Nick Venditti: 2025 Q4 Recap and 2026 Q1 Outlook

Nick Venditti: Welcome to 2026. Before we get into the fun stuff, let's do a brief recap of what happened in the municipal bond world in 2025. 2025 was not a great year for munis, set off by certainly some volatility around “Liberation Day”, some political volatility, and obviously markets not reacting very well to some of the macroeconomic news. The good news is that some of that negative performance turned around in the fourth quarter of 2025, and I think set the stage for what's coming in 2026.

I think the turnaround at the end of 2025 sets us up very well for 2026. So, let's talk about some actionable ideas. Let's talk about how you should think about positioning portfolios as we march into this new year. The good news is the muni bond market saw a lot of money flow into the separately managed account (SMA) space. The reality, though, is that almost all of that money flowed into 1- to 10-year strategies. All of them are very, very similar and that means that right now, all of the demand is concentrated inside 10 years for SMAs. If you are looking at opening a new SMA, if you are looking to reposition an SMA that you currently have, I would highly encourage you to consider going beyond 10 years. You can pick up a substantial amount of yield by taking on a little bit of additional risk on the maturity spectrum. Better than the passive ladder strategy, I would encourage you to consider active. Active management has outperformed passive for going on the last five years, and it's likely to continue to do so in 2026. Why? Because we're going to be in another volatile market. We're going to continue to see macroeconomic risk. We're going to see political risk. We're certainly going to see some geopolitical noise. Active strategies have capitalized by being opportunistic when it pays to be opportunistic. They are better structured to get you yield. And this is the market where we care about yield because that is the part that's tax-exempt. It's why we're all here. I'm excited about 2026 for the municipal bond market. I hope you are, too. Have a great year.