Investors recognized that the massive fiscal stimulus in 2020, with additional support from the $1.9T American Rescue Plan Act (ARPA) in early 2021, would strengthen even the weakest municipal credits and it did. Municipal credit was relatively cheap at the start of 2021 but became richer as the year progressed credit spreads narrowed to record lows by year end. It was relatively straightforward and if you executed the strategy well, you were rewarded. Experience, study and caution will be rewarded.ĭespite a board full of uncertainty at the start of 2021, including Covid, labor shortages, supply chain bottlenecks, wage and price pressures, political uncertainty and shifting Fed views (to name a few!), two key portfolio decisions – Credit and Curve – determined the outcome of the game. Winning will likely require a more complex, multi-faceted strategy than in 2021. Even the most experienced players would admit they can always improve, which can only come through study and experience.Īs we examine the municipal “board” at the start this new year, it looks to us to be a more challenging one than a year ago. And the king must be protected at all costs to avoid ending in checkmate. A player would readily sacrifice a pawn for the opponent’s rook or queen, for example, but not vice versa. There are six unique chess pieces, which move differently and have different value in the game. Chess, on the other hand, is more complex, requiring a deeper level of study, strategy, and practice. Although both are played on a board with 64 squares, the rules of checkers are easier to learn, and the objective straightforward – take all your opponent’s pieces. People who have played both checkers and chess would likely agree that chess is the harder of the two games.
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