Shares of Home Depot (NYSE: HD) retreated today even though there was no company-specific news on the stock. Instead, home improvement store investors reacted to Donald Trump’s victory. While stocks generally rose, the real estate sector fell as government bond yields rose. This is a sign that investors believe interest rates could rise under a Trump administration due to spending and tariff shortfalls, which could lead to inflation and potentially keep the Fed from cutting rates. interest as intended.
Shares of Home Depot fell 3.7% on the news as of 12:47 p.m. ET. ETFs tied to homebuilders and real estate also fell S&P500 rose more than 2%.
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Shares of Home Depot have risen for most of the year despite weak results as investors were optimistic about a turnaround in the housing market and looked ahead to Fed rate cuts that began in September.
Democratic presidential candidate Kamala Harris also likely made solving the housing shortage a higher priority than Trump, so today’s sell-off could reflect the lack of a more robust plan to solve the housing shortage.
However, investor attention now appears to have shifted away from the housing market recovery, especially as Treasury yields rose in response to the market’s anticipation of Trump’s policies.
The biggest factor for the housing market recovery is lowering mortgage rates, but if benchmark interest rates, which are tied to mortgage rates, remain high, the lock-in effect of the pandemic is likely to persist and homeownership will remain out of reach . for many Americans.
The Federal Open Market Committee will make its interest rate decision tomorrow and investors expect a 25 basis point cut, which would lower the Fed Funds rate to 4.5%-4.75%. We’ll also get some commentary from Fed Chairman Jerome Powell, which will be key in determining the trajectory of future interest rates.
That is not the only factor that influences mortgage interest rates, but it is an important one. If 30-year mortgage rates remain high during the second Trump administration, the hoped-for comeback of Home Depot and the housing market is unlikely to materialize.
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