Don't Shy Away From Munis to Avoid Election Volatility

Forthcoming market volatility from an election year may have fixed income investors shying away from bonds. However, it's an ideal time to get municipal debt exposure, especially in the current market environment.

"In the current environment, which includes a too-close-to-call U.S. election and trillions of investable assets parked in cash, there’s opportunity in municipal bonds," noted James M. D’Arcy, an active municipal fixed income portfolio manager at Vanguard.

At the start of 2024, private and public entities have issued bonds with the expectation of coming rate cuts. Now, municipalities are issuing bonds at increased pace. That's providing a plethora of opportunities for fixed income investors to scoop up these debt issues.

"Usually, we see an annual increase in new municipal bond issues around October and November. However, this year, we’re seeing that increase now, particularly as issuers rush to complete new deals before Election Day," added D'arcy. "At the same time, municipalities are issuing more bonds than they have for years."