The Latest: Municipal Strategy Report - February 2020
"Coronavirus Creates Global Economic Uncertainty, Threatens Financial Stability"
In this month’s Municipal Strategy Report we discuss the problem created when unique events create risk that must be discounted and factored into market prices long before the severity or magnitude of the event can be properly gauged. With the Coronavirus epidemic, markets are discounting a highly subjective appraisal of the likely fallout from the virus without the benefit of many valid historical precedents. With the birth of the epidemic only about three weeks ago, determination of the impact on China, US, and global economic growth in 2020 must be made without having sufficient data to rule out the more improbable scenarios.
Also in this month's issue:
- he ambitious House Infrastructure Plan was released on January 29th. We discuss the details of the infrastructure proposal and its muni-related provisions. Build America Bonds (BABs), Private Activity Bonds (PABs), Tax Credit Bonds, and Tax Credits for community development are all in play, as is a provision that restores tax-exempt advance refunding.
- The first wave of Governors’ State of the State Addresses have hit and we analyze changes in the issues most focused-upon by Governors so far. The General Election, and the fate of the eleven Governorships that are up for grabs this year make the addresses all the more relevant.
- Finally, we feature a piece on the Coronavirus with data from our web-scraping technology. From January 21st to February 2nd, the hourly changes in the number of mentions of the term “Coronavirus” were found to be significantly correlated with the contemporaneous hourly levels of the S&P 500. With an R-Squared of around 60%, movements in the number of Coronavirus mentions explained more than half of the variation in the S&P 500 over this period.