By Gayl Mileszko
Market Commentary
Name That Disorder
Words that describe the current financial markets: flighty, desultory, irresolute, helter-skelter. If there were such a thing as a quadipolar disorder, stock traders would have it. Equity indices have bounced up and down like an electrified ping pong ball this year. So far in April, they have been on an upward climb with returns now back in positive territory. But traders cannot hold onto a strategy for long. This week, the focus has shifted between the geopolitical turmoil, the Kevin Warsh confirmation hearings, economic data releases, and quarterly earnings calls, all screaming for priority attention. Alas, few on Wall Street are very good at multi-tasking. Some over-react to a single tweet. Many just overlook the nasty news; they say: Buy the Dip, You Only Live Once, Don’t Miss Out. Still others tend to just let loose the robots, take human emotion and personal bias out of the mix, and allow buy-sell-hold decisions to be controlled by scrolling headlines and momentum from the herd.
Scattershots
You have to feel sorry for any poor schlub in a Capitol Hill hearing room sitting alone at a table facing a semicircular firing squad of elected officials making rapid-fire attempts at gotchas, and photojournalists documenting every grimace and bead of sweat. The days of polite back and forth questioning ended long ago with the John Dean and Oliver North interrogations. A cadre of thick-skinned survivors, lawyers and public relations types now get paid a pretty penny to coach those about to sit in the spotlight on what to say, how to say it, and when to sidestep. It was Kevin Warsh’s turn on Tuesday in the Senate Banking Committee hearing room where, over the course of two hours, he was called a sock puppet and announced plans to divest virtually all his financial assets. We heard the nominee for Fed Chair say that the President has not asked him to lower rates, that he plans to measure inflation better, trim the Fed balance sheet, change how the Fed communicates with the public, and work with the Executive Branch on issues not directly related to monetary policy. He had to field questions on everything from climate change and digital assets to Seinfeld and Jeffery Epstein.
Helter Skelter in Iran and the Middle East
Investors, still recovering from the trauma of tax filing season, have shaken off much of the extreme fear over a prolonged war that dominated trading for weeks. Despite the fact that no peace accord is imminent, there is optimism, however naïve, that peace talks wrap up soon and everything goes back to normal, setting the stage for another huge rally. The CNN Fear and Greed Index has moved firmly into Greed sentiment. The ceasefire has been extended for a few days but a battle over control of the Strait of Hormuz continues. China denies providing lethal war supplies to Iran, but it appears that they are working to expand the war, drain our munitions, and keep us distracted.
Topsy-Turvy at Home
Eyes turn to the U.S. Congress and whether or not they will authorize further military action in Iran by May 1, when the president’s 60-day powers expire. This week, with executive powers quashed by the Supreme Court, the Treasury will start collecting applications from some 330,000 companies looking for refunds plus interest on $166 billion of tariffs previously collected. Domestic oil and gas production provides a nice buffer from shocks like the one that sent inflation skyrocketing in the 1970s, but there is no doubt that inflation remains an ongoing problem. Using a new Vicious Cycle Index, the chief economist at Moody’s Analytics contends that our economy is in the early stages of recession, but retail sales and pending home sales are beating expectations. At this writing, the Nasdaq has hit a new high and the S&P 500 is close to another record. The 20-year Treasury auction saw solid demand, gold prices are up, mortgage applications increased 7.9% in the last week, and the dollar has moved higher as have 10-year Treasury yields.
Last Week in the Municipal Market
Amid all the ups and downs in larger markets, municipal bonds soldier on. Last week, the new issue calendar totaled $17.9 billion, and HJ Sims led the market in senior living offerings. We brought a $80.18 million transaction for LifeSpace Communities through the Palm Beach County Health Facilities Authority structured with a 2061 term bond priced at par to yield 5.625%. We also had a $17.6 million BBB rated financing for LifeSpace that came through the Iowa Finance Authority, featuring a final maturity in 2040 that priced at 5.00% to yield 4.60%. In the charter school sector, Bainbridge and Decatur County, Georgia sold $38.4 million of Ba3 rated bonds for Spring Creek Charter Academy with the final maturity in 2066 priced with a coupon of 6.75% to yield 7.00%. The Build NYC Resource Corporation privately placed $37.4 million of non-rated bonds for Friends of Prospect Schools; the 2031 term bonds were priced at par to yield 4.50%. In the student housing space, the Maryland Economic Development Authority issued $129.3 million of AA rated Assured Guaranty enhanced bonds for Morgan State University; the deal included a 2065 term bond priced at 4.75% to yield 4.91%.
HJ Sims Again Leads with Senior Living Offerings
This week the slate totals $13 billion and HJ Sims is in the market for Bonesta, a new nonprofit owner-operator, with a $162.6 million financing to acquire six senior living and care communities with 360 units in Arizona and Washington. $102.9 million of non-rated bonds are being issued through the Industrial Development Authority of Maricopa, Arizona for skilled nursing facilities in Mesa, North Scottsdale, and Surprise; and $59.7 million of non-rated bonds are coming through the Washington State Housing Finance Commission for independent living, assisted living and skilled nursing communities in Silverdale. We are also bringing a $55.5 expansion million financing for Porter’s Neck Village, a BBB rated Type B life plan community in Wilmington, North Carolina. Bond proceeds will add a net of 67 independent living units to the 222 unit campus. Among other senior living deals, the City of Blain, Minnesota has a $6.5 million subordinate financing for Catholic Eldercare. In the charter school space, the Sierra Vista Industrial Development Authority has an $81.2 million non-rated financing for American Leadership Academy Johnston. The Maricopa Industrial Development Authority is bringing a $46.6 million BBB-minus rated transaction for Legacy Traditional Schools. And the Colorado Educational and Cultural Facilities Authority has an $8.1 million Aa3 rated sale for Parker Core Knowledge Charter School.
For more information on our calendar of new issues, our municipal bond offerings, our market outlook, and tailored strategies to provide an outcome of income, please contact your HJ Sims representative.