As Americans went to the polls to exercise their right to vote for president, global markets took notice.
When Donald Trump was declared president elect, the market reactions overnight were as wild and unpredictable as the election itself. Dow futures were down more than 800 points in the wee hours of the morning, only to close up 250 points Wednesday. Further, the Dow Jones Industrial Average opened Thursday at a new all-time high.
Investors may feel the win is more Stock-market friendly with potential tax cuts, deregulation of banks, and higher defense and infrastructure spending. There is also speculation that President-elect Trump's anticipated policies could spur a rise in inflation.
Rallies in the Stock markets and inflationary increases both can have a negative effect on Mortgage Backed Securities, the type of Bond to which home loan rates are tied.
In other news, weekly Initial Jobless Claims continue to signal a robust job market. The Labor Department reported that the number of Americans filing for first-time unemployment benefits fell 11,000 to 254,000 during the week ending November 5, below the 262,000 expected. First-time claims have now remained below the 300,000 mark for 88 consecutive weeks, a stretch not seen since 1970.
For now, home loan rates remain attractive despite edging higher recently.
If you or someone you know has any questions please don't hesitate to contact me.
Forecast for the Week
Inflation, housing and manufacturing reports will stand out in this data-rich week as the Fed gears up for its Federal Open Market Committee meeting in December.
The Retail Sales report kicks off the week on Tuesday.
Regional manufacturing data comes from the Empire State Index and the Philadelphia Fed Index on Tuesday and Thursday, respectively.
Inflation metrics will be shared in the Producer Price Index on Wednesday and the Consumer Price Index on Thursday.
Housing market data is plentiful starting with Wednesday's release of the NAHB Housing Market Index followed by Housing Starts and Building Permits on Thursday.
As usual, weekly Initial Jobless Claims will be delivered on Thursday.
Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve. In contrast, strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond on which home loan rates are based.
When you see these Bond prices moving higher, it means home loan rates are improving. When Bond prices are moving lower, home loan rates are getting worse.
To go one step further, a red "candle" means that MBS worsened during the day, while a green "candle" means MBS improved during the day. Depending on how dramatic the changes are on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.
As you can see in the chart below, Mortgage Bonds took a dive recently following the presidential election. Bond markets were closed Friday, November 11 in observance of Veterans Day.
Chart: Fannie Mae 3.0% Mortgage Bond (Friday Nov 11, 2016)