By Gayl Mileszko
Market Commentary
Rinse and Repeat
The ceasefire, such as it was, appears to have ended and fighting has intensified again in the Strait of Hormuz and across the Middle East. Wall Street hopes for quick diplomatic success have again been temporarily dashed. The conflict is now in its 13th week but Secretary of State Rubio in testimony before the Senate Foreign Relations Committee this week declared that “the war is over.” Unfortunately, not everyone in Iran got the memo. Missiles are still flying, drones continue to attack, new attempts are being made to breach the U.S. blockade. Some 1,600 ships and 20,000 sailors are stranded in the Persian Gulf, trapped on the wrong side of the Strait. Further away, Iran has targeted strikes of civilian and military buildings in Arab nations hosting U.S troops –Oman, Qatar, the UAE, Kuwait, Saudi Arabia, Bahrain, and even Jordan, 1500 miles away. Around the world, gas and food prices are rising and will continue to rise for quite some time after the Strait eventually re-opens. President Trump repeatedly reports that talks continue at a rapid pace, that the war will end soon, that he is in no hurry as time is on our side.
Focus on AI and Central Banks
The stock market is almost entirely focused on artificial intelligence. AI stocks have been experiencing a melt-up, and there is so much excitement over the forthcoming SpaceX, OpenAI, and Anthropic initial public offerings that almost nothing else matters to many investors. In the meantime, central banks from southeast Asia and Africa Northern Europe to are beginning to raise key lending rates, and the trend should be alarming to those borrowing in early stage, capital-intensive AI projects. Markets are watching the next banks in the batter’s box: India, South Korea, Japan, Canada, England, the ECB, and the U.S. Not much attention is yet being paid to the major shift in reserves underway: gold at 27% has now overtaken our U.S. Treasuries at 25% as the top global reserve asset.
Federal Reserve to Hold Rates Steady
Our central bank meets in two weeks. The new Chair, Kevin Warsh, will preside over a group of voting members scratching their heads over what to do next. Virtually no one expects a rate change in June, but the new dot plot will reveal the range of forward-looking views. Future trading indicates a high probability of a quarter point hike by December. There are two wild cards, either of which could rattle markets; unexpected jobs or inflation data, and a Supreme Court ruling that some contend would greatly damage the perception of Fed independence. This decision may come as early as this week on the extent of presidential removal powers in the case of a Fed Governor (Lisa Cook) and an independent agency head (FTC commissioner Rebecca Slaughter.
Jekyll and Hyde Economy
There are several significant economic releases due out this week. Non-farm payrolls and unemployment on Friday will garner the most attention. But neither are expected to startle markets. Traders are looking for another increase (85,000) in new jobs with no change in unemployment at 4.3%. Other key data includes the Beige Book, durable goods, and factory orders. Several reports earlier this week surprised to the upside: ISM manufacturing at a 4-year high, job openings at a nearly two-year high, and construction spending up by 0.8%. Wall Street chieftains continue to point to a strong, resilient economy with a record high stock market, strong earnings growth, rising capital spending, and high consumer spending. However, they note that resilience is not endless. The big boom periods in 1972, 1986, 2000 and 2007 came just ahead of major market shocks. Consumer sentiment sits at a record low, loan delinquencies are rising, new tariffs are being rolled, energy prices are spiking, business inventories are low, mortgage rates and rents are elevated, healthcare remains a source of financial risk, household debt is at a new high, and growth remains reliant upon high levels of federal spending. There is no doubt that those in the top 1% of income brackets, explosive AI investment, and overvalued assets valuations are masking much of the weakness experienced by middle income and lower income Americans. On top of growing national debt and large deficits, the K-shaped economy is raising recession probabilities.
Attractive Municipal Bond Niche
For those sitting on $7.78 trillion in money market funds, nervous about volatility stemming from uncertainty over fiscal and monetary policy uncertainty, municipal bonds have become an increasingly attractive investment. The federal, and in many cases, state tax-exemptions are a draw on their own. But the solid credit profiles of essential purpose borrowers, relatively reliable market liquidity and low default rates have lured new allocations into muni SMAs and funds. CreditSights reports that funds have taken in a net of $45.4 billion so far this year, split nearly 50-50 between conventional mutual funds and exchange traded funds. Portfolio managers and individual investors have enjoyed a large and wide variety of new issues. During the first five months of 2026, issuance has totaled $235 billion and is on pace for another record year. In many prior periods, heavy volume would depress the market, increase dealer inventories, and cause prices to drop. But demand has been steady, fueled in large part by significant reinvestment cash from principal and interest payments. This summer will see the highest three months of payments: $54.6 billion in June, $49.4 billion in July, and $47.9 billion in August, so this is a good time to reach out to your HJ Sims representative to discuss options for reinvestment.
HJ Sims in the Market
Last week, HJ Sims brought a $16 million financing for Scholars Academy Sunnyslope, a K-8 charter school in Phoenix. The non-rated transaction came through the Arizona Industrial Development Authority and was structured with 2065 term bonds that priced at 7.00% to yield 7.25%. Among other high yield deals on the $9.8 billion calendar, the Lee County Industrial Development Authority issued $86.9 million of BB+ rated bonds for Cypress Cove at Healthpark Florida in Fort Myers, structured with 2061 term bonds priced at 6.00% at 5.87%. The Ohio Housing Finance Agency sold $29.5 million of non-rated bonds for the Ashford at Central Park assisted living community in Heath featuring a 2046 final maturity priced at 6.25% to yield 6.15%. The Huntsville Health Care Authority privately placed $41.7 million of 7.125% non-rated bonds due in 2053 for Huntsville Hospital Health System. And in the charter school sector, the Miami Dade Industrial Development Authority issued $58.8 million of BBB rated bonds for Mater Academy Foundation priced at par to yield 5.375%.
Another Big Calendar, Plenty of Investment Opportunities
This week, the first in June and one of the last in the second quarter, the negotiated calendar is expected to exceed $19 billion including two charter school financings: a $17.7 million AA state credit enhanced deal for George Washington Academy in St. George, Utah, and a $26.8 million Ba1 offering for the Great Hearts Texas charter school network. The slate also features a $109.5 million A-minus rated sale for Heron’s Key retirement community in Gig Harbor, Washington. For more information about municipal bond issues that we have underwritten and placed this year, and for our current offerings in the municipal and corporate bond markets, please contact your HJ Sims representative. Our banking team is dedicated to structuring and executing the best financings for our clients, and our sales and trading teams are committed to finding the best outcome of income for our investors.