Trump = Lower Rates; Hillary = Same or Higher Rates; Why? Stability

We have blogged several times about how rates are not held artificially low prior to major elections. It is a myth that they are.

Presidents in fact like to see proof that the economy is getting stronger, and these signs usually push rates higher. Presidents hope for positive signs like GDP growth, job growth, lower unemployment, etc. These signs usually push investors into stocks and out of bonds, causing rates to go up.

Quick reminder: When investors demand more stocks, rates go up; when investors demand more bonds, rates go down.

With respect to Trump and Hillary, it is all about “stability.” Stock market investors like “stability” as much as they like growth. Worries about instability or shakeups send investors away from stocks and into the safety of bonds (pushing rates down).

Investors believe that Hillary will follow President Obama’s course, and this is perceived as “stability.” So, signs that Hillary might win will probably keep investors in stocks which will ultimately keep rates largely the same.

Investors are not sure what Mr. Trump might do, so signs that Trump might win will probably push investors to the safety of bonds, pushing rates lower. This is very similar to the uncertainty the Brexit vote created and its influence in pushing rates lower.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646