Election Day is Here

It’s election day, and voters are coming out strong to support their candidates.

The key issue driving many Americans’ vote is, of course, inflation. Although polling numbers can change as the day progresses, www.FiveThirtyEight.com is predicting an 84% of the GOP winning the House and 59% odds of taking the Senate.

Inflation is created when there are too many dollars chasing too few goods. For that reason, the mortgage bond market would love to see spending in our US economy fall.

With the US Government being the largest single spender in the nation, the best solution to slow government spending is to create gridlock where the two prevailing parties are fighting to prevent each other from accomplishing their political spending goals and objectives.

For this reason, we will likely see the bond market react positively if the GOP takes both branches of Congress. This could help improve mortgage interest rates, at least a little.

One of the greatest forward indicators of where the US economy is heading can be found by looking at Consumer Confidence. As we can all relate to, as the cost-of-living increases, Consumer Confidence generally declines.

Given the current state of inflation combined with fear over the uncertainty of a looming recession, Consumer Confidence is near its lowest point in a decade. Since Consumer Spending falls as Consumer Confidence drops, this should help achieve the Fed’s goal of getting inflation back to acceptable levels.

Since mortgage bond prices remain beneath their 25-day moving average, the rules of when to float vs lock would support a locking bias.

If you choose to float in hopes of the election results improving bond prices, do so carefully.