Now that the 2024 presidential election has been decided, we wanted to share our perspective on its potential impact on the municipal bond market. Overall, we believe the trajectory for municipal bonds — marked by expected higher demand for tax-free income, continued strong credit fundamentals, and ongoing positive flows — is unlikely to shift meaningfully.
 

  • Our base view on tax rates, as outlined within Insight 2 (“The Specter of Rising Taxes Increases The Value Of Tax Exemption “) of our "Top 5 Insights for 2024," remains unchanged. To reiterate, Insight 2 states that the Federal government would likely need other incremental revenues to finance its more than $30 trillion of debt.
  • Therefore, we expect the new administration will have limited capacity to cut income tax rates further, given the need for revenue to manage the U.S. debt load and budget deficit.
  • Unlike 2016, markets assigned a meaningful probability to a Trump victory this year, and adjustments began well before Election Day. We don’t foresee a post-election outflow cycle for municipals.
  • Demand for municipals should remain robust, supported by high absolute and after-tax yields and attractive valuations relative to taxable bonds.
  • From a portfolio perspective, we entered election season with a strong liquidity profile, enabling us to quickly act on attractive investment opportunities.

     

We will continue to monitor developments as the newly elected administration begins to outline more details about policy issues and personnel appointments. Key uncertainties do remain, including Congressional races, and we will provide updates as more details unfold.

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This material contains the opinions of certain professionals within MacKay Municipal ManagersTM but not necessarily those of MacKay Shields LLC. The opinions expressed herein are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and opinions contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Any forward-looking statements speak only as of the date they are made and MacKay Shields assumes no duty and does not undertake to update forward-looking statements. No part of this document may be reproduced in any form, or referred to in any other publication, without express written permission of MacKay Shields LLC. ©2024, MacKay Shields LLC. All Rights Reserved.

 

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