04 Aug July 17, 2020
Retail Sales
June retail sales rose 7.5%, far surpassing estimates of a 5% gain. The retail sales control group used to calculate GDP rose 5.6%.
Our Take: Numerous government programs to support consumers appear to have worked, as retail sales have almost erased all of their pandemic-related losses despite continued massive unemployment. A number of these programs are set to expire soon. The fact that retail sales may suffer in the absence of continued government transfer payments to consumers remains a real possibility. An increase in virus-related shutdowns could also hamper future sales, but, for now, it appears the consumer is willing to spend.
China
President Trump signed an executive order ending Hong Kong’s special trade status with the U.S. and signed legislation that will sanction Chinese officials who suppress political dissent in Hong Kong. The UK announced that Huawei will be excluded from the country’s 5G network.
Our Take: Conflicts between China and the western world are escalating. Such conflicts are likely to hinder the pace of the global recovery.
Municipals
Taxable municipal bond issuance has increased this year compared to 2019. Estimates show that taxable municipal bond issuance could reach $115 billion this year compared to $90 billion last year according to Bloomberg. In addition, some municipalities are issuing advance refunding taxable municipal bonds.
Our Take: When the Trump tax cut law removed the tax benefit for advance refunding tax exempt municipal bonds, issuers no longer had an economic reason to issue these securities. Now, with the current yield environment so low, some issuers are finding that it makes economic sense to issue taxable advance refunding bonds. Look for this trend to continue if rates remain at low levels.
All expressions of opinions are subject to change without notice in reaction to shifting market conditions. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities and should not be relied on as financial advice.