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Q1 2021 Credit Commentary: Back To The Past?

David Kotok profile picture
David Kotok


  • Are we going to go back to the past, as economies around the world open and vaccinations and herd immunity take hold?
  • At Cumberland Advisors, we see less near-term municipal credit risk, but we are a little cautious of weaker sectors and regions that may not receive aid or that have had their economies altered by the pandemic.
  • Most municipalities learned from the financial crisis to be prepared for outlier events by establishing strong reserves and cutting back spending. We hope that fiscal responsibility continues despite the massive federal support at this time.

By Patricia M. Healy, CFA

Are we going to go back to the past, as economies around the world open and vaccinations and herd immunity take hold? Many activities will return to how they were before the pandemic struck, but others may be changed markedly forever - such as shopping, education, telehealth, cyber risk, and internet access available to all. The return to life nearer normal may be delayed depending on the resurgence of the virus and new strains, which could lead to reimposed shutdowns. John Mousseau refers to a return to normalcy in his recent commentary on the bond markets, "The Bond Market's 'Return to Normalcy.'"

This past quarter marked a reversal from the trajectory of the first quarter a year ago, and in some cases even from last month, considering the recently approved $1.9 trillion American Rescue Plan. Cities, towns, schools, businesses, and other venues that were shuttered at this time last year are opening now, although it may take years for some activities, such as business air travel and convention center attendance, to attain pre-pandemic levels. Many analysts assert that these volumes will not rebound until 2024.

Last year, everyone was afraid for the lives of loved ones or themselves. Now, with many being vaccinated, we see a light at the end of the tunnel and will be able to freely give hugs again! Delivery services flourished last year, and many went on-line for shopping and work or took targeted trips to the supermarket with masks and hand sanitizer. Now folks are heading to restaurants and planning trips.

A year ago, the loss of jobs was sorely felt, and those on the front lines were extremely overworked. The federal, state, and local governments took huge steps to provide needed resources to people and businesses. Various federal aid programs, including the $2.7 trillion CARES Act, totaled about $4

This article was written by

David Kotok profile picture
David Kotok co-founded Cumberland Advisors in 1973 and has been its Chief Investment Officer since inception. David’s articles and financial market commentaries have appeared in The New York Times, The Wall Street Journal, Barron’s, and other publications. He is a frequent contributor to Bloomberg TV and Bloomberg Radio, Yahoo Finance TV, and other media. He has authored or co-authored four books, including the second edition of From Bear to Bull with ETFs and Adventures in Muniland. He holds a B.S. in economics from The Wharton School of the University of Pennsylvania, an M.S. in organizational dynamics from The School of Arts and Sciences at the University of Pennsylvania, and an M.A. in philosophy from the University of Pennsylvania.David has served as Program Chairman and currently serves as a Director of the Global Interdependence Center (GIC), www.interdependence.org, whose mission is to encourage the expansion of global dialogue and free trade in order to improve cooperation and understanding among nation states, with the goal of reducing international conflicts and improving worldwide living standards. David chaired its Central Banking Series and organized a five-continent dialogue held in Cape Town, Hong Kong, Hanoi, Milan, Paris, Philadelphia, Prague, Rome, Santiago, Shanghai, Singapore, Tallinn, and Zambia (Livingstone). He has received the Global Citizen Award from GIC for his efforts. David is a member of the National Business Economics Issues Council (NBEIC), the National Association for Business Economics (NABE), has served on the Research Advisory Board of BCA Research and is currently on the advisory board of RiskBridge Advisors. He has also served as a Commissioner of the Delaware River Port Authority (DRPA) and on the Treasury Transition Teams for New Jersey Governors Kean and Whitman. Additionally, he has served as a board member of the New Jersey Economic Development Authority and as Chairman of the New Jersey Casino Reinvestment Development Authority.

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Comments (1)

Very nice summation of the current situation. Thanks
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