By Gayl Mileszko
Market Commentary
Us Versus Them
All of a sudden, a new narrative on the battle between the generations is circulating. Perhaps it is inevitable, given our changing demographics, staggering debt, and K-shaped economy. But there is an ugly meme developing. It is likely to continue to grow and could potentially divide the nation in a way that will relegate the partisan politics of today to the dustbin. In the past two weeks, we have seen the growing divide laid bare in New York Times, The Atlantic, and Harper’s magazine: intergenerational inequality between old and young is accelerating, and the old tyrants need to be reined in. The contention is that there are too many seniors in public office, they are dominating our elections, they hold 72% of America’s wealth, they are staying in the workforce too long, they monopolize housing, they do not have the same stake in building a better world for the future, and they let long-¬term problems fester and worsen.
The Color of Money
Some academics, political commentators, activists, and disgruntled writers paint a picture of the two worlds: the “haves,” dominated by greedy Boomers, and the rest, the “won’t-haves,” comprised of everyone else from Gen X to the Millennials, the Zoomers, Gen Alpha, and our latest Gen Beta. We are told that America, which once stood for youth and energy, is now a gerontocratic society, a static domain for hoarding seniors. Younger Americans see their interests disregarded, their prospects for advancement degraded, and their taxes providing seniors with six to seven federal dollars for every one that goes to children. An “oligarchy of old people” with too much political and economic power is said to be ruling American life, causing our system to collapse under the weight of the inequality and injustice. Instead of placing a focus on the need to find viable ways to lower the costs of food, housing, and healthcare, it is easier for some to say: “Boomers have ruined everything,” and “The color of money has turned gray.”
The Great Divides
Complaints about how hard it is to find a job, put food on the table, raise a family while caring for elders, and buying a home are not new. Every generation faces its own challenges. Those who lived through the Depression and WWII. Those who lived through Vietnam, the civil rights movement, stagflation and 18.63% mortgage rates, the Cold War, 9/11, the Great Recession, the pandemic. What has changed are the demographics, including lifespan. The U.S. population has doubled since 1950, with the percentage of those over aged 65 rising from 8% to nearly 20%. There has also been a significant increase in American life expectancy: from 68 years to more than 79 years today. We now have better medical practices and technologies along with a healthy focus on wellness such that we soon may well live into our hundreds. So, it is not altogether surprising that arguments are being made for anti-gerontocratic reforms: reinstitute mandatory retirement, place a progressive tax on older homeowners, incentivize older people to transfer wealth to their children before they die, cut Social Security and Medicare so that more social services can go to struggling young families. It may well be that the only real divide here is between the rich, the middle, and the poor. But cultural warfare only exacerbates the problems. We clearly need leaders who can help us figure out how to best treat each other going forward.
Shifting Demographics and Demand
The macro issues are vexing, no less so at the micro level. K-12 school enrollment has declined by 2.3%, or 1.18 million students, in the U.S. over the past five years, and a further decline of 5.5% is projected by 2031, equal to 2.7 million fewer students in school buildings. But charter schools are seeing continued growth; there are approximately four million students currently enrolled and that number is expected to increase by as much as one million by 2030. At the other end of the age spectrum, the population of those over the age of 80 is expected to grow by 4 million over the next 5 years. Statistics show that turning 80 is a milestone that prompts many singles or couples to seek senior housing solutions. More than 560,000 new senior housing units will be required to meet projected demand by 2030, and we are simply not working fast enough to provide that supply. We have been following the debate underway at the local level in New York, Ohio, Massachusetts, Maine, Arizona, and Pennsylvania over what to do with empty school buildings, closed for many years and about to be closed due to declining enrollment, dissatisfaction with old curricula, and budgetary pressures. As just one example of the real-world tradeoffs being discussed, the question is should they sell or give these facilities to public charter schools that are seeing increasing enrollment and need additional space? Or should they convert them to affordable senior housing where there is explosive demand and strong policy and developer interest? As has happened in the development of popular university-based retirement communities and charter schools housed on senior living campuses, no doubt we can work to meet both needs.
Global Conflicts
The U.S. is not the only country facing significant population shifts. We are also engaged in some historically unusual “Us versus Them” situations overseas. The Trump Administration has upset some longstanding relationships and with allies including the NATO nations in the course of the conflicts in Ukraine and Iran. We have borne the brunt of the burden of ridding Iran of its nuclear aspirations and terrorist support but find it hard to believe that other nations more dependent on oil and shipments through the Strait of Hormuz have not stepped up. The financial markets have had some pullbacks over the course of the last 68 days but have generally been optimistic about a quick end to the war and restoration of shipping normality. There is no doubt that many are underestimating the impacts on supply and inflation. In our intense fascination with AI, many are overlooking the still all-too-real issue of tariffs, deficit spending, and debt both on the federal, global, and personal fronts. It is not likely that we will see anything resembling normal in oil, gas, and food prices or in our diplomatic relations for some time to come.
Federal Reserve Yeas, Nays and Jay
Last week, markets took a quick pause to hear Jay Powell in his last press conference as Federal Reserve chair. No traders expected the monetary policy committee to cut rates, so attention was given to his announced plans to remain on the Board of Governors until that ill-considered investigation into renovation cost overruns is over and done. The four dissents, including three over policy language, were the most since October 1992 and raised a few eyebrows from Fed -watchers. But investors are now braced for an independent Fed that is more, well, independent. Kevin Warsh, likely to be confirmed by the Senate next week, has not been shy about expressing his individual opinions and that will likely free up other voters to disagree with the Chair much more openly than has been the longstanding tradition. No doubt the prediction markets will start dealing in dissents, but there could be an awful lot of disruption if the new leader reduces the number of meetings, pressers and/or publications going forward. It will be an interesting start to the term for the 17th Fed leader, if he is cleared to take the seat on June 16.
Market Movers This Week: Jobs
The attention of the world is on the Iran peace talks which have seen many starts and stops and will likely see more until Iran has lost its last drone or undersea mine. Markets continue to anticipate an agreement, an end to the war, a stable presence of U.S. troops in Europe and the global hotspots, so they have shaken off most intraday drama. Stocks are off to record highs on corporate earnings and expectations for the AI revolution. A selloff is overdue, whether related to oil prices and other high inflation, weakening jobs data, new rate hike signals, or new distress in the airline, manufacturing, or consumer sectors. Little about what is happening in the Strait of Hormuz, or the redistricting/gerrymandering maneuvering at home is having an impact. Congress is out of session this week so nothing more about the War Powers Act has been resolved. Futures trading shows no expectation for a rate cut until December 2027 but some increasing odds for a rate hike. Investors will focus on corporate earnings from big names like Disney, Uber, and McDonald’s as well as on the 6 Treasury auctions and 7 Fed speakers scheduled. Key economic data includes job openings, new home sales, productivity, construction, consumer sentiment, and Treasury’s borrowing schedule.
Investing World: Diving In or Standing By
Stock indices are posting strong gains so far this year, but many investors are hesitant to participate in a market recently described by Warren Buffet as a “casino” with prices for an awful lot of things “silly.” The company he founded, Berkshire Hathaway, is holding $397 billion in cash, mostly U.S. Treasury bills, and has been a net seller of equities for fourteen straight quarters. The CNN Fear and Greed Index shows sentiment firmly in the “Greed” category but money market funds, while off the record peak high, still exceed $7.6 trillion. Amid all this uncertainty, municipal bonds have been remarkably resilient, offering steady coupons for projects invested in essential public infrastructure for which the need continues to grow.
Municipal Market Performance: Geopolitics Not Holding Borrowers Back
April was a fantastic month for municipal bonds, reportedly the best since 2014. Both the investment grade and high yield indices had returns up about 1.10% on the month, beating taxable munis, treasuries, and corporates. CreditSights reports that $4.71 billion of net money was added to municipal fund assets, with $866 million coming into mutual funds and $3.84 billion into muni ETFs. New issue volume totaled $47.6 billion, with a 7.3% increase in new money and a rise of 16.9% in refundings. Issuance in 2026 now totals $184.5 billion, a new record high. We know firsthand that borrowers are not holding back out of fear for geopolitical uncertainty or current rates. We have seen seventeen straight months of above average issuance, with $10 billion coming last week, when we saw the Colorado Educational and Cultural Facilities Authority bring a $44 million Ba1 rated financing for Monument Academy structured with a 2036 term bond priced at 4.375% to yield 4.625%. In the senior living sector, the Authority also had a $41.2 million BBB+ rated transaction for Christian Living Communities that featured a 2037 maturity priced with a coupon of 5.00% to yield 3.83%. The California Health Facilities Financing Authority placed a $77.1 million non-rated deal for Valley Presbyterian Hospital in Los Angeles that included a 2051 maturity priced at 5.75% to yield 5.97%.
Tax-Exempt Deals Featured This Week
HJ Sims is in the market with a $222.4 million non-rated financing for Senior Dreams Foundation on behalf of Endeavor Catalina Foothills, a new 177-unit rental senior living community on 21 acres coming to Tucson. Bonds are to be issued through the Tucson Industrial Development Authority. Please contact your HJ Sims representative for more information on this as well as other exclusive offerings.
Most Rates Lower Today Versus Last April
Year-over-year, AAA muni general obligation bond yields are down from one year ago: the 2-year at 2.47% is lower by 45 basis points, the 10-year at 2.96% is down 38 basis points, and even the 30 -year at 4.33% has fallen by 5 basis points. It is now May, where we typically see lighter volume but the start of larger reinvestment flows. $20 billion of principal and interest hit investor accounts on May 1 and we expect another $15.2 billion later this month. We expect that fundamental factors, together with attractive yields, will continue to attract buyers seeking to invest in their communities and creditworthy schools, hospitals, senior living facilities, and affordable student, neighborhood, and workforce housing projects.
Kudos to Our Nurses, Teachers, and Small Businesses: We Are On Your Side
This week is National Nurses Week, National Teacher’s Week, and National Small Business Week. National Charter School Week begins on May 10. HJ Sims sends “High Fives” to our nurses, our teachers, our local small businesses, charter schools, and all of the owners, managers, staff, volunteers, parents, and all those that they serve. We appreciate all that they do to keep us, our kids, our seniors, families, and communities healthy and thriving today and every day. Of critical value to us are our clients: both those who manage the financings we bring to market and our investors. We are proud to partner with all of you. When you work with our professionals, there is no “us versus them” — only financings that are partnered right, structured right, financed right, and executed right. Reach out this week to learn more: https://hjsims.com/.