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Munichain Market Perspective #7

By Matthew Gerstenfeld
Market Perspective
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New issue activity will remain muted over the course of the week ahead of a widely anticipated FOMC meeting. Macro market volatility has caused great pain throughout asset classes, following yesterday’s record plunge in equities drawing concerns over an imminent financial crisis. Soaring oil prices, a stronger dollar and a rapidly climbing 10YR treasury have resulted in a deep recession in past times, triggering fear among investors across the globe.

Consumer prices reported for the month of May peaked to +8.6%, marking record inflation and signifying the greatest surge since the beginning of the 1980s. Massive printing of the dollar throughout the course of the pandemic coupled with a laissez-faire government approach towards inflation in the past year has set the scene for deep financial suffering.

Without pivoting signals from the FOMC, the likelihood of a financial collapse increases exponentially as Americans struggle to pay for basic goods and services. Questions surrounding bank balance sheets remain front and center as a potential solvency crisis fueled by over-levered institutions may result in catastrophe.

Market players are forecasting a 50-75 basis point hike in the upcoming FOMC meeting, with the street forecasting a more aggressive approach on behalf of the Fed to recalibrate the market and foster much needed stability. Amidst the market turmoil, capital will be searching for sound investments placing munis on track to gain investment interest from retail and institutional accounts given the creditworthiness of state and local governments.


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