representative to learn more.
HJ Sims: Strong Market Presence and Relationships
It is hard to look back on a time in American history when so many policy reversals, major judicial rulings, landmark legislation, and technological developments have impacted our financial markets. Our presence in the municipal market since 1935, which has now expanded to 14 states and sectors including senior living, charter and private schools, hospitals, utilities, and student housing, provides us with a finger on the pulse of most economic, financial, and demographic trends. And our relationships with issuers, rating agencies, consultants, and vendors keep us in touch with all that is most important to our borrowers and investors. We celebrated our treasured ties just last week with a record-setting participation in our Late Winter Conference in Fort Myers. There, we once again enjoyed the company of so many friends, colleagues, and business partners. Our hosted panel sessions were so jam-packed with insights and lessons learned that conversations continued well into the evening. We look forward to staying in touch with all who attended, and all who plan to attend our February 2027 conference in Tucson.