As often happens during times of market volatility, corrections — dramatic changes in market direction evidenced by great price changes — are very often overdone. Momentum in this type of market may be difficult to stop and generally overshoots reasonable endpoints. [Muni Bond ETFs Slip on Rate Concerns]
Let’s not overlook the fact that, in my view, these higher taxable equivalent yields may some time in the future look attractive versus equities and corporates once more. The seasonal technicals governing the positive outlook for near-term demand are still in place. I am not the only one suggesting that this is not the time to abandon the baseline philosophy that municipals should remain prominent in one’s portfolio.
James Colby is a portfolio manager and senior municipal strategist at Market Vectors ETFs.