Reinhart Week in Review by Madison Investments 05.13.22

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INFLATION

April consumer prices (CPI) rose 0.3%. Year-over-year, CPI increased 8.3%. Producer prices (PPI) also rose in April, up 0.5% for the month. On a trailing twelve-month basis, PPI is 11.0% higher.

Our Take: Inflation moderated ever so slightly in April compared to March but obviously remains well above the Fed’s 2% target and exceeded economist expectations. Inflation continues to be broad-based, and causes such as the war in Ukraine and China’s zero-COVID policy don’t figure to be going away soon. Additionally, energy prices, which fell in April, have now surpassed March highs. Continued higher-than-expected inflation reports could cause the Fed to tighten more aggressively.

MUNICIPALS

Illinois received two credit upgrades. Fitch Ratings upgraded Illinois by two notches, from BBB- to BBB+. S&P Global Ratings raised its rating from BBB to BBB+. S&P cited “improvement in the state’s financial flexibility.” In addition, S&P indicated that the state’s timely budget adoption, along with its revenue surplus, reflects longer-term financial stability.

Our Take: Illinois, like many other states, has experienced higher-than-expected tax collections. Illinois’ revenue growth, along with federal pandemic aid, has helped the nation’s lowest-rated state improve its fiscal health. The upgrades are good news for bondholders and may lead to decreased borrowing costs in the future.

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“Madison” and/or “Madison Investments” is the unifying tradename of Madison Investment Holdings, Inc., Madison Asset Management, LLC (“MAM”), and Madison Investment Advisors, LLC (“MIA”), which also includes the Madison Scottsdale office. MAM and MIA are registered as investment advisers with the U.S. Securities and Exchange Commission. Madison Funds are distributed by MFD Distributor, LLC. MFD Distributor, LLC is registered with the U.S. Securities and Exchange Commission as a broker-dealer and is a member firm of the Financial Industry Regulatory Authority. The home office for each firm listed above is 550 Science Drive, Madison, WI 53711. Madison’s toll-free number is 800-767-0300.

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