An insider's take on the 2026 National Outlook event

The Bond Buyer hosted our 2026 National Outlook conference on February 11-12 at the New York Athletic Club in Manhattan. Over 320 attendees from across the public finance ecosystem converged to hear from wide-ranging panels of stakeholders offering their expert views of the challenges and opportunities framing today's municipal bond market outlook. The two-day event was particularly gratifying for me as The Bond Buyer's Market Intelligence Analyst and a panel member for the Live Market Survey.

In addition to the insightful content provided by our panels and keynote speakers, the conference provided ample networking opportunities for attendees to reconnect with colleagues and peers as well as to form new professional relationships. It is through these conversations that many of us can interact in a less formal setting while gaining otherwise impromptu insights and opinions.

As I think about my journey through a rewarding career in municipal securities, it is the many relationships that I have formed that helped make me a better credit analyst and market strategist. Differing points of view should always be welcome, as many times they often result in a learning experience.

While functionality within the municipal securities industry can be unique across state and regional lines, there are operational, strategic, and political similarities on a national scale. Issuers, along with their advisors, attorneys and bankers, focus on the development of new funding vehicles and credit structures that not only provide them with flexibility, but also with options to address specific obstacles that may interfere with their capital plans.

While these formative discussions do not take place at a conference venue, the setting does invite some casual post-issuance banter over market acceptance and areas of success. Moving forward, better clarity as to the types of roles issuers and their municipal advisors will play in planning for capital investment in infrastructure development should emerge.

As I contemplate these conversations, there are always themes that complement those introduced across the panels. Attendees generally agree the industry is witnessing a number of key paradigm shifts that are likely to have undetermined implications for our business.

One leading example is the application of AI across all role-based disciplines and how AI can make these jobs more efficient and accretive to the bottom line. AI will impact all aspects of the economy, touching virtually every business vertical and reshaping and differentiating the views currently held by many public finance stakeholders. The dynamics of AI require creativity, a key ingredient necessary to unlock value, opportunities, and innovation.

Given that the municipal securities market is backdropped by a number of inefficiencies ? not the least of which is the large range of over 50,000 issuers ? integrating AI into best practices will be challenging. This is due to presently unquantifiable costs, the need for learning tools, the overall selection and management of the data, the importance of preserving market competitiveness, efficiency and risk mitigation and expectations for enhanced regulatory oversight.

As we think about data, we must have confidence that it is presented without compromised integrity. For market stakeholders, the question is how do we take all of this data and assimilate it into something that is far more analytically powerful? I do see AI having a significant impact upon many sectors of the muni bond market, particularly surface transportation, higher education, healthcare and airports.

There is broad agreement that policy uncertainty represents the number one concern for the municipal securities industry. While the federal tax exemption on munis survived the OBBBA, we should not be lulled into a false sense of security given that the 1988 U.S.Supreme Court decision in South Carolina v. Baker makes clear there is no constitutional protection for the municipal bond interest exclusion from federal taxation.

Congress has the ability to legislate the elimination of the tax exemption, and so I expect this issue to be revisited during future budget deliberations. Having said that, bipartisan congressional support recognizes the critical importance of preserving the tax exemption as a vehicle to support cost-effective infrastructure financing. The municipal securities community has built a very influential coalition of stakeholders spearheading the effort to lobby against the elimination of the coveted exemption, with many of these stakeholder cohorts represented at the National Outlook Conference.

As an industry, we must all remain vigilant in our mission to protect the federal tax exemption and guard against an event that could elevate borrowing costs for state and local governments and their enterprise units. We must continue to argue for the reinstatement of tax-exempt advance refundings and oppose any further assault on specific classes of municipal securities, such as private-activity bonds. While Congress may demonstrate support for the broader exemption, it tends to find ways to chip away at the periphery.

Uncertainty over monetary policy also preoccupied our downtime at National Outlook. Directional shifts in interest rates guide issuance activity, market pricing and investor preferences. The takeaway from my sidebar conversations is most participants expect continued central bank autonomy beyond installation of a new Federal Reserve chair in May.

The Iranian crisis, coming on the heels of the Supreme Court's adverse tariff ruling, adds to the geopolitical unrest and may elevate inflationary pressures, at least over the short-term, arguing against further rate cuts for now.

The other side of the monetary policy calculus involves labor market conditions. As jobs are created, we must consider any month-to-month downward revisions and the types of jobs that are being filled. In our low-fire, low-hire environment, many new jobs seem to be low-paying, service-related roles in the healthcare and education sectors.

While attendees are generally sanguine over municipal credit quality, there are concerns regarding certain sectors. On my Live Market Survey panel, I described the challenges confronting the healthcare, higher education, and K-12 sectors. Many of us agree that careful security selection has become a top priority in the portfolio management process. Now that rating agency actions are shifting ? with expectations that the upgrade/downgrade ratio will likely compress and become more balanced at a time when issuance remains heavy and stimulus funds have evaporated ? active credit research is critically important.

Threats of cybersecurity attacks were certainly top of mind at National Outlook. Cyberattacks represent a clear and present threat to all aspects of our way of life that could gravely disrupt our nation's financial system, array of infrastructure assets ? enveloping our power grid, water supply, and transportation systems ? healthcare delivery protocols, communication and information technology networks and the security of our food stock. Now with heightened geopolitical uncertainty tied to the Iranian crisis, concern over cyberattacks has greatly escalated. Rating agencies are heavily focused on the financial impact from cyberattacks and cybersecurity risk is an important aspect of the credit assessment process.