KEEP YOUR MUNI PORTFOLIO ON TRACK

Four Ways to Align Your Muni Strategy for Today’s Market

Macro, market and political uncertainty looms, but tax bills are certain—and so is the value of after-tax income. Here are four things you can do to keep your muni bond strategy aligned for today’s market.

INVEST IN THE RIGHT SEGMENTS OF THE YIELD CURVE

With muni bonds, return potential varies based on where on the yield curve you invest. The muni market seems to think that tax rates will decline: finding the right part of the curve can reduce exposure to falling tax rates and rising interest rates while boosting income potential.

DO YOUR CREDIT HOMEWORK ON HIGHER-YIELDING BONDS

If you think President Trump’s policies will stoke economic growth, consider investing in lower-rated munis with higher yields. These bonds should thrive in an improving economy: in the last five Fed rate-tightening cycles, lower-grade munis beat high-grade munis. But with the demise of bond insurance, credit research is key.

DON’T LET INFLATION TAKE A BITE OUT OF YOUR BONDS

With the new administration planning big tax cuts and infrastructure spending, inflation could reawaken. A muni strategy that offers inflation protection through Consumer Price Index swaps could be more tax efficient than simply buying Treasury Inflation-Protected Securities (TIPS). If you add inflation protection now, you may avoid having to add it later as inflation—and the cost of protection—rises.

GET OFF THE BOND LADDER—IT COULD BE A SAFETY HAZARD

BOND LADDERS FALL SHORT TODAY—HOW ACTIVE MANAGEMENT CAN HELP

Interest rates and markets are dynamic and evolving. Because bond ladders can’t adjust to changing risks and opportunities, they can be more vulnerable to interest-rate, credit and inflation risk. Avoid the ladder and put your muni portfolio in the hands of an experienced active manager.

Daryl Clements

Portfolio Manager


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AB High Income Muncipal Portfolio (ABTYX)

Against 145 High Yield Muni Funds

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Against 176 Muni National Short Funds

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Against 263 Muni National Interm Funds

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Against 176 Muni National Short Funds

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AB High Income Municipal Portfolio was rated 4 stars against 145 and 119 funds in the category, for the three- and five-year periods respectively. AB Intermediate Diversified Municipal Portfolio was rated 5 stars among 176, 153 and 92 funds in the category for the three-, five- and 10-year periods, respectively. AB National Portfolio was rated 5 stars against 263, 227 and 154 funds in the category for the three-, five- and 10-year periods, respectively. AB Municipal Bond Inflation Strategy was rated 4 stars against 176 and 153 funds in the category for the three- and five-year periods, respectively.

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