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Illustration: Rebecca Zisser/Axios
It's been bonds, not stocks, that have drawn major investment this year and municipal bonds have attracted particularly large and consistent inflows.
What's happening: Thought of as a slow and sleepy asset class preferred by retirees and risk-intolerant savers, muni bonds saw record inflows during the first quarter.
Details: Data from Lipper shows cash has flowed to munis every single week this year, and the asset class has seen cash inflows of more than $1 billion or more in 15 of the 20 weeks this year that Lipper tracks.
"Taxpayers are experiencing the effects of the limit on SALT deductions, which in many cases are increasing tax bills," analysts at RBC Wealth Management wrote in a note to clients last month. "We anticipate tax-bill sticker shock could stoke additional demand for tax-exempt securities."
Why it matters: The asset flows show investors are eschewing risk. While equities have seen nearly $100 billion of outflows from mutual funds and ETFs so far this year, investors have pumped close to $150 billion into bonds, EPFR data shows.
"[M]any institutional investors today say they see taxable municipals as an attractive late-cycle asset class," Scott Sprauer and Robert Burke, municipal portfolio managers at investment firm MacKay Shields wrote recently for Pensions & Investments.
Yes, but: Investors also have been chasing riskier munis in an effort to increase returns, pushing $8 billion into into high-yield muni bond funds, also known as junk munis, through the first 5 months of the year. That's the highest inflows through May since at least 1992, according to Lipper's data.
Munis outperformed every other bond group in 2018, including emerging market and high yield, or junk bonds, that are considered high-risk/high-reward plays. They also outperformed the S&P 500 by about 8%.
What's next? RBC analysts point out that despite underperforming some corporate bonds and international issues, munis' first quarter return marked their best Q1 performance since 2014, while March's performance was the month's best since 2017.
What to watch: The strong appetite for munis has meant lower interest rates for some borrowers that don't fit the typical definition of municipal bonds, WSJ notes.
One of the few areas the U.S. holds a trade surplus with China is in travel. Significantly more Chinese visit the U.S. every year than Americans visit China, spending an estimated $36.3 billion last year.
Why it matters: The increase in tourism spending by Chinese year-over-year has been markedly slowing since 2016 and is seriously threatened by the escalating trade war, the U.S. Travel Association warns.
The Conference Board said its index of U.S. consumer confidence rose to a 6-month high in May and is now close to the 18-year high it touched last fall.
Equity analysts at UBS downgraded pharmaceutical companies Teva and Mylan significantly on Tuesday, highlighting pending litigation and an "unclear path to upside."
Driving the news: Teva on Sunday agreed to pay $85 million to settle claims with the attorney general of Oklahoma for its role in the opioid crisis.
The big picture: UBS analyst Navin Jacob, who downgraded his price target on Teva to $12 from $22, said in a note that the generic drugs and opioid lawsuit open the company up to a potential $4.1 billion in damages.