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July
21
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Week In Review

Housing

US housing starts in June increased 8.3% to an annualized rate of 1.22 million, and May starts were revised upward to 1.12 million from 1.09 million. This uptick follows a three month slide.

Our Take

The June data breaks what was a concerning trend, although it is likely too little too late to support an uptick in 2Q GDP.


Brexit

The latest round of Brexit negotiations ended with key differences no closer to resolution. The UK and the EU remain far apart on the size of the exit bill, the jurisdiction of EU courts for EU citizens within Britain, the movement of EU citizens into the UK, and the border between Northern Ireland and Ireland.

Our Take

Both sides are on a course towards a hard Brexit with no trade deal in place at the time Britain leaves the EU. This would be the worst option for residents of both the UK and the EU, but political leaders are thus far not willing to move on some major issues.


Municipals

Standard & Poor’s downgraded Alaska’s credit rating from AA+ to AA with a negative outlook this week. Moody’s Investors Service downgraded Alaska from Aa1 to Aa2 with a negative outlook last week. S&P warned Alaska a month ago that a downgrade could occur if the state’s lawmakers didn’t address fiscal reforms.

Our Take

Alaska continues to struggle with falling oil prices and a budget shortfall due to the state’s dependence on oil revenue. Alaska has relied on reserve funds to fill budget gaps as oil revenue has declined. Lawmakers must work to implement budget reforms and close the budget gap. The recent downgrades will likely lead to increased borrowing costs for the state.