Market update, post election: What happened to interest rates?

Market update, post election: what happened to interest rates?

Well, it started yesterday, Tuesday November 4th.  There was a big sigh of relief in the credit markets where we saw one of the biggest rallies we have seen in a long time, and the prices of mortgages were driven WAY up by the end of the day.  If you read any of my updates, by now you know that price up is a good thing!  It takes the price to go up for the yield to go down. That relief rally has carried into today with some more gains. On the Equity side of the equation we saw one of the biggest election day gains ever, only we lost everything we gained yesterday and then some. But that is just stocks.. Not bonds and mortgages... So do not get caught up in what stocks are doing, the media does not report on the credit markets, and the credit markets are doing well.

It is typical to see the election day, post election day rally in the markets but it is typically short lived. This week the calendar looked busy, but the election took over and the next big news will be Friday's employment Report. The Non-Farm payroll number is expected to lose 200,000 jobs, the rate is expected to be 6.3% and average hourly earnings are anticipated to be up +0.2%.  There is hardly any doubt that the report will not paint a pretty picture, the question is how ugly will it be? The anticipated numbers will support steady to fractionally lower rates. If there are significantly fewer jobs lost and the jobless rate 6.1% or better it is likely rates will move higher fairly quickly.

The bulk of the news is and was anticipated to show a slow economy and it was priced into the market. This bad news is typically good news for interest rates.  As far as rates go we have seen significant improvements this week over last with a 30 year fixed rate coming in about 0.5% lower than we saw last week. A 50 basis point move in a week is significant.

Now that the election is over I hope to see the market get a little happier. The Negative campaigning and mudslinging are over and the stack of negative post cards in your mail box wont be there this afternoon. No matter what your politics are, or what you believe.... The election being over is a good thing. Change is what people wanted and they can now move forward in the hopes that there will be improvement in the economic climate. This alone will help to raise consumer confidence and the consumer will not hold on to their dollars quite as tightly. As the consumer spends the economy improves.(We just need them to start buying houses!) I am sure there is some pent up demand in real estate now, and I wont be surprised if your phone starts ringing with people looking for their next home.

Have a great week!

Rob

Robert Rauf

www.RobertRaufHomeLoans.com