Higher Rates Hurting Trump Donors?

Today is a light day for economic news, and it’s a relatively light week overall.  This is good right now for the bond market, as the technical picture is slightly favoring mortgage bonds at the moment.  In fact, mortgage bonds broke above their 100 day moving average in early morning trading.  However, until the breakout is considered “decisive”, we should hold off on celebrating too much.  Since this has been a barrier for mortgage bonds since September of last year, chances are strong that bonds will quickly fall back beneath this critical level.

After facing a total of five interest rate hikes during his presidency so far, President Trump is complaining to his donors about Fed President Jerome Powell’s continued hikes.  Higher rates are adding a fierce headwind to the strength of the U.S. economy.  In fact, continued hikes are almost certain to eventually lead to a recession here in the U.S.  Although Powell is viewed as more of a ‘Hawkish’ Fed President than his predecessor, Janet Yellen, Trump seems surprised that Powell is continuing the same path as Yellen.  This is causing pressure to many of Trump’s donors whose businesses tend to thrive in an environment of cheap money.  This should lead to an interesting battle in the months to come as economic pressures tighten.

Until the move in the mortgage bond market has some wings behind it, we will maintain a locking bias.