By Gayl Mileszko
Toys in the Attic
Fifty years ago this week, the Boston-based rock band that has been performing since 1970 released its iconic album, Toys in the Attic. Aerosmith recorded its nine songs live at Record Plant studio in New York City and their third and best-selling album was released by Columbia Records on April 8, 1975. In addition to the title song, “Sweet Emotion” and “Walk this Way” rocketed up the billboard charts. More than nine million copies of the vinyl records. 8-track tapes, cassettes and compact discs have since been sold and the five-member group, now in their mid- to late 70’s, featured these tunes on worldwide tours for the next five decades. It was their hope that the music made in Toys would be played long after they were gone, that the record would be up there in millions of attics along with all the things that were loved and never to be forgotten. Last August, the band announced that they would retire from touring, but fans across the generations continue to hold out hope for at least one more reunion concert.
Fifty years Ago
1975 was an eventful year. Saigon fell and the Vietnam War ended, Microsoft was founded, President Ford survived two assassination attempts, “Saturday Night Live” premiered, the first digital camera was invented, spacecraft from the U.S. and Soviet Union docked in orbit, three men were sentenced for the Watergate cover-up, Jimmy Hoffa was reported missing, fugitive Patricia Hearst was captured, The Edmund Fitzgerald sank, New York City was bailed out, and daylight savings time was introduced in response to the energy crisis. Fifty years later, we are in the midst of another eventful year, perhaps revolutionary, certainly one not to be forgotten.
Going Crazy
“Toys in the attic” is a phrase sometimes used like “bats in the belfry” to refer to someone going crazy or losing his or her mind. It is being tossed around a lot this past week. Despite having been informed of candidate Trump’s policy proposals and intentions, and hearing the details rolled out since his election, many investors here and abroad are shocked by the actual implementation. The downsizing of the government workforce, the closure of agencies, the claw back of grant funds, the ouster of criminal noncitizens, the executive orders numbering more than 110, all of these have generated cheers from some and led to protests by others. But the “Liberation Day” tariffs imposed in the past week have literally roiled global financial markets and continue to do so.
All Markets Are Functioning But Sentiment Turns on a Tweet
Some analysts remark that it is only Wall Street — not Main Street — that is surprised that President Trump is actively working to keep the promises that got him elected. Yet if stiff tariffs remain in effect for some time, if prices rise significantly and shortages persist, if the economy goes into recession (as Jamie Dimon of JP Morgan Chase sees as a likely outcome of the trade policy turmoil), Main Street is also bound to see disruption. For now, the focus is on traders and investors who loathe uncertainty but find it in nearly every action and reaction on domestic and foreign fronts. Although markets are experiencing levels of volatility unfamiliar since the pandemic, no curbs, or temporary halts in trading have yet been triggered. All markets are functioning. But we are generally seeing less liquidity along with the postponement of bond sales, initial public offerings, leveraged loan deals, and mergers and acquisitions. There is a dash for cash, a new fear of wiping out (FOWO) replacing the decade-long Fear of Missing Out (FOMO). The usual haven, bonds, is not behaving normally this week but experiencing as much pressure as risk assets. Same for crypto; Bitcoin prices have fallen more than 11% this month. Reactions to scrolling headlines — real, fake, speculative – are causing huge market moves and making some investors skittish, others panicked. Traders are bracing for more inflation, wondering if China is dumping Treasuries, if there will be boycotts of our debt, how much hedge fund deleveraging is underway, how much the headline-driven algorithmic trading bots are responsible for the wild price swings. In general, sentiment seems to turns on a dime — or a tweet.
Auctions, Sales and Outflows
This week’s 3-year Treasury auction was weak with unusually low demand from U.S. pension funds and insurance companies. Many eyes are on the outcome of bellwether 10-year and 3-year auctions. In the municipal bond market, new issue volume has been on a record-setting pace, with the MSRB reporting $126 billion of par in the first quarter and $13 billion during the first week of April. Retail participation has led the way, in part due to attractive yields but also out of some concern that the Congress may do away with tax-exemption on future bond issues. Net inflows into municipal bond mutual funds total $5.5 billion so far this year, with $4.06 billion of that total going into high yield funds. Muni exchange traded funds took in almost $1 billion last week alone during the flight to safety, but high yield mutual funds inexplicably saw their first net outflows of 2025, totaling $96 million. On Monday and Tuesday, muni ETFs were socked with more than $641 million of withdrawals and the tax-exempt market saw the worst rout in 30 years. Benchmark index returns fell by almost 3% on Monday alone, the most since at least 1994.
Liquidity
New York City went ahead with its $1.5 billion general obligation sale on Tuesday, but some planned refinancings suddenly became uneconomical and quite a few new issues have been placed on day-to-day status. All the drama and pain come at the same time that households are trying to sell holdings to pay taxes due mid-month, meet margin calls, move into more liquid money market funds, or buy stocks trading at extraordinarily low prices. Trading platforms are being deluged with bids-wanted; on Monday, the Bloomberg platform alone had nearly $2.6 billion of listings. Prices have been extremely volatile and underwriters are challenged to provide price thoughts to borrowers and prospective buyers as they have changed significantly from last week and intraday throughout this week.
“Round and Round” with Data
The usual market-movers – economic data, insights from Federal Reserve officials – are not likely to be top of mind this week. Markets overlooked Friday’s strong jobs data. But there are some key releases on inflation – CPI and PPI — plus minutes from the last Fed meeting, the University of Michigan surveys on sentiment and expectations, and the first of the first quarter corporate earnings are coming out with forecasts for the remainder of the year. Everything is changing so dramatically from hour to hour and day to day, but at this writing, fed futures trading indicates expectations for 25 basis point cuts in June, July, September, and December. The highest yielding Treasury at this writing is the 20-year at 4.94%, followed by the 30-year at 4.89% and the 3-month at 4.33%. The AAA municipal bond benchmarks are changing throughout the day but the 2-year yield is at 3.40%, the 10-year at 3.87%, and the 30-year at 4.82%.
“Walk This Way”
Portfolios have been hit hard this past week and the losses may continue for some time as the markets adjust to the new political and economic realities. Unless we are selling positions, these are paper losses. We see emotion – sweet and otherwise – and uncertainty as inevitably influencing many of us as trade negotiations take place, court cases against Trump Administration are filed and adjudicated over time, the Congress attempts to get a budget resolution in place before the two-week Easter and Passover holidays, and a new tax bill somehow gets passed by the end of the year. We at HJ Sims have no crystal ball, but we do have 90 years of operating history, sometimes involving the “Same Old Song and Dance” market conditions. Students of history will find that this includes some 50 stock market corrections. We have also seen overvaluations and undervaluations in bonds, extraordinarily high rates, and rates artificially suppressed by the Fed. We have senior staff in Washington right now advocating for municipal bonds. We cannot project whether the Fed will step back in to start buying Treasuries to support the bond market and lower rates, or if the bond market will stabilize on its own. In any event, our professionals are always in the hunt for best methods and great bargains at times like this. Your HJ Sims representatives are available to work with you on maximizing your income and navigating the capital markets to help meet your goals and needs in the context of your timing and risk parameters and “Dream On.” Reach out to us this week. As always, we welcome your questions and feedback.