By Gayl Mileszko
Market Commentary
The Giant Chessboard
Flowers and rabbits that talk. Potions that make a person shrink. Cakes that make you grow. A broken clock telling time. Flamingoes used as croquet mallets. Un-birthday presents. An endless tea party. Our world structured as a giant chessboard. These are some of the whimsical, nonsensical things that Lewis Carroll’s heroine, Alice, finds when she falls down a rabbit hole and steps through a mirror to enter topsy-turvy worlds where logic and rules are reversed. A queen advises her to practice believing in the fantastical noting that, at Alice’s age, she believed as many as six impossible things before breakfast.
Possible and Impossible
The world today feels topsy-turvy. The order that has been in place for several generations is being upended. Actions that seemed impossible just one year ago are being taken. President Trump is working to ban institutional investors from buying single family homes and impose a 10% cap on credit card interest rates. He is trying to eliminate at least seven independent agencies and has partially dismantled the Department of Education. The U.S. military has bombed Iran nuclear facilities, Iraq, Syria, Yemen, Nigeria and Somalia. We brokered the Israel-Hamas and Thailand-Cambodia ceasefire and peace frameworks. The Venezuelan president was seized from his home and flown to a New York jail to face narco-terrorism charges, and the U.S. is asserting control over that nation’s governance and oil reserves. The Chair of the Federal Reserve, himself the subject of a criminal investigation, is in the audience at the Supreme Court as justices hear oral arguments in a case testing the extent of the power of the president to remove a central bank governor. Markets and trading partners around the world await another decision by the Supreme Court on the legality of emergency tariffs in effect — and perhaps many of the new ones threatened.
Bold Moves in Davos
Government and business leaders from around the globe are gathering in Davos Switzerland this week to address the disruption and tensions – not involving Russia or Ukraine, China, Iran or North Korea, but Greenland, a nation of strategic value with only 57,000 people but vast reserves of rare earth minerals. The theme for this year’s World Economic Forum is “A Spirit of Dialogue” but financial markets have been rattled by one-sided talk of new tariffs on goods from countries that oppose President Trump’s plan to for the U.S. to buy the planet’s largest island or turn down his invitation to pay $1 billion and join his new Board of Peace. The volatility that has been missing in year-to-date trading so far returned in spades as a result of all the 3D chess in global politics. Wall Street, scarred by its overreaction to the Liberation Day tariffs, thought that they had President Trump’s negotiating style all figured out and have since pretty much shrugged off most of the unconventional White House strategies and shockwaves. But headlines from Washington, Davos, and Nuuk quickly drove investors to the havens of silver and gold. In trades lumped together and labeled as “Sell America”, a major rout happened, impacting U.S. stocks, Treasury bonds, and the U.S. Dollar Index on Tuesday. Worries soon dissipated with what the Wall Street Journal describes as the President’s “head-spinning U-Turn” and stocks and bonds returned to rally mode as of this writing on Wednesday.
No Quiet Moves in 2026
We are not even one full month into the new year but we can tell that 2026 is going to be very noisy. We expect a lot of clapping for the expert panelists and engaging keynote speakers at our Late Winter Conference next month in Fort Myers. There will be wild cheering for athletes in Milan’s Winter Olympics and the FIFA World Cup. There will be some intense backslapping when another lengthy federal government shutdown is somehow avoided. The White House, Christiansborg Palace, and Naalakkersuisut will all roar with national pride when a framework for new military bases, security guarantees, and minerals in Greenland is eventually announced, quietly affording the U.S. a “virtual” ownership interest. Wall Street will heave a sigh of relief when the tariff disputes are resolved, the Powell investigation is dropped, and a new Fed Chair is confirmed. Americans will whoop loudly during the 250th anniversary celebrations. Boisterous crowds will greet their chosen candidates for office in the campaign season leading up to the November mid-term elections and there will be quite a bit of wailing over losses and upsets.
Opening Moves in High Yield
In the municipal bond market, participants recognize the many, many unmet financing needs and applaud new senior living, charter school, and dorm construction projects: start-ups, expansions, and renovations.
• Senior Living: The first start-up continuing care retirement community to come to market this year, and the very first life plan community to be located in New York City, is River’s Edge, a luxury entrance fee community to be located on a 32-acre campus adjacent to the Hebrew Home at Riverdale overlooking the Hudson River in the Riverdale Section of the Bronx. HJ Sims is a co-manager on the $634 million non-rated transaction, scheduled to come through the Build NYC Resource Corporation in the next few weeks. Bonds will finance the construction of 260 independent living apartments and various amenities in an 11-story building, 39 months of capitalized interest, and fill debt service reserve funds. For more information on this triple tax-exempt New York bond issue, please contact your HJ Sims representative.
• Charter Schools: The first charter school expansion financing of 2026 is a $9.8 million non-rated bond issue for Metro Deaf School, a Birth-3, PreK, and K-12 school with 177 students coming next week through the Saint Paul Housing and Redevelopment Authority. This school opened in the fall of 1993, the second charter school in the state and the first deaf-focused charter school in the country. The school building is owned by 1House2Hands, Inc. in Saint Paul, Minnesota, the obligor on the bonds which will finance school improvements, including the construction of an addition, pay approximately 10 months of capitalized interest, and fund a debt service reserve fund. This school is authorized by the University of St. Thomas and has historically had 100% special education students. Bonds are issued on parity with $9.55 million of outstanding Series 2018A Bonds and a $4.47 million 2025 Port Authority Note.
• Hospitals: The first non-rated hospital deal so far is a $50 million non-rated Hamilton County, Ohio private placement for TriHealth that priced last week. The 30-year term bonds came in $100,000 denominations, callable in one year at par, and were priced at par to yield 6.875%. Also, the $100 million nonrated Illinois Finance Authority sale for Endeavor Health Clinical Operations in the Chicagoland area which sold on January 15 had 30-year bonds priced at par to yield 7.00%.
• Student Housing: The first dorm deal of the year, for Florida International University, is scheduled for next week, when the Miami Dade Industrial Development Authority plans a $249.6 million BB+ rated deal for PRG CASA Properties to acquire land in Sweetwater and construct an 820-bed dorm.
The Big Muni Checkerboard
This week’s $11 billion municipal calendar is being priced against a backdrop which includes the media-fueled frenzy over Greenland, protests and riots in Minnesota, protests and crackdowns in Iran, demonstrations in Cuba, potential Supreme Court bombshells, threats of federal funding cuts to sanctuary cities, Japanese bond yields, the Brightline Florida’s interest payment “deferral”, New York City’s $12 billion budget gap, the countdowns to the next government funding bill and Federal Open Market Committee meeting, Treasury auctions, GDP, inflation and housing data, and corporate earnings. We note that investor demand from institutional and retail buyers remains robust for most all U.S. asset classes, and that so far this year high yield munis are the best fixed income performers outside of preferreds and convertibles. But we know that some worry about overpriced securities – bonds and stocks and commodities. Your HJ Sims representative welcomes your inquiries, comments and feedback, your request for insight, guidance and execution. And for those borrowers and investors looking forward to a few warm days in a great venue designed to brainstorm, exchange your ideas and best practices, we look forward to seeing you at our 23rd Late Winter Conference in Fort Myers from February 24-26: “Financing Methods and Operating Strategies for Charter Schools and Senior Living.”