By Gayl Mileszko
Market Commentary
Winning
Bill Parcells better known by players as the Big Tuna, is the only pro football coach to lead four different teams to the playoffs and three to a conference championship. He enjoyed a 19-year career as head coach of the New York Giants, New England Patriots, New York Jets, and Dallas Cowboys, and was the vice president of football operations for the Miami Dolphins. In regular season play, he racked up 172 wins, plus another 11 victories in the post season, including two Super Bowl titles. He is now 84 and his record also reflects 138 NFL losses, most notably Super Bowl XXXI in 1996. He remembers many of these battles on the gridiron and the difference that a single point can make in the battle for victory. As he once put it, “There is winning …. and there is misery.”
Thrill of Victory and Agony of Defeat
In this year’s NFL season, so far every team has suffered at least two losses. On Tuesday, an off-year election day, voters cast their votes for favored candidates and ballot measures, producing a good number of headline wins and an equal number of headline losses. There were gubernatorial races in Virginia and New Jersey, and mayoral races in New York, Atlanta, Cincinnati, Detroit, Jersey City, Pittsburgh, Buffalo and Minneapolis. There were also a number of state supreme court and attorney general seats as well as propositions decided. It is usually the mid-year elections, when all 435 U.S. House seats are up, that pollsters see as a test of presidential popularity. Some see Tuesday’s outcomes as an early temperature check and warning for incumbents. Others find no verifiable national trends, instead simply proof of the Tip O’Neill theory that “All Politics is Local.”
Polls on Congressional Approval Sink as Shutdown Sets New Record
There was only one open congressional seat up for grabs on Tuesday, Texas 18, and the top two candidates advanced to a general runoff yet to be scheduled. For the Members of the 119th Congress, it is a lucky thing that there were no referenda on their popularity. Recent polls show an approval rating of only about 20% for the two chambers as a whole, the lowest in some four decades. Many of those surveyed perceive legislators as ineffective and out-of-touch, although assessments diverge by party and many approve of their individual representatives. Some negative opinions have been formed or supercharged by the federal government shutdown in progress, now the longest on record, due to the inability of the House and Senate to come to agreement even on a short-term funding extension. The impacts of the closures have been felt most severely by federal workers, SNAP and WIC recipients, air travelers, businesses and markets heavily reliant upon economic data, university researchers, and government contractors, among others. There has been recent chatter about a bipartisan deal to end the standoff, but Tuesday’s election outcomes may have solidified a good number of holdout positions.
Supreme Challenges
Approval ratings for the Supreme Court have recently fallen below 40% for the first time. This comes at a time when the court is hearing several major cases involving the powers of the presidency. One this week focuses on whether President Trump lawfully levied tariffs without the approval of Congress. The stalemate on Capitol Hill causes many observers to wonder if Congress is capable of approving tariffs or anything else. That aside, arguments were heard by the nine justices on Wednesday and a decision is expected to be expedited by the end of the year. This case involves trillions of dollars of customs duties and has a significant impact on our economy as well as our international relations and national security. On top of this, on December 8 SCOTUS plans to hear arguments on the powers of the president to remove independent agency officials, a matter that impacts the composition of the Federal Reserve Bank and the role of the executive branch in monetary policy. Some of the other major issues before the Court involve dismantling the Department of Education, birthright citizenship, deportations, mass federal layoffs, foreign aid cuts, and domestic troop deployment.
A Series of Firsts
For traders as well as federal workers, Main Street businesses, academics, overseas allies and many others, just about every day since President Trump’s inauguration in January has involved a new executive order and disruption of the status quo. Not all initiatives have been rolled out during the “normal” workday, so most mornings bring a new list of actions that need to be analyzed, digested, and reacted to, and a series of speculations on what might come next and how to prepare. But, for nearly 250 years, our country has grown accustomed to a series of “firsts”. For example, 85 years ago, Franklin D. Roosevelt became the first and only U.S. president elected to a third term.
Don’t Worry, Be Happy
Financial markets are taking all the uncertain fiscal and monetary policy and legal dispute turmoil in stride. On the one hand, we see significant strength in the U.S. economy, American businesses, and the financial standing of states and municipalities. On the other hand, anything goes: uncertainty and disruption is the new normal. One opinion writer recently summarized this as a “Don’t Worry, Be Happy” market referring to the 1988 Bobby McFerrin song lyrics: “In every life we have some trouble, but when you worry you make it double. It will soon pass, whatever it is.” The stock market keeps setting new highs, and artificial intelligence and crypto are the promised lands for many. But many, many others are skeptical for now and batten down the hatches, content to sit in money market funds and gold.
HJ Sims Underwrites $134.6 million Financing for Rolling Green Village in SC
There are some $7.4 trillion of funds sitting in money market funds at present, but there are plenty of places to put these assets to work. Last week, HJ Sims was in the market with a $134.6 million non-rated financing for Rolling Green Village in Greenville, South Carolina. We structured the final maturity due in 2060 with a coupon of 5.75% to yield 5.95% and it sold through the state’s Jobs-Economic Development Authority. The municipal bond market saw a total of $8 billion come to the primary market last week. Also in the senior living sector, the Oregon Facilities Authority sold $89.6 million of non-rated bonds for Integrated Senior Foundation featuring a 2060 final maturity priced at par to yield 7.25%. The New Hope Cultural Education Facilities Corporation sold $80 million of BB+ rated bonds for Brazos Presbyterian Homes, including a 2060 final maturity priced at 5.375% to yield 5.55%. In the charter school sector, the Idaho Housing and Finance Association sold two state-guaranteed Aa2 rated bond issues due in 2060: the $13.2 million transaction for Elevate Academy North in Port Falls priced at 5.00% to yield 5.07%, and the $14.4 million financing for Elevate Academy Nampa priced at par to yield 5.00%. And Central Jersey College Prep in Somerset came to market with a $31.8 million Baa3 rated financing through the New Jersey Economic Development Authority that had a 35-year final maturity priced at 5.25% to yield 5.40%.
HJ Sims Back in the Market with $45 million financing for Wesley Commons in SC
At this writing, the 2-year AAA municipal general obligation bond yield stands at 2.46%, the 10-year is at 2.74%, and the 30-year stands at 4.15%. The 2-year Treasury yield is 3.63%, the 10-year at 4.16% and the 30-year at 4.73%. This week, markets are digesting election results, some of which will have implications for our municipal bond borrowers and investors. There are six Treasury auctions, 11 Federal Reserve officials on the speaking circuit, and economic data from non-governmental sources on manufacturing, services, auto sales, mortgage applications, private employment, Challenger job cuts, and consumer sentiment and expectations. HJ Sims is back in the market with a $45.5 million expansion financing for Wesley Commons in Greenwood, South Carolina. Non-rated bonds are being issued through the state’s Jobs-Economic Development Authority and will finance 33 new cottage and garden homes and renovate many common areas. For more market insight as well as information on all HJ Sims offerings, please contact your HJ Sims representative. We are on your team and look forward to working with you on a winning plan for you midway through this fourth quarter.