Interest rates are currently hovering at all-time lows. Will that change after the Presidential election? Let’s take a look at what’s happened after each Presidential election during the past 20 years:

2016: Interest Rates Shot Up by Approx. 1% Within 60 days. This was due to the huge stock market rally after Trump won the election. The stock rally caused a sell-off in the bond market, which caused interest rates to jump higher. If Trump wins this time around, it’s unlikely that stocks will rally significantly because stocks are already at all-time record highs.

2012: No Change to Interest Rates After the Election. This was likely due to the fact that the incumbent (Obama) won the election, meaning that no significant change to policy was anticipated.

2008: Interest Rates Declined by Approx. 1% Within 60 days. This was primarily triggered by the Fed’s massive bond-buying program that kicked off in late 2008. This was the first time the Fed began buying mortgage bonds.

2004: No Change to Interest Rates After the Election. This was likely due to the fact that the incumbent (Bush) won the election, meaning that no significant change to policy was anticipated.

2000: Interest Rates Declined by Approx. 0.5% Within 60 Days. This was likely because the election was contested, causing stocks to falter on the uncertainty. Investors flocked to the safety of bonds, causing interest rates to decline.

Conclusion: If Trump wins, and the election is uncontested, interest rates may not change. If Biden wins, and the election is uncontested, interest rates may decline if the market senses that a change to policy may be forthcoming. If the election is contested, it’s possible that stocks could sell-off and rates could decline as investors flock to the bond market for safety. Of course, interest rates are already at all-time record lows. Is it likely or even possible for rates to decline further? Time will only tell. Please contact me for more info or to evaluate your options!

Source: CMPS Institute

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