Insights

CREDIT AND MARKET STRATEGY
MUNICIPAL MARKET WEEKLY

September 3, 2019

Recap / Thoughts:
+ US-China trade concerns and slowing global growth continue to drive markets
+ This week’s big data day is Friday when the Labor Dept releases non-farm payrolls for Aug
+ Munis gained in Aug but massively underperformed a surging Treasury market
+ M/T ratios and spreads are now fairly valued vs historical following Aug underperformance
+ Muni gross supply ramped up significantly in Aug to $44.5 bil. due to lower rates and is up 10% YoY
+ $9.0 bil. of new issue Muni supply on tap for this week
+ Trade ideas: Sell: 5% coupons thru 10yrs, short duration / calls (1-2yrs), weaker credits; Buy: floating or fixed sub-5% coupons, 6-10yr calls, long-final (18-30yr final mtys), high-quality credit

Market Recap.

US markets continued to be driven by US-China trade concerns and tariffs amidst Trump tweets and weakening economies in Europe and Asia. Equities experienced massive volatility – the S&P 500 had 11 daily moves of at least 1% -- but ended the month in relatively good shape with the S&P 500 down only -1.8% in Aug (+16.74% YTD). Treasuries posted a massive rally on the month during the trade war escalation with safe-haven demand supporting all points on the curve, including the 30yr, which returned +7.87% on the month (+23% YTD), the best return on record. Treasuries overall returned +3.40% in Aug (8.63% YTD) as yields declined by an average of...

Quarterly Review

SAMUEL A. RAMIREZ & COMPANY, INC.
QUARTERLY MACROECONOMIC OUTLOOK
FINANCIAL STRATEGIES GROUP – 3rd QUARTER 2019

Dear Clients,

Please find attached Ramirez & Co.’s Quarterly Macroeconomic Outlook. In our report, we continue to monitor the US economy, global events and the Fed’s outlook on the economy and rates:

• Despite numerous concerns and pessimism, the US economy remains healthy.  The Fed expects GDP growth in the second quarter to be slightly below its potential of 1.9%. Inflation expectations decline and move away from the Fed’s 2% target.  The labor market stays robust.

• Trade, politics, fiscal policy, private and public sector debt, fully valued markets, and slowing economies across the globe pose challenges.

• The markets see high likelihood of significant declines in the Fed Funds rate, with the bulk of estimates suggesting a drop of 25-75 bps by the end of 2019.  Median primary dealer expectations are flat and Fed economists split on future expectations.  By contrast, the EU and Japan wade deeper into negative rate policies.

Members of our Financial Strategies Group, Niso Abuaf, Konstantin Semyonov and Duncan Sinclair, would be happy to discuss further any of the material with you.