With the election of Donald Trump to the Presidency, investment markets have moved in diverging manners. While DJI futures dipped as low as 855 points and the yield on the 10-year UST fell by 14 basis points, both have since recovered with the DJI approaching a 100 point increase and the 10-year UST now at about 11 basis points higher than at the domestic open – and at an eight-month high to boot.
Why the recovery? Perhaps the prospect of unilateral Republican control of the Presidency and Congress soothes the perception of political stalemate.
Why are yields out so widely? This early after the result, it is anyone's guess.
My opinion is that Mr. Trump's campaign clearly identified a strategy of cutting government revenue (taxes) while ramping up government spending. This would, in a non-dynamic environment, result in higher government budget deficits, which then would lift U.S. government borrowing costs. Again, this is my perception and investors may be pricing these expectations in in the immediate aftermath of the election.
Even with “friendly” control in Congress, I believe President-Elect Trump will find Washington much more difficult to navigate from a policy perspective and our international trade partners will obviously take their own positions on our government debt, not to mention other securities such as equities, fixed income and, of course, real estate.
In the meantime, remember that the media will be telling you all the things that will happen as a result of the thing they said wouldn’t happen.
Make up your own minds.
Having just landed in Doha, Qatar – I assure you, not as part of a pre-meditated Election Day evacuation plan – I am confronted immediately with concerns about international reaction.
I promise to bring you sentiment from the Middle East in real-time.
Jimmy Hinton serves as Managing Director of HFF, responsible for the firm’s national research efforts. Mr. Hinton works with the executive management team to assist in investor relations and to inform both HFF staff and firm clients with in-depth analysis of economic, property and capital market trends. He is also responsible for providing extensive market reports, client presentations and deal-specific analysis for debt placement and investment sales assignments. Mr. Hinton’s responsibilities include substantial interaction with pension funds, life insurance companies, regional and CMBS lenders, REITs, foreign investors and private equity funds.
During his tenure at HFF, Mr. Hinton has supported the execution of more than 150 commercial real estate transactions totaling more than $4.5 billion in 20 states. Mr. Hinton has experience in fixed- and adjustable-rate debt, mezzanine debt, construction loans and joint venture executions on behalf of clients engaged in the acquisition, development and recapitalization of property types including multi-housing, industrial, office, retail, medical office and storage properties.