Everything Election-related

Last week saw a powerful rally in the stock market and an unexpected Fed rate cut, driven by Donald Trump’s victory in the presidential election.

The election results boosted market confidence, with the S&P 500 and Nasdaq reaching record highs and the Dow topping 44,000 for the first time. Gains were led by sectors like consumer discretionary, energy, and finance. Major players like Wells Fargo and Morgan Stanley surged.

U.S. mortgage rates went up, driven by a surge in the 10-year Treasury yield, reaching 7.13% for a 30-year fixed mortgage. This increase has led to a drop in housing stocks, with companies like Lennar, D.R. Horton, and Home Depot all seeing declines.

Here’s a little Mortgage 101: Higher mortgage rates make home purchases more expensive. So with mortgage rates going up, a $400,000 mortgage now costs $216 more per month than in early September. But somehow that doesn’t change a dang thang, existing home sales have risen due to higher inventory levels. So what about future of mortgage rates? As pretty much always, it will depend on inflation, economic performance, and Treasury issuance.

Which is a great time to say that this week’s focus shifts to key economic reports, especially inflation data and consumer spending, which will signal the economy’s trajectory heading into the holiday season.

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TARIFFS AND HOMEBUILDING COSTS

Now that Donald Trump has been elected, one of the first things that US economists are grappling with is the President’s very publicly proposed tariffs on imports. This includes significant hikes for goods from China and Mexico which could further increase U.S. homebuilding costs.

And look, these are just assumptions based on the trends from his previous term, when tariffs on Canadian lumber led to steep rises in construction costs. Current tariffs on Canadian lumber under the Biden administration have already tightened supply and increased prices, impacting housing affordability.

Economists warn that a 10% universal tariff could raise inflation by nearly a percentage point, placing extra pressure on U.S. manufacturers and consumers.

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