As mentioned in the most recent Muni Market Monitor, high yield muni funds have accumulated $24 million of net inflows year to date, representing ~20% of total inflows to the total municipal category. With the prospects of higher individual tax rates and the continued need for after-tax income, tax-aware investors have found shelter in the higher yielding non-investment grade municipal market in record volumes. For those investors that recently allocated to the high-yield space or those that are considering it, below are some things to know about the asset class.

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Corporate America did it again. Companies blew by estimates and made strategists and analysts look silly (though we humbly suggest that we may have looked less silly than most in our earnings preview on July 12). S&P 500 earnings growth did not surprise by quite as much as in the first quarter, but came pretty close—boosted by the biggest quarterly upside revenue surprise in at least 13 years. Here, we recap the strong numbers and raise our forecasts for earnings and for S&P 500 fair value at year-end. 

Blowout Numbers…Again

In our earnings preview commentary in mid-July, we wrote that we expected

The highly transmissible Delta variant of COVID-19 now makes up an overwhelming majority of the new cases in the U.S., bringing with it a rise in cases and hospitalizations. Widespread vaccine distribution and distancing measures have helped limit the variant’s impact, but we could still see some drag on economic growth as some restrictions are reintroduced and consumers potentially become more cautious. While we may see an increase in market volatility due to the Delta variant, we believe the S&P 500 is still likely to see more gains through the end of the year.

The Delta Variant May Drag on Economic Growth

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Index Performance

U.S. and International Equities

Markets Finish Marginally Higher

The major markets reversed course from last week, finishing the week higher. Overseas markets produced gains, as emerging market equities (MSCI EM) rebounded from last week’s selloff. The utilities and financials sectors had good weeks as the banks enjoyed a solid Friday as the better than expected jobs report pushed yields higher amid increasing optimism about the outlook for the U.S. economy.

Earnings and Market Valuation

Second quarter earnings are, thus far, nothing short of exemplary, wit