Reinhart Week in Review by Madison Investments 8.20.2021


RETAIL SALES

Retail sales fell 1.1% in July.

Our Take: Retail sales were expected to fall just 0.3%, so this week’s report was clearly unwelcome. On the positive front, retail sales remain well above their pre-pandemic trend. However, the effect of government stimulus is waning, and it is possible that spending could have slipped as a result of the Delta variant as well. Delta is likely to have an even larger negative effect on August sales.

AFGHANISTAN

Following the withdrawal of U.S. armed forces from most of Afghanistan, the Taliban has quickly defeated the Afghan government forces throughout the country. The speed with which the Taliban was able to accomplish this takeover was much greater than expected, and this has led to a crisis in terms of foreign citizens and Afghans who worked with the U.S. being trapped in the country.

Our Take: While the Afghan economy is too small and too isolated for these events to directly impact major capital markets, the uncertainty they are creating is likely to have a negative impact.

FOMC MINUTES

Minutes from the Federal Open Market Committee (FOMC) meeting on July 28 were released this week. The minutes noted that “Participants expressed a range of views on the appropriate pace of tapering asset purchases once economic conditions satisfied the criterion laid out in the Committee’s guidance. Many participants saw potential benefits in a pace of tapering that would end net asset purchases before the conditions currently specified in the Committee’s forward guidance on the federal funds rate were likely to be met.” Additionally, “Participants commented on other factors that were relevant for their consideration of future adjustments to the pace of asset purchases. A few participants suggested that the Committee would need to be mindful of the risk that a tapering announcement that was perceived to be premature could bring into question the Committee’s commitment to its new monetary policy framework. With respect to the effects of the pandemic, several participants indicated that they would adjust their views on the appropriate path of asset purchases if the economic effects of new strains of the virus turned out to be notably worse than currently anticipated and significantly hindered progress toward the Committee’s goals.”

Our Take: The FOMC continued its discussion surrounding the eventual reduction of asset purchases, hinting that a decision could be made at their September meeting and that tapering could start before year end. There is some fear that a change in conditions due to the Delta variant could alter plans. Keep in mind, this is only a discussion on when to begin reducing the size of asset purchases. The Fed remains highly accommodative

MUNICIPALS

CUSIP Global Services released its Issuance Trends Report for July. Requests for new municipal security identifiers decreased from June to July, the first monthly decrease since January. However, requests for new municipal security identifiers remain higher year-over-year. According to the report, New York issuers requested the most identifiers followed by Texas and California.

Our Take: New municipal issuance tends to slow during the summer months. As long as interest rates remain low, new issuance should rebound in the upcoming months as municipalities continue to issue new bonds and refinance existing debt.

“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.

Any performance data shown represents past performance. Past performance is no guarantee of future results.

Non-deposit investment products are not federally insured, involve investment risk, may lose value and are not obligations of, or guaranteed by, any financial institution. Investment returns and principal value will fluctuate.

This website is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

“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.
Any performance data shown represents past performance. Past performance is no guarantee of future results.
Non-deposit investment products are not federally insured, involve investment risk, may lose value and are not obligations of, or guaranteed by, any financial institution. Investment returns and principal value will fluctuate.
This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.
Although the information in this report has been obtained from sources that the firm believes to be reliable, we do not guarantee its accuracy, and any such information may be incomplete or condensed. All opinions included in this report constitute the firm’s judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.