I think it is safe to say that the new presidency will mean the opposite of the status quo.
1. Trade - this is the biggest area of concern. When the election results were hitting the news, there was a 1% drop in CDN and an 8% drop in the Mexican peso. President-elect Trump has emphasized his plan to pull out of some trade deals and likely, the trade deals that are in the works are dead.
2. Taxes - There will be a notable rise in budget in the years ahead to pay for the infrastructure spending. In an effort to get American companies to return to US, he will be reducing the corporate taxes to make it attractive for their return from off-shore operations. This will increase our deficit in addition to the infrastructure spending.
3. Regulations in energy, financial services and healthcare will be addressed. Trump has pledged to do away with Obamacare and Dodd-Frank.
4. Monetary Policy - this will be the strongest point that will affect the markets and subsequently affect the real estate market. There is a 50% chance of a rate hike. The cost of money will go up and inflation risk is high with a more aggressive fed hike expected within 2 years. The ten year will have a much more significant impact than the results after Brexit. More spending will ultimately lead to more net treasury issuance.
Janet Yellen's position ends in 2018. Will she resign? We know that Trump has said that she should be ashamed of herself.
The strongest indicator of the months and years to come is the Ten Year Treasury Bond. The yield on the 10-year note TMUBMUSD10Y, +0.00% gained 4.9 basis points to 2.118%, its highest level since Jan. 11. The four-day advance was the 10-year’s largest since June 24, 2013. Credit: Marketwatch
The result of the rise in the ten year, will mean a sell-off of stocks and a decline in the stock market. This will inevitably lead to a downturn of markets and ability for real estate purchases. Additionally, interest rates are expected to increase, making the cost of money more expensive. The outlook for the next 12 months - 24 months is a buyer's market.
Michelle Farber Ross