Market Commentary: Profiles

Our local newspapers have begun to publish touching profiles of community members lost to the coronavirus in much the same way as The New York Times featured those lost on 9/11, with a snapshot taken on a happy day and recollections of unique achievements during lives so sadly cut short. This time: veterans, ballplayers, cops, teachers, musicians, transit workers. Tributes to those whose lives will only be celebrated with the gathering of family and friends in days ahead when conditions permit. Plans are also being made for ticker tape parades in cities like New York to honor the doctors, nurses, EMTs, police, fire and other public safety officials who are risking their lives to protect and care for others. Some of those who do not make it to the front pages for acclaim are the millions of family caregivers tending to those battling chronic illnesses as well as the disabled, the elderly and the very young. Unpaid family caregivers are said to be the backbone of our health care system, providing as much as 90% of all home health care for no pay or public honor. This amounts to 30 billion hours for the 44 million Americans, including more than 1.3 million children, who take care of others in need while trying to stay healthy, work, go to school, or look for work. Approximately 12.3 million are sandwiched between aging elders and young children, some for the first time right now, facing challenges and navigating crises with little, if any, outside help, day in and day out.

There are some 15,600 nursing homes and 28,900 residential communities caring for many of our most frail elderly and disabled as well. Some of these facilities, particularly in New Jersey and Massachusetts, have been hit very hard by COVID-19 outbreaks, while others struggle mightily to protect residents and staff, incurring significant, unbudgeted expenses for supplies and labor, trying to manage what at times seems unmanageable. A recent unofficial count found more than 4,000 facilities and 36,500 residents and staff with cases that have been reported to states and counties. These numbers also point to the majority of communities and several million residents that have not been or may not be affected.

Having accurate and timely case information is critical for residents, families, local citizens, policymakers and the industry as a whole. At the federal level, the Centers for Disease Control and Prevention has just started to receive data on COVID-19 cases in long term care facilities under a directive that went out to nursing homes on Sunday from the Centers for Medicare & Medicaid Services. CMS is also finally mandating that facilities notify residents and families of this information. It is hard to believe that this data was not required earlier. But it is hard to believe a lot of the things we are seeing today across the country and around the world. No sector of our economy, no part of our day-to-day lives, has been unaffected by this scourge on the Earth. We applaud those facility managers that are being the most pro-active with residents, families, public health officials, and investors, making timely, regular, and comprehensive disclosures of medical, operational, and financial conditions. The profiles of well-prepared, well-managed, and resourceful communities with a culture of open communication will be long remembered and held as a standard for all others as we face the challenges ahead.

There is no reliable profile of the financial markets right now. We are seeing things never seen before as a result of this virus and the policy chokeholds imposed on our economy. Record unemployment claims. Record low Treasury yields. Negative oil prices. Unprecedented outflows from municipal bond funds. Historic corporate bond issuance. It is hard to know from day today what to expect by the close. But since the start of this month just about everything other than oil is up, buoyed by phased increases of federal stimulus and the active presence of the major central banks who have bought more than five times the amount of assets they did during the Great Recession. It has by no means been a smooth rally but, at this writing, the Dow is up 8%, the S&P 500 9%, the Nasdaq 11%, the Russell 2000 5%, and gold 6%. Bond prices are also up. The 2-year U.S. Treasury yield has fallen 3 basis points to 0.20%. The 10-year yield is down 7 basis points, and the 30-year has dropped 13 basis points to 1.21%. The 10-year Baa corporate bond yield has plunged 36 basis points to 4.24%. In the municipal market, the 2-year AAA general obligation benchmark yield has fallen 21 basis points to 0.85%, the 10-year is down ever more at 26 basis points to 1.07% and the 30-year has dropped 9 basis points to 1.90%. The AA taxable municipal bond, attractive for many retirement accounts, yields 3.14%, down 24 basis points since the start of April trading and well above the comparable AA corporate at 2.55%.

There has been very little municipal new issuance this month, but we are very active in the secondary market for tax-exempts as well as taxables, including corporates. The sheer quantity of bonds being offered in sectors being battered by newspaper headlines make it difficult at times to distinguish the good credits from those that were already struggling and may come under greater stress. Whether it is utilities, hospitals, transit, colleges or senior living — where most of our industry expertise lies — we have the credit analytic capabilities to pick out those bonds which we believe have the most enduring value and offer above average streams of income. We encourage you to contact your HJ Sims advisor to update your investment and risk profiles as well as your capital needs, and exchange views on current market opportunities.