The rally for stocks and crypto following Donald Trump’s U.S. election win is a head fake that diverts attention from several investing and personal finance pain points ahead.
Mr. Trump was seen as better for stocks than Democratic candidate Kamala Harris, and he’s thought to be a booster of crypto currency. The S&P 500 and several cryptocurrencies surged in morning trading on Wednesday, but signs of trouble were there if you looked for them in the bond market.
Investors sold U.S. Treasury bonds, which has the effect of making bond yields rise. Why we care about bond yields in the United States: They have a big influence on bonds here in Canada and, in turn, on the cost of mortgages.
Mortgage rates are well off their recent peaks, but still well above the level where many homeowners locked in several years ago. Waves of these homeowners will renew mortgages in the next 12 months, and they have to be wondering how much more they’ll be required to pay. Events in the bond market suggest further mortgage rate cuts aren’t imminent, a point worth noting if you’re on the housing market sidelines waiting for lower borrowing costs.
Stocks rise and fall on expectations for corporate profits, while bonds are dependent on how investors view economic prospects, including inflation. Mr. Trump’s plan to introduce tariffs on imports is considered inflationary because it will increase the cost of imported goods, while also potentially slowing growth.
Something else investors worry…
