Election Surprise Pushes Up Rates, But Should It Have?

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Most people probably came to this week’s rates update expecting bad news. One of the most popular facts thrown out by analysts as Donald Trump’s election creeped toward inevitability was that the Dow futures and S&P 500 both took hits even more drastic than those caused by 9/11. Using that logic, most would assume that mortgage rates would skyrocket as well. Of course, this result would fly in the face of the lead-up to the election, where any news that favored Trump also favored bond markets. Therefore, we could have expected lower rates, if anything, in the immediate fallout to the election.

It didn’t happen. Why not?

As many have pointed out, the presidential elect hasn’t made many of his plans for the future rock-solid. However, those interpreting his stated goals have previously determined that his financial policies ultimately damage bond markets and push rates up in the long run (as in, across four years).

The ambiguity of his plans and these predictions have, until now, failed to make them relevant to rates. Perhaps the surprise of his victory shocked prognosticators into making a rash change-of-mood that led to, yes, “bad news.”

The average lender issued rates on Wednesday that were, on average, one-eighth of a point above what they had suggested on Election Day itself. Some even pushed rates up a full fourth. This marks the most rapid shift in rates since 2013’s “Taper Tantrum.”

With rates currently sitting around 3.75 percent on a 30-year fixed rate, it’s hardly the ideal time to lock in. After all, the S&P 500 and DOW both started moving quickly back toward normalcy the next morning. Mortgage rates could easily ease down to the 3.625 percent range in the next few weeks as well.

A more pressing question, perhaps, is what impact will Trump’s election have on the Federal Interest Rate? Janet Yellen and co. have certainly found less shocking developments to justify a delay in raising the rates. Is it possible that December’s anticipated increase could be pushed back into 2017?

Crazy developments in the market. Keep up to date and be prepared for more sudden surprises over the next few months. No need to panic—only a need for vigilance.