Effect of Trump's Economic Policies on Interest Rates
Investor · Denver, PA · Member since 2015 · 193 posts · 55 votes
Effect of Trump's Economic Policies on Interest Rates
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Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
9yWhen economic performance is viewed through a political window of presidential time lines you have skewed and incorrect assumptions made, usually simply to place blame on some administration, political garbage. The performance or lack thereof in 2008 wasn't tied to that political administration, the effects that began those results were from prior years. The lag time of cause and effect isn't understood by those attempting to set economic performance at the foot of some president.
Do recall, 9/11, 2 war fronts, balloon popping in the finance world all had an impact on the economy which has been improving or rebounding, some facets react quicker than others, you can't turn a battleship on a dime like a jetski. All ships don't turn at the same time or in the same space.
To measure the performance of an administration you need a starting line of where one was when they took command, then measure out to the end of that period of command and follow up in some segments a few years after someone leaves office, such as employment, that can have a very long cycle, especially when it is severe.
Rates have been kept down to stimulate economic growth, rates will increase. The question is, how high?
Initially the financial markets have reacted to the unknown of a Trump administration, in a few months they will react again as more unfolds. Interest rates move faster than any other indicator, they change daily, might call them the jetski. I expect a quicker or accelerated rate of interest rate hikes, that will come from our new economic direction.
So far, we are hearing of privatized social security and Medicare, money into the market place, stock prices up, bonds down, interest rate up.
Infrastructure rebuilt, capital finds a new home, for those who may not know, banks fund such projects, where is their best return (?) with subsidized projects, not your remodel job, that's an interest rate up for residential construction.
My bet is that Mexico won't be paying for any wall! Folks in Berlin didn't pay for their wall, so I'd say it will be the tax payer's wall.
We've already had a thread on this, interest rates up, home prices down.
We still aren't out of the woods from the mortgage crash, much of the money generated from poor practices ended up in commercial loans, those foreclosures are still in waves. since many bad loans have been reset, they are now increasing home foreclosures, again, it takes decades to recover, not years. But, like the poor, foreclosures will always be with you.
As Warren Buffet mentioned about 4 years ago, the economic war between the rich and middle class in this country has been going on for a long time, (decades) and the rich are winning. No skin off my tail any way you look at it, but the middle class and poorer aren't just losing the war, you're going to get creamed!
So, I kinda look at signals, reading between the lines as to how big business will act, operate and perform. Unless you're a large stockholder I'm not seeing middle class relief. Real estate can be a hedge, just don't own anything that can possibly get in their way.
While tax rates are to be changed, your real tax liability may well go up, talk is to eliminate dependent deductions, so those young parents will carry a larger burden, that may well mean no new home, or moving to a nicer rental. In 2018 or 2019, will landlords be knocking on more doors in May to collect rents? We will see.
I'd say you can kiss energy deductions goodbye, building green will cost more.
My bet is that corporate welfare will be in it's heydays, if you think material prices, lumber and labor costs will go down, someone drank some kool-aid. If there is money on the table it will be taken as profit!
While I might leverage a deal, I don't borrow for what I need or want, if rates were 18% as they were in the 80's, the deal just has to be better and there were good deals in the 80's!
We always make it through regardless of who is in the Executive Branch, opportunities always exist in real estate, just need to really learn the rules of the game and go forward. Good luck :)
5 Replies
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes9y
We've had incredibly strong economic growth over the last 8 years and we're mostly a falling interest rate environment.
I do believe interest rates will rise whether we are in a good or bad economic environment, and they have risen by about 2/3 of a point since the election already.
District Invest Group545 Reviews - Investor · Denver, PA · Member since 2015 · 193 posts · 55 votes9y
Hi Russell,
Thanks for your reply. Not to be a contrarian, but what market indicators do you look at that indicate strong market growth over the past eight years? I know the stock market has gone way up, but there are reasons for this not related to actual market growth from what I understand (quantitative easing for one). Over the past eight years for the first time in American history GDP growth has not risen above 3%. Also since 2008 the labor participation rate has been steadily dropping up until 2016 when we've started to see somewhat of an improvement finally. Please see chart below.
http://data.bls.gov/timeseries/LNS11300000
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes9y
Every economic indicator available. Gdp, unemployment, stock market, bond market. You might think 3% growth is small, but when translated to a real number that's $2 trillion to $4 trillion the US has added to GDP in the last 8 years depending on source. That's like adding anywhere from the 7th to 3rd largest economy onto our own economy.
Instead of looking at the media coverage of the economy I prefer to look at the actual numbers. If we have 3% growth again that's about $500 billion added to GDP.
Just like with a stock, it's far easier for a company with a market cap of say $100 million to have 100% growth than for a company with $100 billion market to have say 5% growth. When you are working with large numbers, even smaller percentages are incredibly large numbers.
District Invest Group545 Reviews - Investor · Denver, PA · Member since 2015 · 193 posts · 55 votes9y
Point taken, and you may be right, but if you're saying the main reason GDP hasn't risen above 3% in the past eight years for the first time, is because our economy is already so large, then why did we see +3% GDP growth as much as we did in the past up until the last decade? For at least 50-60 + years the US has had the world's largest economy by far, yet +3% GDP growth was fairly normal and I don't think we ever went 8 years without getting above 3%.
So if the reason for <3% GDP growth now is that our economy is already so large in comparison to others, why did we still see >3% GDP growth over the past 50-60 years...during which time I believe our economy was always by far the largest in comparison to other countries as well.
But to get back to my main question, let's just assume for the sake of argument that GDP rises to 5% for the first time in years in 2017 (not saying this is likely to happen, just a hypothetical). What effect would you all see that having on interest rates, housing prices, and the rental market in general? Realizing of course that individual areas will all fare differently.
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes9y
When economic performance is viewed through a political window of presidential time lines you have skewed and incorrect assumptions made, usually simply to place blame on some administration, political garbage. The performance or lack thereof in 2008 wasn't tied to that political administration, the effects that began those results were from prior years. The lag time of cause and effect isn't understood by those attempting to set economic performance at the foot of some president.
Do recall, 9/11, 2 war fronts, balloon popping in the finance world all had an impact on the economy which has been improving or rebounding, some facets react quicker than others, you can't turn a battleship on a dime like a jetski. All ships don't turn at the same time or in the same space.
To measure the performance of an administration you need a starting line of where one was when they took command, then measure out to the end of that period of command and follow up in some segments a few years after someone leaves office, such as employment, that can have a very long cycle, especially when it is severe.
Rates have been kept down to stimulate economic growth, rates will increase. The question is, how high?
Initially the financial markets have reacted to the unknown of a Trump administration, in a few months they will react again as more unfolds. Interest rates move faster than any other indicator, they change daily, might call them the jetski. I expect a quicker or accelerated rate of interest rate hikes, that will come from our new economic direction.
So far, we are hearing of privatized social security and Medicare, money into the market place, stock prices up, bonds down, interest rate up.
Infrastructure rebuilt, capital finds a new home, for those who may not know, banks fund such projects, where is their best return (?) with subsidized projects, not your remodel job, that's an interest rate up for residential construction.
My bet is that Mexico won't be paying for any wall! Folks in Berlin didn't pay for their wall, so I'd say it will be the tax payer's wall.
We've already had a thread on this, interest rates up, home prices down.
We still aren't out of the woods from the mortgage crash, much of the money generated from poor practices ended up in commercial loans, those foreclosures are still in waves. since many bad loans have been reset, they are now increasing home foreclosures, again, it takes decades to recover, not years. But, like the poor, foreclosures will always be with you.
As Warren Buffet mentioned about 4 years ago, the economic war between the rich and middle class in this country has been going on for a long time, (decades) and the rich are winning. No skin off my tail any way you look at it, but the middle class and poorer aren't just losing the war, you're going to get creamed!
So, I kinda look at signals, reading between the lines as to how big business will act, operate and perform. Unless you're a large stockholder I'm not seeing middle class relief. Real estate can be a hedge, just don't own anything that can possibly get in their way.
While tax rates are to be changed, your real tax liability may well go up, talk is to eliminate dependent deductions, so those young parents will carry a larger burden, that may well mean no new home, or moving to a nicer rental. In 2018 or 2019, will landlords be knocking on more doors in May to collect rents? We will see.
I'd say you can kiss energy deductions goodbye, building green will cost more.
My bet is that corporate welfare will be in it's heydays, if you think material prices, lumber and labor costs will go down, someone drank some kool-aid. If there is money on the table it will be taken as profit!
While I might leverage a deal, I don't borrow for what I need or want, if rates were 18% as they were in the 80's, the deal just has to be better and there were good deals in the 80's!
We always make it through regardless of who is in the Executive Branch, opportunities always exist in real estate, just need to really learn the rules of the game and go forward. Good luck :)
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