Expertise

In 2022, we highlighted in our publication, "Opportunity Optimum,"¹ how investors' flight to perceived safety amid post-pandemic market volatility had increased benchmark concentration. Two years later, that risk appears even more pronounced as the top 15 companies have increased from 20% to 26.5% of the MSCI ACWI Index since 2022.² This increased benchmark concentration has been driven primarily by investor enthusiasm for megatrends of generative artificial intelligence (AI) and weight loss drugs (GLP-1).

KEY POINTS
1. High yield municipal bonds are positioned to benefit from the favorable fundamental and technical backdrop that buoyed performance over 2023 and the first half of 2024.
2. Yields remain attractive on a relative and historic basis, with the yield on the Bloomberg High Yield Municipal Bond Index currently at 5.43%.
3. Current and historical trends suggest that investors may want to consider adding high yield municipal bonds to their portfolios as a core allocation.

It's sunny skies and the summer start is marked by constructive tailwinds for credit markets. The improving fundamental picture is supported by robust albeit easing growth, falling inflation, the seeming end of peak rates and a still-resilient consumer and corporate earnings—the last of these is expected to further recover in the second half of the year.