Investing with Insight
At Appleton, we value active engagement and interaction with financial advisors and clients. Investing with insight helps us meet client objectives. And by sharing our economic and market perspectives, we foster deeper relationships. Here’s what we’re talking about this month.
Review and Outlook
"July ended with a bang, with the final week so packed with macroeconomic data that the Federal Reserve meeting on 7/30 was almost an afterthought. The bad news is that very little of the week’s data was pretty. The good news is that data is at least telling a consistent story after a long period of uncertainty..."
"June was bookended with two labor reports that received very similar, and we believe incorrect, market reactions. Both May’s 139k (revised to 144k) and June’s 147k job gains were objectively weak releases, below the long-term trendline. But the markets treated both as strong due to beating even worse expectations (126k and 106k, respectively)..."
"There seems to be a “Groundhog Day” element to writing economic commentary lately. At the start of June, we are still concerned about tariff uncertainty, as well as the scope of federal layoffs, and unless you look at the details, it is entirely possible to miss the fact that another month has passed..."
Economic and Market Commentary
"Uncertainty is the norm in the capital markets, yet municipal bond investors have recently been forced to grapple with unusually high levels. Record YTD net issuance, rate volatility, monetary policy questions, and Fed leadership speculation have all led to increasingly unsettled markets. But with this uncertainty comes opportunity, and for those seeking tax-advantaged income, high-quality municipal bonds currently offer attractive yields at compelling valuations along with sound credit fundamentals..."
"After months of negotiations, President Trump signed into law the “One Big Beautiful Bill Act (“OBBBA”)” on July 4th. While there are wide-ranging implications for the economy, individuals, and corporations, it is our opinion that the impact of the OBBBA provisions on the municipal market will be relatively modest..."
"Moody’s Investor Services downgraded the US Government’s credit rating from Aaa/negative to Aa1/stable on May 16th, reflecting accelerating deficit growth and associated borrowing requirements, a fiscal situation exacerbated by recently elevated borrowing costs. Despite considerable attention being paid to federal spending cuts, Moody’s noted a lack of faith in the willingness of Congress to actually reduce the deficit, and US debt levels have now reached thresholds that are materially weaker than other Aaa-rated peers..."
Quarterly Perspectives
Q2
"As Harry Markowitz, the father of Modern Portfolio Theory, put it, “The only free lunch is diversification.” This quote underscores one of the most fundamental principles of investing: managing risk and reducing volatility by spreading investments across assets and asset classes with distinct risk exposures..."
Q1
"Making sense of the economy and markets can be challenging in any era, although today’s environment is proving to be particularly perplexing to many. Context and perspective are critical, as it is all too easy to get lost in the day’s headlines and varying predictions. With apologies to the long running staple of David Letterman’s former “Late Night” show, here is an Appleton “Top 10 List..."
Q4
"Economic developments rarely have isolated impact as one factor affects another. A pandemic-influenced spike in inflation was followed in 2022 by rapid Fed Funds rate increases and an inversion of the US Treasury and AAA Municipal yield curves..."
Don’t Forget About Municipals: