Reinhart Week in Review by Madison Investments 9.13.2024

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INFLATION

The Consumer Price Index (CPI) rose 0.2% in August. The core CPI, excluding food and energy, rose 0.3%. Year-over-year, consumer prices are up 2.5% while core CPI has risen 3.2%. Producer prices (PPI) rose 0.2% in August and are up 1.7% over the last twelve months.

Our Take: While the CPI report remains an important indicator, market focus has shifted toward reports which detail the strength of the economy as inflation has continued to moderate. Inflation has clearly slowed enough for the Fed to confidently embark on an easing cycle, which is all but certain to start next week.

EUROPEAN CENTRAL BANK

The ECB cut its deposit rate 25 basis points and cut the rates on other lending facilities for banks. ECB President Christine Lagarde declined to commit to the timing or extent of any further cuts, stating that the ECB would “remain data-dependent.”

Our Take: Similar to the Fed’s likely course, the ECB is moving to normalize monetary policy in response to inflation approaching its target and weak growth. The ECB does not have a dual mandate like the Fed, but many members are concerned about growth levels and the labor market slowing to a point that would drive below-target inflation.

MUNICIPALS

Fitch Ratings upgraded the City of Atlanta’s issuer default rating, guaranteed bond rating, and general obligation debt rating from AA+ to AAA, an all-time high. City leaders touted the upgrade. Atlanta Mayor Andre Dickens stated, “these ratings reflect responsible, sound fiscal management and confidence in how we do business in this city.” Fitch indicated that Atlanta’s budget reserves have been at least 20% of spending over the last three years. Fitch also cited the city’s strong and diverse economy as reasons for the upgrade.

Our Take: In addition to Atlanta’s healthy budget reserves and sound economy, the ratings upgrade follows the implementation of Fitch’s revised local government ratings criteria. Nevertheless, the upgrade should be viewed as a positive for the city, which has taken steps to continue to improve its fiscal health.

About Reinhart Fixed Income
“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”). 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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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.

Madison Investment Holdings, Inc. acquired the fixed income management assets of Reinhart Partners, Inc. on June 11, 2021 and now employs the Investment Team that previously managed the assets at Reinhart. The Investment Team manages the assets using substantially the same strategies and objectives as at Reinhart. Performance information dated prior to the purchase reflects that of Reinhart Partners, Inc.

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