A major theme that keeps us optimistic about municipal bonds is the shortage of income in the household sector. Most are focused on the anticipated large supply of government bonds impacting the market. Yet, there is less attention to the accelerating demand from a boomer population that is short of income. They are desperately seeking safe income. Total personal income has fallen, over the last 6 months, at an annualized rate of almost 4.5% – a huge decline. Wages, interest income, and dividends have all dropped off the edge.
Over 15% of personal income is a government handout of some kind – a record. The boomer generation spans the 45 to 63 age range. They are being stressed for income, while staring retirement head-on. You can be sure they’re looking for investments that produce income to replace what they’ve lost.
This segment still has significant holdings in equities, and they’re looking for something safe that will produce income. They also have a mountain of cash, earning next to nothing, Between the two, it amounts to nearly $15 billion!
The conclusion: the boomer generation collectively has a tremendous pool of liquidity looking for a safe, income-producing home. Munis make a mighty attractive fit.