Market Commentary: Wishing-Well

by Gayl Mileszko

Wishing Well

Chris Greicius was a cute little kid who grew up in Scottsdale, Arizona dreaming of becoming a police officer who caught all the bad guys.  When he was seven years old, he was diagnosed with leukemia and tragically lost his battle with the disease a mere three months later. But not before he had a chance to live out one unforgettable day.  Chris had made a few special friends in state and federal law enforcement as word of his plight spread through the community, and they arranged for him a very special adventure away from the hospital that included a specially tailored uniform, hat, badge, and fantasy rides in a cruiser and helicopter. His mother was profoundly grateful, and she was inspired to launch an effort has since turned into a worldwide wish-granting organization for children with critical illnesses. Since 1980, Make-A-Wish has granted more than 520,000 wishes in 50 countries. In the U.S., a life-changing wish is now granted to a child diagnosed with a life-threatening condition every 34 minutes. A good percentage involves a family trip to Disney.

Three Wishes

Ruby Chitsey was an 11-year-old from Harrison, Arkansas who would sometimes accompany her mother to her job as a geriatric nurse practitioner at a local nursing home. One day, Ruby’s heart was deeply touched by the sight of Pearl, a senior being separated from her beloved dog of 12 years. Pearl was no longer able to care for her pet on her $40 a month Medicaid personal needs allowance. Ruby wanted to break open her piggy bank at once to help her but soon came up with an even better plan. With the help of her Mom, she started a project called “Three Wishes” to raise money for nursing home patients low on funds, family, or happiness.  The pre-teen created a notebook and went through one nursing home after another, asking residents “If I could bring you three things in the world, what would those be?” Her list soon filled with mostly modest requests: a warmer blanket, some pet food, a cell phone, hearing aids, prayers, a pair of pants or shoes that fit, McDonald’s French fries, a trip to a water park. Ruby started to raise funds locally, then moved to GoFundMe, and now runs a non-profit that posts a big Wish List on Amazon, sponsors an adopt-a-resident project, and runs a national postcard program. She just turned 15 and is already a nationally recognized hero.

Wishin’ and Hopin’

In European folklore, a wishing well was a place where water deities resided and spoken wishes might be granted. Wall Street has become something of a modern wishing well, both for investors as well as for those seeking equity investors or lenders. Every morning, traders, investors, custodians, clearing agents, trade processors, accountants, techies, lawyers, and all who support most of the world’s largest financial markets in securities, commodities, currencies, and other financial assets seek the favors of the so-called market gods for new public offerings, secondary market support, high prices if selling and bargain prices if buying. Many approach the well with technical and fundamental analysis behind them while others, as in the old Dusty Springfield song, are “wishin’ and hopin’ and thinkin’ and prayin’, plannin’ and dreamin.’”

Spending Sprees with Higher Rates Ahead

Prospective homebuyers, auto shoppers, those with credit card balances, adjustable-rate mortgages, and those looking to tap home equity lines of credit are all wishing for a reversal in the Federal Reserve’s record series of rate hikes. That wish has little chance of being granted in the near future. The central bank’s monetary policy committee will meet again next week to set the U.S. target rate, and, by almost all projections, members will vote to increase the benchmark rate by another 25 basis points and hold it at that elevated level for another eight or 10 months. Their goal is to quelch consumer demand without causing a recession in order to bring down the unnaturally high inflation rate brought about by none other than Washington’s own monetary and fiscal policies. But the American consumer has not been cooperating in this effort. Sentiment runs high, home prices and rents remain stubbornly high, and a devil-be-darned attitude prevails. We are exhausting our savings, tapping out our credit cards, borrowing from retirement accounts, and using “buy-now-pay-later” options. During the most recent two-day Amazon Prime Day e-shopping extravaganza, we spent a record $12.7 billion. The St. Louis Fed reports that U.S. credit card debt has risen from $736 billion in April 2021 to $993 billion as of July 5, 2023. And, according to the Transamerica Center for Retirement Studies, so far in 2023, 37% of workers have taken a loan, early withdrawal, and/or hardship withdrawal from their 401(k) or similar plan or IRA.


Signs of easing inflation and a stable labor market data propelled U.S. consumer sentiment to the highest level in nearly two years according to the University of Michigan’s key gauge. The reading jumped 13% from June. This has emboldened investors to take on more risk. CNN’s Fear and Greed Index notched up again last week into the “extreme greed” category, the polar opposite of where it stood just one year ago plunk in the middle of a “fear” reading. More than $22.2 billion of funds were withdrawn from the $5.4 trillion of cash sitting in money market funds this past week while $$5.1 billion was added to equity ETFs and $3.2 billion to taxable bond ETFs.  Buyers of non-rated municipal bonds have seen index gains of 5.06% so far this year while high yield corporate bonds indices are up 6.58%, the S&P 500 has risen 18.4% and the Nasdaq is up more than 35%. The mantra for many is “risk-on” for fear of missing out on the rallies.

Current Equity and Taxable Markets

As of the close on Friday, the S&P 500 at 4,505 has gained 1.2% on the month and the Russell 2000 at 1,931 is up 2.2%. Oil prices at $75.42 a barrel is 6.8% higher, silver prices at $24.94 an ounce are up 9.8%, and Bitcoin at $31,224 is 2.2% higher.  The peak of the U.S. Treasury yield curve remains at 6 months, 5.43%, well above the 30-year maturity at 3.92%. The 2-year Note yield at 4.76% is 13 basis points lower in July, while the 10-year at 3.83% is flat. The Baa Corporate bond benchmark index yield at 6.18% has dropped 9 basis points. So far in 2023, among fixed income indices, convertible bonds have gained 11.3%, leveraged loans are up 7.55%, preferreds are returning 4.49%, mortgages are up 2.15%, and Treasuries are +1.75%. Major market movers this week include heavy second quarter corporate earnings, eight Treasury auctions, and a host of retail sales and housing data.  The Fed is in a blackout period ahead of the rate decision on Wednesday, so there are no speakers scheduled.  Recession expectations are in recess for now but traders are watching the dollar, which saw the biggest drop of the year versus other major world currencies last week.

Tax-Exempt Market Updates

Investors in municipal bonds have been wishing all year for tax-exempt and taxable supply to meet their demand. This week, they will see $11 billion, one of the highest volume weeks of the year, after $8 billion last week, and yet that is not enough to satisfy demand.  Buyers have plenty of cash to spend for individual bonds, mutual funds, closed-end funds and ETFs – on top of the $117.5 billion in tax-exempt money market funds. During the month of July, they will receive an estimated $12.9 billion of interest and cash from $37 billion of maturing and called bonds. That is $50 billion available for reinvestment in the market in July ahead of another $56.2 billion cash avalanche scheduled to hit their accounts in August. Most munis are delivering solid, but modest returns so far in 2023, better than Treasuries but a bit less than comparably rated corporates. Investment grade benchmark munis are up 3.09% so far, while high yield munis have gained 3.47% and taxable munis even better at +4.77%.

High Yield Muni Sales This Week

At last count, there were 535 municipal bond mutual funds and 78 municipal bond ETFs with a combined $861 billion of assets but only some long-term muni funds and high yield muni funds have seen net inflows this year. Overall, outflows have totaled $8.1 billion, so fund buyers have been less active than in the past.  Banks, too, especially since the Spring crisis, have also pulled back. Households have kept the muni market humming all year. But high yield issuance as a percentage of total par has slipped to the lowest level in 9 years and vexed those buyers with highest risk profiles. This week, several higher yielding muni sales are planned. These include a $191 million non-rated South Carolina Jobs-Economic Development Authority financing for the new Seafields at Kiawah Island life plan community and a $23 million Build NYC Resource Corporation issue for Unity Preparatory Charter School of Brooklyn. In the lower investment grade space, we await a $54 million BBB-minus rated financing for Ohio Living Communities and a $79 million Baa2 rated transaction for YES Prep Public Schools in Texas.

Make A Wish Come True for Someone

Everyone has at least one wish this summer and it is likely within our power to make someone else’s wish come true.   Reach out to your HJ Sims representative this week. We can work with you to align your portfolio for one-time or ongoing gifts for those in need, those deserving, those you know and love. It will make a world of difference to them – and to you.

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