The View from Muniland: Our 2023 Outlook

Video Description

Municipal bond investors stand to benefit from today’s higher yields—and from a flexible approach. 


Jason Mertz: Daryl, we just wrapped up 2022. It was a really, really challenging year for fixed-income investors, and the municipal market certainly was susceptible to that. We are battling not only really, really high inflation, but a very, very aggressive Federal Reserve and the way that they were tightening the short end of the yield curve in interest rates. Talk us through how these dynamics played out in the muni market and what happened in 2022.

Daryl Clements: No one expected, not even the Fed, the amount of increases that they put through, but nevertheless, that’s what happened. More specific to the municipal market, though, it was municipals [that] were expensive. They had a really good 2021 coming into 2022, at least relative to Treasuries, and they became expensive. So municipals had to give back a little bit at some point, and the market and we expected that to happen, and it did, especially early in the year.

And then finally, it was outflows. The municipal market realized over $120 billion in mutual fund outflows, by far a record. All three of those issues combined caused the muni market to have its worst year since 1981. So there was a lot of activity in portfolios, which clients should expect in a year that we haven’t seen in over 30.

JM: In addition to all those moves that we made throughout the year, I know we did an enormous amount of tax loss harvesting.

Daryl Clements
Portfolio Manager

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