Reinhart Week in Review by Madison Investments 9.20.2024

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THE FED

This week the Fed cut rates by 50 basis points to 4.75%-5.0%, in what some see as an aggressive start to rate normalization. The new dot plot shows the Fed expects another 50 basis points in cuts this year and an additional 100 basis points in 2025. The post-meeting statement reflected a somewhat positive assessment of economic conditions noting that growth continued at a “solid pace” despite a slower pace of hiring. This sentiment was echoed by Fed Chairman Jerome Powell during his post-meeting press conference. He noted that although price pressures “remain elevated,” the Fed has gained greater confidence that inflation is moving toward its target of 2%. He added the Fed remains committed to its dual mandate of price stability and maximum employment with risks from both sides coming into better balance.

Our Take: Despite the strong opening move of a 50-basis point cut, the Fed was careful to note that this is not an indicator of the pace of cuts going forward. Powell noted the Fed is in no rush to cut rates. There is still uncertainty in the outlook and the Fed will continue its patient approach to policy going forward.

RETAIL SALES

Retail sales rose 0.1% in August. Control group sales (which feed GDP calculations) rose 0.3%.

Our Take: August sales were better than expected. Real sales (excluding the effects of inflation) have risen in nearly every month this year. The consumer continues to drive economic growth, keeping the chances of a recession at bay.

MUNICIPALS

The Bureau of Transportation Statistics reported that 77.2 million domestic passengers and 12.5 million international passengers flew on United States airlines flights in June. This marks an increase of 6.7% over June 2023 and an increase of 7% over June 2019. Along with the increase in passenger traffic, municipal airport issuance has reached $12.3 billion according to Bloomberg, an increase of more than 100% compared to 2023.

Our Take: The demand for air travel has led to crowded terminals along with additional baggage and check-in desk needs. Due to the increase in airport passenger traffic, airports feel able to tackle capital improvement projects, facilities updates, and other expansion projects.

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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A basis point is one hundredth of a percent.