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With big infrastructure spending proposals and the possibility of higher taxes looming over the policy horizon, it’s only natural that municipal bonds would become a top-of-mind consideration for more investors. The reasons aren’t that complicated.

Given the unprecedented federal support to help fight the COVID-19 pandemic as well as the size and scope of the Biden administration’s trillion-dollar budget and infrastructure proposals, the prevailing market sentiment is that tax hikes are inevitable. President Biden is on record stating that taxes will go up for individuals who earn more than $400,000 a year. He also wants to raise the top tax bracket back to pre-Trump administration levels, from 37% back to 39.6%.

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1 “Trends in Municipal Bond Ownership,” Municipal Securities Rulemaking Board, 2021. 

2 “How Much Each State Will Receive From the Coronavirus Relief Fund in the CARES Act,” Center on Budget and Policy Priorities, 3/26/20.

3 “New York Has Spent Almost None of the Rescue Aid It Pleaded For,” Bloomberg, 9/1/21.

4 “Inside Biden’s $4.5 Trillion Infrastructure Plan,” Smart Asset, 8/27/21.

5 Barclays Live, 8/31/21.

6 Moody’s, cumulative 5-year default rates (%), 1970-2020. 

 

Past performance does not guarantee future results. Indices are unmanaged and are not available for direct investment.

Important Risks: Investing involves risk, including the possible loss of principal. • Fixed-income security risks include credit, liquidity, call, duration, and interest-rate risk. As interest rates rise, bond prices generally fall. • US Treasury securities are backed by the full faith and credit of the US government as to the timely payment of principal and interest. • Municipal securities may be adversely impacted by state/local, political, economic, or market conditions. Investors may be subject to the federal Alternative Minimum Tax as well as state and local income taxes. Capital gains, if any, are taxable. • Diversification does not ensure a profit or protect against a loss in a declining market.

“Bloomberg®” and any Bloomberg Index are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the indices (collectively, “Bloomberg”) and have been licensed for use for certain purposes by Hartford Funds. Bloomberg is not affiliated with Hartford Funds, and Bloomberg does not approve, endorse, review, or recommend any Hartford Funds product. Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to Hartford Fund products.   

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About The Author
Author Headshot
Joe Boyle, CFA, CPA
Investment Specialist, Fixed Income and Alternatives for Hartford Funds

 

 

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