Market Commentary: MOVE IT MOVE IT MOVE IT

by Gayl Mileszko


The airwaves and blogospheres are filled with New Year weight loss-related products and services but, as so many of us have learned the hard way over time, the only things that work to drop those extra holiday pounds (not to mention the ones still lingering from early pandemic years) involve significant cuts in calories and big step-ups in our exercise routines. Stress can contribute to both gains and losses on the bathroom scale. Picking up and moving to a new location is usually one of the most stressful things in life, right up there with divorce, bankruptcy, job loss, and the death of a loved one. Most times, you move because you have to – for a new job, graduate school, to support family members in need, or perhaps due to a serious illness. Many of us made our big moves during the pandemic, leaving the city for more personal space, going to a favorite place where we could work remotely, or leaving more rural locations to be closer to family, friends and essential services. So, a large number of us were settled in 2023, pretty much happy to stay put. And, in the face of skyrocketing interest rates, stubborn inflation, and housing costs, moving was just plain too expensive. Home affordability hit an historic low last August.  As a result, there were only 25.6 million or 7.8% of us who moved.  That was the lowest number of relocators since the 1940’s when our government began tracking this data.

Moving Vans Chart People Moves

Of course, the folks with the keenest eye on who is moving where are from year to year are moving companies such as United Van Lines, Atlas, Mayflower, and U-Haul.  HireAHelper is just one of several online marketplaces that assists in comparing local movers and tracks the shifts in population.  They recently published data providing insight on the top reasons people gave for moving. Number one was retirement at 44%, double the percentage of job-related moves, and more than four times the rate of people seeking cheaper housing. Several hundred thousand retirees eagerly chose to relocate in 2023 to another state, one with a nicer climate, better health care, a more favorable economic or political environment, proximity to children and grandchildren, or all of the above. Family and health issues in fact were the top two motivators in 2023, collectively driving 27 percent of retirement relocations.  After dropping for obvious reasons during COVID lockdowns, the number of Americans moving to retire has increased for the third straight year.  U.S. Census Bureau data indicated that more than 338,000 older Americans sold their homes or ended their leases to move elsewhere. About 37% were under the age of 65 and approximately 23% were “young” retirees, under age 55. 

Moving for Retirement

Florida ranked as the top destination for the second straight year, attracting an estimated 11% of all the retirement moves across state lines, and Miami-Fort Lauderdale was the top draw for those moving to the Sunshine State. South Carolina was in second place as the destination state for 10% of all cross-state moves, followed by New Jersey, Texas and Washington state. In terms of the states with the highest share of retiree outmigration, California topped the list at 18% with New York next at 11%; about 3 in 10 relocating retirees departed from one or the other. On average, moving retirees were not married; 33% were people of color, up from 14% the year before. And the median household income of relocating retirees was $88,347, approximately 17% higher than the Census-reported U.S. median household income.  These demographic trends should inspire those sponsoring and developing more seniors housing, and affordable housing in particular, in move-to destinations like Miami, El Paso, Sarasota, Houston, and Myrtle Beach. By 2040, about one in five Americans will be age 65 or older, up from about 16.3% in 2020. By 2050, the number will grow to almost 90 million. Their migrations will increasingly impact local and state revenue, home sale prices and housing stock, elections, consumption, labor and service demands.

Forward Movements

In the world of politics, primary elections have moved from Iowa and New Hampshire into South Carolina. In the U.S. capital, the House and Senate moved another continuing appropriations bill to keep parts of the government funded through March 1 and others through March 8. There is also forward movement on legislation to extend a number of business tax breaks, expand the childcare tax credits, provide affordable housing incentives, and assist with disaster relief. Iran is moving drone jammers and parts for long-range rockets and missiles into Yemen for Houthi allies to use in attacking merchantmen and U.S. warships and disrupting international commerce.  Ninety thousand NATO soldiers from 31 nations are being moved throughout the Trans-Atlantic region for Steadfast 24, the largest joint training exercise since 1988. In the NFL, the Lions, Chiefs, Ravens and 49ers are moving closer to the Super Bowl. In the world of golf, 20-year-old Nick Dunlap is deciding whether to move back to Alabama for college or join the PGA Tour after his one-shot victory in La Quinta on Sunday.

Market Moves

The financial markets have seen some dramatic moves just three weeks into the new year as fourth quarter corporate earnings and municipal borrower financials begin to roll in. Palladium prices have plummeted by 14%, aluminum is down 9%, and silver prices have dropped 5%. The Russell 2000 is down 4.1%. Oil prices are up 2.5%. Stock market volatility as reflected in the VIX has increased by nearly 7% and equity funds have seen 101 straight weeks of net outflows. But the Nasdaq has gained another 2%, and the S&P 500 at 4,864 and the Dow at 38,001 recently hit all-time highs. The surging stock market has reduced the attractiveness of bonds and money market funds, the latter of which lost $22.5 billion of assets last week but still sit near record highs at $5.96 trillion. There is a tremendous amount of money happily sitting in bank accounts, money market funds and exchange traded funds with little reason to go elsewhere until the economic and political pictures are clearer.

Moving Down and Up

After the biggest two-month rally in decades, bonds have fizzled in these first few weeks of 2024. The 2-year Treasury yield at 4.38% is 14 basis points higher than where it began the year. The 10-year at 4.12% is up 25 basis points, and the 30-year yield at 4.32% has increased 30 basis points.  The peak of the government yield curve at 5.38% is currently in the one-to three-month maturity range, exemplifying an inversion that has persisted since July of 2022. Weekly auctions to fund our growing deficit have increased. There are eleven this week alone. Municipal issuance is the tax-exempt benchmarks are also trending higher in 2024. The 2-year AAA municipal general obligation yield at 2.73% is up 21 basis points. The 10-year at 2.46% is 18 basis points higher, and the 30-year at 3.59% is up 17 basis points. The SIFMA 7-day yield jumped 67 basis points last week to 2.57% and we note that variable rate trading volume at $21.4 billion was the heaviest in 43 weeks. The gap between the 1-year muni yield at 3.01% and the 30-year yield at 3.59% is only 58 basis points and the short end of the curve has been inverted for a record 14 months.

Backward Moves

Returns in the fixed income sector are mostly negative year-to-date. Using the BofAML indices to gauge performance, U.S. Treasuries are down 1.33%, high yield corporate bonds have lost 0.67%, investment grade corporate returns stand at negative 1.03%, convertible bonds at negative 1.35%, investment grade munis at negative 1.07%, high yield munis at negative 0.35% and taxable munis at negative 1.69%. In fixed income, only leveraged loans at +0.51% and preferred at +0.94% were in the black as of January 19. Despite the many indicators of near-term recession, markets still cling to any positive economic data and dismiss the negative trends. The leading indicators have declined for 21 straight weeks, the national debt exceeds $34 trillion or 122.3% of GDP, household debt has skyrocketed to $17.29 trillion, the Federal Reserve which has assets totaling $7.67 trillion cannot cover its own operating expenses, our M2 money supply dropped year-over-year for the first time since 1933, and the 10-year Treasury yield is still most unusually below the Fed Funds rate. Futures trading reflects market expectations for six rate quarter point cuts this year, beginning in May but that may change depending on the moves that Jay Powell will share after next Wednesday’s Open Market Committee meeting.

Choice Moves

This week, HJ Sims joins schools and educational organizations across the country in celebrating National School Choice Week, an effort to raise awareness about the many options available to K-12 students and their families. We have recently expanded our firm’s education finance team and are bringing our first charter school deal of the year to market this week, an $11.85 million non-rated Lee County Industrial Development Authority revenue bond issue for Lee County Community Charter School in Fort Myers, Florida. As we conclude the last full trading week of January, we have seen five other charter school financings for borrowers in California, Idaho, Arizona, Pennsylvania and South Carolina. These deals were structured with final maturities due from 2033 to 2063, in denominations of $5,000 to $250,000, and credits that ranged from non-rated to BB+ to Aa2.  Sizes varied from $1.18 million to $57.2 million, and coupons ranged from 5.00% to 8.25% with yields of 5.06% to 8.905%.

For more information on this and other recent charter school transactions, financing options, market moves, and investment opportunities, please reach out to your HJ Sims representative.