I Hate To Talk Politics, BUT…

We have all been warned of the three taboo conversation topics: sex, religion, and politics. Touching on such subjects with others often leads to conflict or misunderstanding. Wikipedia even admits on their web site that “its nearly impossible to provide a neutral point of view” on these matters.   And yet, NOT discussing politics in our current climate is nearly impossible as well, even for a guy like me who wants to focus on economics rather than politics.

So here it goes; my bold attempt to lace politics into my Part-Professional, Part-Personal, Rarely-Ever-Political blog.

Political news is everywhere!  Its even prevalent on financial (see below), fashion (peek at GQ’s polarizing Facebook video page) and sports (Google “Ass or Asset”) news sources .

Check out this screen shot I took last night when visiting www.Money.CNN.com, my preferred source of financial and market news. Every single one of the top 10 headline stories covers some element of President Trump’s administration; they even have a page titled “Trumponomics.”  The unavoidable reality is that our politics are shaping our economics, including mortgage rates.

As I’ve been preparing my Annual Market Forecast post (coming soon!), I’ve realized I must understand our political affairs in order to best counsel my clients about the recent and potential future changes in interest rates. For example, mortgage rates and other financial markets have been incredibly volatile since Election Day due to the foreshadowing of how our world may be different under a Trump Administration. In fact, the term “Trump Effect” has been coined as a reference to the markets being indirectly influenced by President Trump. For example, on good stock market days, you’ll read headlines such as “Dow closes above 20,000 for first time as Trump actions spark rally” and “Trump tax talk lifts Wall Street to record high.” And on down days you’ll see “Will Trump kill the Trump rally?” and “Is Wall Street starting to show Trump regret?”

Like it or not, our economics are closely tied to our politics, and it seems that in the near term market movements will be directly correlated to President Trump’s every move, meeting, tweet, and executive order.

So here is the economic takeaway from this tip-toed political blog post: the more volatility, uncertainty, and controversy surrounding President Trump’s first 100 days in office, then the more likely we will see mortgage rates drop.  Markets disfavor uncertainty, and when it comes money flows to safer investments such as bonds and mortgages. On the other end, the more focused he becomes on pushing his domestic promises to cut taxes, deregulate industry, and increase infrastructure spending, then the more likely we will see mortgage rates rise. If you are in the market to purchase or refinance a home in the coming months, then the inescapable political headlines you encounter every day have more impact for you, as the Trump Effect on mortgage rates will surely be at play in the weeks to come.