Last Thursday, September 19th, the Volcker Alliance and the Penn Institute for Urban Research, held an illuminating webinar that focused on the year ahead.

It featured Vikram Rai, head of municipal markets strategy at Wells Fargo; Jane Ridley, managing director and local government sector leader of S&P Global; Matthew Stitt, managing director of PFM's Management and Budget Consulting team and Mark Zandi, chief economist at Moody’s Analytics.  The webinar was moderated by Bill Glasgall of the Volcker Alliance and Susan Wachter of the Penn Institute for Urban Research.

You can find the webinar by clicking here, but here are some highlights: 

The webinar kicked off with some very positive comments by Zandi, “It’ all good. It’s all good,” he said. “You know the economy is at full employment (with a) 4.2% unemployment rate. Inflation is effectively at the Federal Reserves’ target. We’re creating a lot of jobs. Job growth has slowed but that’s largely been by design. And just to add to it, yesterday’s decision by the Fed to cut the federal funds rate . . . by half a point signals very strongly that they’re going to be engaged in a series of rate cuts going forward.” 

Subsequently, Ridley, who is an expert on state and local government, added to the news, “There are some pockets of stress, but it’s really quite stable. And you know, regardless of whether or not it is a strong economy, or a weak economy, proactive management and strong governance is really what we see across this sector, too.”

She emphasized the importance of planning in the public sector, saying that “if you’re not doing a lot of planning then probably chances are you have more likelihood to have some kind of (fiscal) cliff happening.”

Stitt addressed some of the concerns for the year ahead, saying that “some of our clients that I’ve been working with across the country are honestly still facing the same issues they were facing a couple of years ago.”'

Some of the challenges he cited included:

• The dwindling of federal funds

• Downtown buildings that aren’t going to be occupied to the extent they were prior to the pandemic

•  An absence of sufficient housing supply.

• Continuing challenges in delivering services.

The last speaker to present, Vikam Rai, addressed what all this means for the municipal bond market, saying that “There is about $5 billion of cash and cash equivalent that have built up on household balance sheets. So, the question is will that flow into longer-term investments? And correspondingly will we see some of this flow into municipals? And obviously, if this cash flows to municipals, that will drive down bond prices and bring down the financing costs for state and local governments. . . 

“I am optimistic about money flowing into municipals. . . the next two weeks are going to be volatile, despite the fact that we had a very large cut. Then we’ll wait for the market to settle down. So, these two weeks, you know whatever happens is going to be temporary.”

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