June 6th, 2017 8:40 AM by Steven Hofberg
Whew! What a nail biting election. My initial reaction is that I am happy it is over, and I reserve judgment on the rest. Whichever side you are on, life, and the markets, go on.
The first and most obvious thing to notice is the uncertainty generated by the election of President-Elect Trump. Markets dislike uncertainty and almost always react negatively to it. The question for many market participants is whether President Trump will be mostly like Candidate Trump, or will there be some hedging. Initially the stock market futures were predicting a huge (“huuuge”?!) loss on Wednesday, but a well-received acceptance speech by Trump and some pleasantries exchanged by Trump and President Obama seemed to calm the markets down, and in the end the equities markets did extremely well last week.
In the mortgage markets, rates increased by about 0.500%, largely because the yield on the 10 year US Treasury Bond shot up to over 2.000%, the first time in almost a year that it is above that mark. Add that to the widely expected increase in short-term rates by the Fed in December, and an increase in inflation, and you get higher borrowing rates, at least for now.
It is important to note, however, that much of this market activity has as its basis uncertainty, and therefore volatility (the volatility index has risen sharply as well). Many important events are still to come. Among the most important is Trump’s selection for Treasury Secretary. Front runners being discussed are the super anti-regulation Representative Jeb Hensarling (R-Tex), and the CEO of JP Morgan Chase, Jamie Dimon, both of which signal a more business-friendly economy.
Enjoy your weekend!
Kindly,Steven Hofberg Operations Manager Residential Mortgage Center Inc.