Municipal Bond Market Wraps Up Tough Year of 'Muted' Returns

RJ Gallo discusses the 2018 market performance, highlighting muted returns in the muni market due to Fed policies and the rise of cash as a viable alternative. Looking into 2019, he predicts that broader macroeconomic factors will influence muni returns, with potential benefits if the Fed pauses rate hikes. He also explores high yield outperformance and investment strategies, emphasizing the importance of credit risk and duration in the context of economic conditions.

What was a significant challenge for the muni market in 2018?

• High inflation rates

• Federal Reserve's tightening policies

• Increased demand for Muni mutual funds

• Major tax policy changes

What factor is unlikely to cause munis to diverge from Treasurys in 2019?

• Global growth

• Inflation

• Major tax policy changes

• Fed policy

What is the expected impact of a Fed pause on high-quality fixed income?

• Negative impact

• No impact

• Constructive impact

• Uncertain impact

In the event of a US economic slowdown without a recession, what is expected for credit risk in munis?

• No change

• Underperformance

• Outperformance

• Increased risk

What is considered a major wild card for the muni market in the coming year?

• Inflation

• Global growth

• Interest rates

• Credit risk