Municipal Fixed Income Investment Strategy, April 2024

April 12, 2024 — Sage answers the 4 big questions (outlook for macroeconomic growth, Fed policy, valuations, and investor sentiment) and illustrates our municipal fixed income positioning in the current environment.

Market Outlook

• Growth and inflation readings surprised to the upside on the quarter, which complicated the outlook for Fed policy. The most recent US labor market readings reinforced the notion that job growth continues to underpin the strong economic expansion and on balance, should result in more patience from the Fed in commencing rate cuts.
• Despite negative returns across most fixed income sectors, municipal indices outperformed many of their taxable peers. In general, municipal issuers remain strong from a credit perspective and are well positioned to manage the initial phases of any economic slowdown.
• Looking ahead, the second quarter is likely to be a better entry point for investors as tax-season selling pressure tends to coincide with a weaker technical environment until June.