by Gayl Mileszko
Multiple Choice
The amount of choice that we have in America is truly quite staggering. Just walk into your average supermarket, where the number of available products has increased from 8,948 in 1975 to 31,530 in 2022. Much is credited to the trade agreements made in the 1990s which have led to an explosive growth in imported food. About 55% of fresh fruit and 32% of fresh vegetables are now sourced from abroad, according to the FDA. The USDA reports that we have become the world’s second largest agricultural trader after the European Union, importing $198 billion worth of fruits, nuts, beverages, coffee, cocoa, spices, and other products. Our exports of food and agriculture added up to $191 billion in 2023 and represented 20% of the total value of all U.S. agricultural production. These exports range from food grains and oilseeds to dairy and bakery products.Â
School Choice
So-called choice in K-12 education was mainly limited to the one school nearest our home for decades. But now 47 states offer some form of public or private school choice program in the form of vouchers, educational savings accounts, scholarship tax credits, individual tuition tax credits, and/or charter schools. A host of studies show that school choice improves academic outcomes and saves taxpayer dollars. The new options available to students and parents developed in response to troubling statistics shared by the American Federation for Children and other nonprofit organizations showing that every 60 seconds a child drops out of a public school, and that the U.S. is lagging behind more than a dozen other countries in math and literacy. Last year, seven states adopted universal education freedom policies, bringing the total to nine. Altogether there are 12 states with education savings accounts, 26 voucher programs in 15 states, and others with tax credit accounts, scholarships and deductions, according to EdChoice. Twelve states are considering legislation to expand educational choice this year, and there are a number of jurisdictions with ballot questions on education this November. Ahead of the voting, one Real Clear Opinion Research poll shows that 76 percent of voters say they are more likely to vote for a candidate who supports school choice, including 77 percent of Democrats, 86 percent of Republicans, and 67 percent of Independents. Nearly 80 percent of Black Americans, say they are more likely to vote for someone who champions school choice.
Sound Advice
There are plenty of choices available to non-profit and for-profit organizations looking for capital to build, expand, upgrade or acquire, those seeking guidance on board education, ratings applications, or fund investments, and those in need of a partner to help develop strategy, manage risk, or execute divestitures. During our Late Winter Conference in San Diego last month, we examined a number of innovative approaches and successful outcomes. We invite you to contact your HJ Sims representative for these case studies and for other information that may be of interest to your team.
Investment Options
Investors have an eye-popping number of choices these days and may be swayed by hyped financial media headlines, glossy marketing materials, sales-y webinars, or just plain fear of missing out on the latest craze and rally. Anything having to do with artificial intelligence or weight loss drugs is now portrayed as a portfolio must-have. We always look for diversification in the form of tax-exempt bonds financing the essential public purpose projects in our communities and corporate debt offerings by companies whose products we buy or use every week. We invite you to reach out to your HJ Sims representative to review your investment strategy, core holdings, and suitable higher coupon- and dividend-paying bonds that may better meet your income needs. Our teams stand ready to answer your questions on how to choose wisely among products ranging from ESG bonds to bitcoin ETFs, Magnificent Seven stocks, money market funds, and everything in between.
Municipal Bond Offerings
Institutional as well as individual bond buyers have seen quite a bit more volume and variety in the primary municipal bond market during the first two months of the year. Municipal volume during the first two months of the year at $55.5 billion is 20% higher than it was in 2023 according to the Bond Buyer. We have seen 16 charter school financings totaling $540 million versus last year when only 10 deals totaling $123.5 million came to market. In senior living, there have been $198.8 million of bonds sold so far, including seven drawdowns totaling $17 million. Last year at this time, there were $105.3 million of sales, including six drawdowns with combined par of $20.9 million.
Municipal Market Conditions
Market conditions remain favorable for tax-exempt borrowers this month, although March has a history of being the weakest of the year. This is primarily due to the fact that issuance tends to average 30% more than February, altering the supply/demand imbalance. The good news is that there were $8.9 billion of net inflows into conventional municipal bond funds in January and February, investor interest in tax-exempts always picks up during tax filing season, munis are outperforming Treasuries, and rates remain at favorable lows: the 30-year benchmark AAA general obligation bond yield is 3.59% and the 10 year stands at 2.46%. Muni customers have been net buyers all year long, and high yield muni index returns year to date are returning +1.70% through March 1. Principal and interest payments this month will exceed $30 billion, and there is more than $6 trillion sitting in money market funds awaiting attractive long-term opportunities.
HJ Sims in the Market
This week, HJ Sims is in the market with an $11 million non-rated 40-year bond issue for Prescott Valley Charter School, a free K-9 public school in Arizona that is financing an expansion with social bonds issued through the Maricopa County Industrial Development Authority. The whole muni slate is expected to total $7 billion and it is heavy with deals for institutions of higher education including Harvard, Villanova and the University of California. Potential market movers include six Treasury auctions, appearances by Fed Chair Jay Powell before the House and Senate Banking Committees, remarks made by six other Fed speakers, and economic data releases including jobs, unemployment, job openings, consumer credit, the Beige Book, inventories and trade. Quarterly corporate earnings will be reported by Kroger, Costco, Gap, Nordstrom and Campbell Soup. The President will report on his priorities in Thursday’s State of the Union address. Traders are closely monitoring progress with government funding coming up against another Friday midnight deadline. All eyes are on the extraordinary rallies underway in Bitcoin and gold, largely propelled by the news that our national debt is now increasing by $1 trillion every 100 days. And, of course, we have voters participating in the 19 primaries and caucuses being held on Tuesday, Wednesday and Friday.
Smart Choices
Choices matter more than ever this year, whether they involve school enrollment, home sales, land acquisition, relocation, affiliation or merger, expansion or repositioning, diversification of investments, the timing and method of market entry, or the best candidates for public office. Choose wisely.