As the market prepares to ring in 2017, municipal experts predict changes to tax laws, interest rates, inflation, and volume will drive the market in the year ahead.
Tax reform under the Trump presidency will continue to dictate demand in the municipal market in the New Year, since tax cuts can reduce the attractiveness of tax-exempt income…
Trump’s plan calls for the reduction of the current seven tax brackets down to three, lowering the top marginal rate to 33% from 39%, eliminating the 3.8% Affordable Care Act tax, and capping itemized deductions at $100,000 for individuals and $200,000 for couples.
Other concern is that inflation might rise quickly if there is an infrastructure bill passed “without any real way to pay for it,” Belsky said.
Longer term, Belsky said, “investors might dip their toe in and commit some funds if they have flexibility or cash.”
“If there is no grand tax bargain agreement, we might see a rebound,” Belsky said. “Of course, if stocks sell off at a time when current yields are higher, then there might be strong interest in munis.”
Read more: Bond Buyer.