Q1 2025 Credit Commentary Trump 2.0 Effect On Munis And Other Challenges

2025-04-10 04:10:00 ET

Summary

• The events of the quarter include DOGE and tariff actions, the reassessing of and halting of subsidies, and the functioning and funding of major spending programs, among many other changes from Trump 2.0 that will challenge municipalities.
• Trump 2.0 has many complaining and hopefully thinking about better ways to do things instead of following the status quo.
• Municipalities were already grappling with budget challenges with the end of pandemic aid, along with inflation in goods, services, and especially labor.
• The stock market downturn and increasing investments in alternative assets are elements that may affect pension funding levels and the estimation of future liabilities that need to be managed.

By Patricia Healy, CFA

The events of the quarter include DOGE and tariff actions, the reassessing of and halting of subsidies, and the functioning and funding of major spending programs, e.g. Medicaid and education priorities, among many other changes from Trump 2.0 that will challenge municipalities. These challenges come on top of the runoff of pandemic aid, increasing natural disasters and weather risks, and the need for continued vigilance to protect against cyber threats. Change is constant, but so many changes all at once are unusual. Thankfully, many municipalities have amassed strong reserves and practice good budget management....

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