IFM Correspondent

November 14, 2016: Mortgage rates have quickly surged ever since Trump was declared the victor of the US presidential election. Rates modestly changed, with the benchmark 30-year fixed mortgage rate rising to 3.73 percent, according to Bankrate.com’s weekly national survey.

After results of the elections came out, financial markets expected turmoil. However, Trump’s acceptance speech soothed investors who were previously sceptical about a Trump victory.

The prospects of higher government spending and more government borrowing for infrastructure improvements sent long-term Treasury yields racing higher. The 10-year Treasury note yield soared above 2 percent on November 8, closing at 2.07 percent, the highest since January 22.

The benchmark 15-year fixed-rate mortgage rose to 2.97 percent from 2.96 percent while the benchmark 5/1 adjustable-rate mortgage rose to 3.15 percent from 3.14 percent.

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IFM Correspondent

November 14, 2016: Investors endured a rocky day of trading after the shock election of Donald Trump as the next US president sparked a bout of unusual volatility that rocked financial markets around the world.

Shares and bonds whipsawed violently as initial concerns about a Trump presidency gave way to cautious optimism that the businessman-turned-reality-television-star would be less divisive than originally feared.

The FTSE 100 dropped as much as 146.8 points at the opening of trade, only to recover remarkably and close up 68.71 points, or 1pc, at 6,911.84, a rally mirrored in Europe and the US. While futures on the Dow Jones Industrial Average at one point plunged more than 800 points, the US benchmark index was up 1.4pc, or more than 256 points, by the end of the day, just 0.25pc off its record high set in August.

Mark Haefele, global chief investment officer at UBS Wealth Management, said Mr. Trump’s acceptance speech, in which the Republican outsider with no government experience struck an unexpectedly conciliatory tone, soothed some investors’ worst fears.

“We clearly saw the market turn when Donald Trump began speaking and rather than continuing with divisive campaign rhetoric, thanked Hillary Clinton, said he would reach out to all Americans and the Democrats for guidance,” said Mr. Haefele.

In the early hours, before his speech, markets initially panicked as it became apparent he would win, with Japan’s Nikkei 225 stock index slumping 5.4pc and the dollar sharply weaker.

“We had a knee-jerk reaction,” said Phil Poole, head of research at Deutsche Asset Management. However, hopes that Mr. Trump will pursue pro-business policies that will stimulate economic growth, along with his overtures towards the Democrats, helped to spark a rally in the dollar and equities, and saw gold fade.

“He spoke about jobs, he spoke about lower taxes, he also spoke about infrastructure,” said Mr. Haefele. Investors are now betting that Mr. Trump’s focus on infrastructure spending and tax cuts will be inflationary. Treasuries, which had earlier been in demand, were sold-off and 10-year yields spiked as high as 2pc.

Stock markets were also buoyed by expectations among some investors that global central banks will keep monetary policy loose amid the uncertainty caused by Mr. Trump’s victory, although the consensus was still for the US Federal Reserve to hike rates in December.

“People have taken a view that this doesn’t change the over-riding importance of monetary policy and that monetary policy is going to remain extremely loose,” said Mr. Poole.

As the shock waves from the election rippled through the business world, JP Morgan boss Jamie Dimon warned employees in a memo that “we need to listen to those voices” that elected the Republican. Analysts also urged caution that investors should not be over-optimistic.

“If we look at all his pronouncements around policy, they’re not necessarily consistent, they’re not well fleshed out,” said Mr. Poole. “Investors need to watch very closely who Trump appoints, what his team’s going to look like and the extent to which that team is experienced. These are all going to be very important signals in determining just what kind of Trump we’re going to get.”

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IFM Correspondent

October 24, 2016: Only a few weeks is left before the US chooses its 45th president. Historically, every US president elected till date has faced a recession or a recession-like scenario. A Wall Street Journal survey in June of more than 60 economists shows that the odds of a recession within the next 12 months are about 21%, a rise of two percentage points higher than the poll taken in April.

“If the next president is not going to have a recession, it will be a US record,” said Gad Levanon, chief economist for North America at the Conference Board in New York. In the United States, the unofficial beginning and ending dates of national economic expansions have been defined by National Bureau of Economic Research (NEBR), a private non-profit research organisation. The NBER defines expansion as a period when economic activity rises substantially, spreads across the economy, and typically lasts for several years.

It might be recalled that when President Barack Obama took office in January 2009, the nation was in midst of the Lehman crisis. When George W Bush started his tenure in 2001, he inherited a recession-like scenario.

The current economic expansion, which is 83-month-old, is already the fourth-longest in more than 150 years. According to studies, it is showing signs of wearing off. In fact, the history of cyclical expansion suggests that the odds are significantly better than 50-50 that the US will have a recession within the next three years. US’s real GDP growth is on a downward trend over the last four quarters, according to the US Bureau of Economic Analysis (BEA).

A lot will also depend on how Brexit unfolds. An unstable EU will affect US in more than one way. Exports, which have been a major contributor in the nation’s post 2008 economic recovery, has suffered in the past few years, thanks to slower growth in Europe. Brexit will only exacerbate this. Historically, the UK has acted as the main channel for US to express its political and economic will in Europe. With the UK out of the European Union, the US will find it harder to influence Europe.

Hence, many are of the belief that the US is overdue for a recession even if Clinton comes to power. According to a report in Yahoo, findings by Tax Foundation show that a Clinton presidency would reduce GDP by 1% over the long-term and cause a 0.7 percent drop in after-tax income for the top 10% of taxpayers.

However, Tom Elliott, deVere Group’s International Investment Strategist, does not foresee much change if Clinton wins. “Assuming Clinton wins, I don’t expect much change from current growth rates (between 1 and 1.5%). She will be under pressure to be ‘tough’ on foreign trade, so Pacific and European trade deals look vulnerable. But the positive effect of completing these is only long term.”

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