Resilience in U.S. States, Cities, Health Systems, and Universities: Municipal Asset Class Review & Outlook

September 17, 2020 | Aimee O’Connor, CFP®, Managing Partner

To date during this COVID-19 pandemic, both U.S. municipal bond issuers as well as municipal bond strategies have proven to be resilient despite the mounting adversity brought on by the nationwide lockdowns and other social distancing guidelines. The broader market recovery has been relatively quick as the S&P 500 is now back to pre-COVID highs, corporate credit spreads are back to pre-COVID tights, and overall volatility has mostly stabilized. The rebound in the economy is proving to be slow, however — with recent signs of leveling off — and is not expected to fully rebound until a vaccine is approved and distributed.

In the following, we provide a quick review of how municipal bonds have weathered the crisis so far in 2020; an assessment of key valuation, fundamental, and technical indicators to formulate a thesis for investing in municipal bonds going forward; and perspectives on how specific segments of the asset class such as investment grade municipals vs. high yield municipals and select sectors of the municipal bond market such as healthcare and education are expected to fare during the balance of the recession and recovery.

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The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.