By Gayl Mileszko
Market Commentary
Silver Bells Ring
Silver bells are ringing this holiday season but perhaps no more loudly than on the COMEX, the world’s largest silver futures market. Back in September, the price of silver started to surpass that of a barrel of oil. With one exception, that has not happened since January 1980 when the Hunt Brothers tried to corner the market. The recent anomaly occurred in April 2020 when oil futures shocked the markets by going negative (-$37.63) due to the lack of working storage capacity when global demand plummeted in the early days of the pandemic. But today, West Texas Intermediate oil is trading at $55.20 a barrel and Brent crude at $58.93. One troy ounce of silver, equivalent to 31.1 grams or 0.06 pounds, is now going for $63.53.
Above All This Bustle
With this year’s big increase in U.S. production, there is an excess supply of oil on the market. That sure makes most of us commuters happy: the average price of a gallon of gasoline in the U.S. has dropped to $2.90. At the same time, there has been an explosive demand for silver from a wide range of buyers: not just the traditional jewelers, photographers, and dentists, but also more diverse sectors: water purifiers, manufacturers of solar panels, medical supplies, tableware, electric vehicles and, of course, AI accelerators. This precious metal, known by the chemical symbol Ag, has seen its value skyrocket from $28.90 at the start of the year.
Meeting Smile after Smile
Silver is not the only commodity that has made investors smile this year. Copper is up 31%. Gold prices have risen 65%. Platinum is 93% higher. And almost all the major stock, bond and commodity indices are reporting positive returns for 2025. On the equity side, we reflect upon a strong year: as of the close last Friday, the S&P 500 is up 17.5%, the Dow Industrials are higher by 15.84% and the Nasdaq has gained 20.9%. In the bond markets, major indices show that convertibles have gained 19.7%, high yield corporates are up 7.83%, mortgage-backed by 7.72%, investment grade corporates by 7.35%, U.S. Treasuries by 5.84%, and preferreds by 4.80%.
Santa’s Big Scene
The municipal bond market has delivered an abundance of gifts this year. Issuance year-to-date is at $558.5 billion, up 13.4% year-over-year, according to LSEG Lipper. Mutual funds, money market funds, insurance companies, and banks scooped up almost all the tax-exempt, taxable, and corporate CUSIPs offered. A few dozen financings were shelved or postponed, awaiting tighter security provisions or other changes sought by lenders. These included some biotech, charter school, senior living, hotel, and workforce housing deals. The pace of issuance picked up early in the year when tax-exemption got tossed into the mix of possible One Big Beautiful Bill pay-fors and borrowers advanced hundreds of deals in order to be “grandfathered.” But the threat passed, as it does during the debate on every tax bill, and it brought tax-exempt income top of mind for many retail investors. Separately managed account and exchange traded fund business ballooned this year. Cerulli estimates that total SMA assets exceed $3.8 trillion this year. SMA municipal fixed income assets have grown from $100 billion in 2008 to an estimated 1Q25 total of $1.2 trillion Household buying – direct as well as through funds — fueled many sales this year.
Shoppers Rush Home with Their Treasures
Munis are a $4.3 trillion market, with $1.97 trillion held by the household sector. Muni bond mutual funds hold $833 billion of assets, ETFs hold $183 billion, and money market funds $144.7 billion. Double tax-exemption, attractive taxable equivalent yields and the relative safety of this asset class amid volatile markets, soaring and selling off due to Fed rate uncertainty, fears of an AI bubble, geopolitical conflict, and a 43-day federal government shutdown, among other factors, bolstered retail demand. Having $511 billion of principal and interest payments available for reinvestment also certainly helped. Taxable municipal index returns are up 7.01% year-to-date. Investment grade tax-exempts have gained 3.54%, and high yield munis are higher by 2.94%. Tax-exempt income and solid returns, good liquidity, and lots of diversity, all gifts that keep on giving. As we see in the economy as a whole, the gap between strong and weak credits, the safe and risky sectors, continues to grow. Diversification, research, and surveillance is called for. But default rates as a whole remain relatively low versus corporate bonds, and the class as a whole continues to prove quite resilient. Last week, the City of Oakdale, Minnesota issued $21.1 million of non-rated refunding bonds for Ebenezer York Assisted Living and Oak Meadows, including 30-year term bonds priced at par to yield 5.75%. The Build NYC Resource Corporation came to market with a $95.8 million non-rated deal for Renaissance Charter School in Elmhurst that had a 2060 maturity pried at 5.75% to yield 5.86%. This week, the City of Wichita sold $32.4 million of non-rated revenue bonds for Larksfield Place featuring 2060 term bonds priced at 6.75% to yield 6.64%, and the Georgia Higher Education Facilities Authority issued $230 million of AA-minus rated taxable student housing bonds for the University System of Georgia structured with a final maturity in 2046 that priced with a 5.764% coupon at par.
Blink of Bright Red and Green
As expected, the Federal Reserve’s Open Market Committee gave a green light and reduced the target rate last week by 25 basis points, its third reduction of the year. Three voters dissented and some pundits saw this as a sign that, going forward, the choir will not likely all sing the same song together. Some Fed followers have concerns about the independence of the institution given the membership changes coming next year. Quite a few eyebrows were raised over the bank’s announcement on balance sheet expansion after just having allowed $2.4 trillion to roll off. There were many new questions on the accuracy of the jobs data, tariff impacts, sticky inflation, and why so many regional bank presidents are looking to hold rates. Many traders reading the tea leaves see no more rate cuts until the second half of next year, although future prices reflect a good probability of additional reductions in April and July. If red lights flash in the next rounds of data and there are no cuts or few cuts, that would not be good news for home shoppers and credit card holders. The national average being offered for new credit cards is 19.83%. The average 30-year fixed mortgage rate is 6.22%, and Realtor.com forecasts an average of 6.3% in 2026. The average 60-month new car loan rate is 7.05%. And bond yields? Well, the Fed Funds rate has declined 175 bps since the central bank’s easing campaign started. But longer-term yields as measured by the 10-year Treasury have not fallen. Instead, they have risen from 3.70% to 4.14%. Some attribute this to expectations for higher inflation, others point to rate trends overseas. Analysts also remind us that prices were quite elevated back when the easing cycle started and that, every so often, investors take a look at the staggering levels of U.S. and worry that the appetite for the dollar and U.S. Treasury could wane.
Hear the Snow Crunch
NOAA’s National Snow Analyses show that approximately 30.7% of states have snow on the ground today. Winter starts next week but much of the country is shivering, with temperatures below freezing. With the holidays upon us, we have good reason to huddle and enjoy the company of family and friends indoors. The trading year comes to a virtual close this week. Volumes will be light, so some moves may be magnified. And there is also always the chance that breaking news on Russia, Venezuela, crypto, or some breed of black swan will trigger unusual robo and algorithmic program trading and stir up all kinds of new trouble. Our offices will be staffed to help meet your year-end needs but we hope that these next two weeks will be joyful and peaceful ones for all. Enjoy singing “Silver Bells” and all the great songs of the season; studies show that singing in groups helps to relieve stress, stimulate our brains, boost our immune functions and draw us closer together. We will be back on this page in early January to sing about our many exciting plans and products. Until then, we send warm holiday greetings and our best wishes for a new year of good health and prosperity.