“Nobody knows anything…… Not one person in the entire motion picture field knows for a certainty what’s going to work. Every time out it’s a guess and, if you’re lucky, an educated one.”
-William Goldman
If you were to replace the words “motion picture field” in the above quote with “world,” you’d have a very accurate encapsulation of how I’ve felt since last Tuesday. Among many other things, Tuesday’s election was a lesson in being wrong. Loud wrong. I did not think that there was any chance that former “Apprentice” host Donald Trump would become President-elect, but here’s what I had to say about the possible immediate ramifications of Trump winning the election if he did: “stocks probably sell off, bonds rise a little bit in a flight to safety, mortgage rates are flat or perhaps improve a little bit in the short term.”
Another check in the “wrong” column for this guy. More on what happened after the jump.
Click here to get today’s latest mortgage rates.
The rate outlook:
For a period of time – a very brief period of time – I was somewhat correct. As it became increasingly likely on Tuesday night/Wednesday morning that Trump would win the election, Asian stocks got slammed, and Dow and S&P futures were down to the point that I believe futures trading was halted (my memory of this is somewhat clouded due to a lot of Jameson). Treasuries rallied, and it looked like we were going to see yields not seen since the night of the Brexit. Then as the markets opened, things swung in the exact opposite manner. Stocks went on a huge rally. Treasuries tanked. The most basic explanation I’ve seen for this is that there is an expectation that a Trump White House would be pro-business, cutting business taxes and slashing regulations. That would explain the stock rally. Additionally, the speculation is that Trump would pursue aggressive inflationary policy, and that the Fed would need to normalize rates more quickly than they had intended. Thus the Treasury sell-off.
Will any of this actually happen? Who knows. This is where we are right now: prior to the election, yields on 10-year Treasuries were sitting somewhere around 1.80-1.85%. Now they are around 2.15%-ish. Mortgage rates got smashed accordingly. I think this is the worst run for mortgage rates since the taper tantrum of 2013. No matter where you look, rates rose by somewhere between 1/8 to 1/4 from Wednesday to the end of the week.
The markets are truly in a wait-and-see mode. You could make plausible arguments for rates going either direction. A lot of it depends upon what the President-elect says or tweets between now and January 20th. Expect the markets will be as volatile as the President-elect has shown himself to be. Anything is in play. There’s a lot of economic data coming out this week. The implied probability of a Fed hike in December is now around 80%. I don’t think any of it matters right now. We’re all waiting to see what happens.
If the last week has taught us anything, it is that attempting to predict the future is complete folly. It sure looks like rates are headed up, but again – who knows? If you’re been considering refinancing but have been on the fence, your window may be closing. If you’re buying a home, your purchasing power just diminished a bit. What happens in the longer term is a complete mystery. Despite the increase, rates are still low on a historical scale. Rates have been low for longer than anyone have predicted. Perhaps we are at a turning point. I simply do not know, and neither does anyone else. Now might be a time to go with your gut.
It’s time to see if you can save money. Contact us now.
from Total Mortgage Underwritings Blog http://ift.tt/2ewTOzu
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