top of page

Waiting for Election Results

Overview: The election was clearly the focus over the past week. Mortgage rates moved a little higher in the days prior to the election and then reversed sharply due to the uncertainty about the outcome. The net effect left rates little changed and near record-low levels.


When an economic report is released, there is typically a consensus forecast from leading economists. Expectations for election results do not have a similar benchmark, however, making it more difficult to determine what investors had anticipated. That said, most polls predicted a stronger showing by Democrats, and the close election likely means that control will remain split between the two parties. Of interest to mortgage markets, divided government generally makes it more difficult to pass large new government programs such as an additional stimulus aid package. Since bonds must be issued to fund government spending, this reduced likelihood has been viewed as positive for mortgage rates.

Gross domestic product (GDP) is the broadest measure of economic activity. Normally, quarterly readings show relatively small gains or losses below 5% annualized. Due to the partial shutdown of the economy, however, GDP declined a shocking 31.4% annualized during the second quarter of this year. By contrast, the latest report revealed that it reversed and increased 33.1% annualized during the third quarter, which was close to the expected levels. Early estimates for the fourth quarter vary widely, but the consensus forecast is for a much smaller change than the last two quarters.

The reduced economic activity resulting from the pandemic has caused a decline in inflation, which has helped keep mortgage rates low. In September, the core Personal Consumption Expenditures (PCE) Price Index was just 1.5% higher than a year ago, matching expectations. Core PCE is the inflation indicator favored by Federal Reserve officials, and their stated target is 2%.

Week Ahead

The next Federal Reserve meeting will take place on Thursday. The key monthly Employment Report will be released on Friday. Investors will mainly be focusing on the election results until the outcome is known. In addition, they will continue to watch for news about medical advances to fight the coronavirus and government stimulus measures.

GDP Growth (% change)

bottom of page