Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Investments And Economy topic
No spam. Unsubscribe anytime.
Insight Investment briefs Juneau finance committee: economy steady, tariffs a wildcard for inflation and returns
Summary
David Whitmohan, a partner with Insight Investment, told the Assembly Finance Committee on March 5 that the U.S. economy is running above trend, inflation is moderating toward the Fed’s 2% goal (core PCE), and U.S. tariff moves are the principal near‑term uncertainty for markets.
David Whitmohan, a partner with Insight Investment (the public‑sector arm of Bank of New York Mellon), told the Assembly Finance Committee on March 5 that the U.S. economy has been stronger than many forecasters expected, inflation is trending down toward the Federal Reserve’s 2% target (core PCE), and recent tariff actions are the principal wildcard that could slow growth and lift inflation in the near term.
"The U.S. economy is doing well," Whitmohan said in a slide presentation that summarized macro trends and their implications for municipal portfolios.
Why it matters: The city’s investment advisor briefed the committee so members could understand near‑term market risks and the rationale for the portfolio manager’s positioning choices as the city allocates cash and looks at longer‑term collars for interest rates.
Key takeaways from the presentation
- Economic and labor market: Whitmohan said U.S. GDP growth in 2023 and 2024 ran roughly 2.8–2.9%, above long‑term trends, and the labor market has been resilient though some recent softening has been observed. He said the market forecasters’ probability of a 2025 recession has risen from about 10% to approximately 25% amid new shocks.
- Inflation: Core personal consumption expenditures (core PCE) has moved toward the Federal Reserve’s 2% goal; shelter is the remaining sticky component. With shelter removed, Whitmohan said the rest of the index is near the Fed target.
- Tariffs: Recent tariff announcements are a major uncertainty. Whitmohan said short‑term tariff policy could be inflationary; whether that effect becomes longer lasting depends on how persistent the measures are and whether supply chains adjust.
- Portfolio performance and posture: Insight reported the city portfolio produced roughly a 4.2% return over the trailing one‑year period (gross of fees). The manager noted the firm seeks modest outperformance versus a 1–5 year government benchmark and has leaned slightly longer in maturity to lock in high yields while the Fed policy cycle is expected to ease later in 2025.
- Asset allocation: The portfolio contains treasuries, agency and corporate bonds, and mortgage‑backed securities; the adviser said agencies and certain long duration paper haven’t been as available at attractive long non‑call structures, so the portfolio mix reflects available issuance and the team’s view on timing.
Committee discussion and next steps
Committee members asked about how tariffs and potential inflation spikes might affect local projects and construction costs. Whitmohan said tariffs could be inflationary for metal‑intensive projects in the short term and recommended the committee monitor developments before making large procurement decisions. He also advised the committee that if the Fed begins cutting rates later in 2025, Insight would consider gradually lengthening the portfolio duration to lock in current yields.
The committee thanked Whitmohan for the briefing and moved on to the audit and other agenda items.
