Weekly Market Update

CONSUMER CONFIDENCE ON THE UPSWING

Thursday, March 30, 2017

Consumer confidence soared to a 16-year high in March, increasing 9.5 points from 116.1 to 125.6, well above the consensus estimate of 114.1. Since November's Presidential election, consumer confidence has steadily climbed on the prospect of tax cuts and infrastructure spending. Stalled changes by Congress have yet to affect confidence. When broken out by income levels, those making $15,000 per year or more have increased confidence since before the election. Income and confidence go hand in hand as increased income tracks with higher consumer confidence. Additionally, optimism in the labor market has also increased. More consumers believe that jobs are plentiful, at 31.7% compared to 26.9% in February, while fewer consumers believe that jobs are hard to get, at 19.5% compared to 19.9% in February.

In Other News

  • After suffering losses in 2016, college and university endowments may have a light at the end of the tunnel. According to the Wilshire Trust Universe Comparison Service, endowments had a median 4.4% gain for the last half of 2016. The losses from June 2015 through June 2016 forced some institutions to dig deeper in their pockets and consider reducing expenses.
  • On April 7th, The Ohio State University's Board of Trustees will vote whether or not to embark on an energy public-private partnership to support the university's sustainability and academic mission. The Comprehensive Energy Management Program would entail a $1.015 billion payment to OSU and is expected to fund teaching and research. The proposed deal has a total value of $1.165 billion.
  • The tides in higher education in Pennsylvania may be changing. Some schools are facing the real possibility of having to shut down unless they decide to merge. For example, Cheyney University, the oldest historically black institution of higher education in the US, has faced several years of declining enrollment and extraordinary levels of debt. This has sent the University into crisis and forced it to consider a merger.
  • This week, Moody's released a report citing its concern over President Trump's budget proposal. The report also clarified that Moody's believes there is a very low probability of the budget passing as it currently stands. As proposed, the budget could result in severe reductions in funding for the Department of Education, including slashes in research funding and eliminating certain programs.
  • On Tuesday, the University of Louisville Foundation's Board voted to pay the University of Louisville $30 million less than last year. The decision aims to cut back on spending and manage the endowment more effectively. Last year, the Foundation gave the University $70 million, and is expected to give $40 million this year.
  • Wells Fargo has reached an agreement that includes a $110 million settlement for two million fraudulent accounts opened to increase bonuses based on sales targets. In September, the bank agreed to pay $185 million in fines and penalties in conjunction with a settlement with regulators and the Los Angeles city attorney's office.
  • Over time, nonprofit museums have been facing increasing financial challenges leading to mergers and layoffs. Museums have struggled to continue to service their missions and adapt to a new era. These institutions have been forced to become more innovative in their marketing strategies by planning non-traditional events, like wine tastings and ice skating.

Rating Agency Update

  • Moody's downgraded Stonehill College (MA) to A3. The outlook is stable.
  • S&P assigned BBB+ to Saint Edwards University Series 2017 Bonds. The outlook is stable.
  • S&P assigned AA to Denison University Series 2017 and 2017B bonds. The outlook is stable.
  • S&P downgraded Kansas State University A+. The outlook is stable.
  • S&P assigned A- to Manhattan College's Series 2017 Bonds. The outlook is stable.