Smith's Research & Gradings

Q3 Ratings Upgrades and Downgrades

The High Grade Municipal Bond Portfolio managers basked in the warm sunshine of steady credit quality while high-yield municipal bond funds saw massive outflows.

Mark Paris, CIO, Head of Municipals at Invesco, hosted an investor call on March 30, 2020. Eddie Bernhardt, head of managed accounts joined him for the presentation.

Invesco purchased Rochester Funds last year and 2019 was a period of consolidation after the acquisition. The newly combined entity has over $60 bln. in Municipal Assets Under Management. Mr. Paris heads up a municipal bond team that includes 15 portfolio managers including Jim Phillips, Jack Connelly and Scott Cottier. Invesco's municipal credit research is lead by Mark Gilley, CFA (27 years of experience) and the team includes Angela Uttaro, Mark Stockwell, Mary Jane Minier, and Robert Bertucci. The Quant Research & Portfolio Analytics are lead by Casey Ryan and Michal Milewski.

Invesco emphasized the demand for tax-exempt municipal bonds had experienced unprecedented growth. The reasons for the record weekly inflows were due to a myriad of factors, starting with the Trump Tax-Reform's elimination of State and Local Tax Deductions. Falling interest rates and collapsing credit spreads contributed to a strong performance for municipal bond funds.

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Disastrous Puerto Rico Elections

Puerto Rico's elections were a mess. On Sunday, August 9, Puerto Rico was forced to partially suspend voting for primaries marred by a lack of ballots, as officials called on the president of the Commonwealth's elections commissioner Juan Ernesto Davila to resign. The primaries for voting centers that had not received ballots by early Sunday afternoon were expected to be rescheduled, while voting would continue elsewhere, the commission said.

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Beirut’s Agony: Ports, Food, and China

On August 4th the port of Beirut was the scene of a horrific explosion, which killed more than 150 people, injured 6,000 and left some 300,000 homeless. The damages are estimated to be in excess of $15 billion. The city’s hospitals, already struggling due to the COVID-19 pandemic, were damaged by the blast and swamped with injured. On top of already raging economic and political crises, the explosion now raises the question of food security. Prior to the explosion, 80 percent of Lebanon’s imports passed through Beirut’s port. Without a functioning port in Beirut, the country now relies on a handful of secondary ports, chief among them being Tripoli in the north, to import food and to export its products.

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Will Infrastructure Promises Meet Expectations

Targeted Infrastructure programs will be one of the featured revitalization tools used for stimulating growth in the US economy post the COVID-19 pandemic. Many observers have anticipated massive large-scale infrastructure programs, but that may not be viable at this time, given the financial capabilities of many state and local governments.

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