Good morning. Just two days after the U.S. presidential election, the Federal Reserve will announce this afternoon whether it has decided to implement a second rate cut this year.
This comes after the Fed announced a 50-basis point cut to its benchmark interest rate in mid-September, the first cut in four years. For now, the central bank remains on course to cut interest rates another 25 basis points, Mark T. Williams, a former bank examiner for the Federal Reserve, told me. This decision is supported by strong employment numbers and inflation trending down to Fed target rates, he said.
Will the anticipated cut help consumers in what is still a tough housing market? “Unfortunately consumers will not feel needed relief as the yield on the bellwether 10-year treasury, post-election, has leaped to almost 4.5%,” said Williams, a finance faculty member at Boston University’s Questrom School of Business. Given how the 10-year treasury shapes mortgage rates, the cost of borrowing is likely to remain higher for longer, he said, adding that higher mortgage rates will also reduce the amount of homes on the market.
“The bond markets have been betting on a Trump win for about the last six weeks,” Peter Ricchiuti, a finance professor at Tulane University’s A.B. Freeman School of Business, told me. The yield on the 10-year Treasury has soared over this time mainly because tariffs are inflationary. Ricchiuti also thinks the Fed will announce another rate cut.
The post-election market reaction has been “swift and telling,” Williams said. “The sizable post-election spike in yields is driven by concerns that Trump policies including tax cuts and deficit spending will push inflation back up,” he said.
Inflation reached 9.1% in June 2022, the highest 12-month increase in about 40 years, due to the COVID-19 pandemic. After a series of rate hikes, inflation fell to 2.1% in September, near the Fed’s target of 2%.
The Fed is data dependent and the fiscal implications of President-elect Donald Trump’s policies have not yet made its way to the economic data, Williams said. “Should Trump implement fiscal policies as promised, it could ignite higher inflation by June 2025,” he said.
Sheryl Estrada
sheryl.estrada@fortune.com
Leaderboard
Dan Swanstrom was appointed CFO of The Macerich Company (NYSE: MAC), a real estate investment trust, effective Nov. 16. He will succeed current CFO Scott Kingsmore, who will transition to a senior advisor role and will remain with the company until the end of the year. Swanstrom arrives with over 20 years of experience in real estate, including serving as CFO of two public REITs and as a former investment banker at Morgan Stanley.
Joanne Zach was promoted to CFO of Fathom Holdings (NASDAQ: FTHM), a real estate services company. She has served as the company’s SVP of finance since February 2021 and brings over 25 years of finance experience in both public and private sectors. She began her career at Arthur Anderson, starting as an auditor before advancing to senior finance positions.
Big Deal
President-elect Donald Trump did not release a detailed blueprint on tax policy during the general election campaign, but a new report from Deloitte analyzes the possible tax implications of his second term.
Trump has called for making the Tax Cuts and Jobs Act permanent, but he has also weighed in on issues beyond the signature legislation he signed in 2017. While the TCJA reduced the corporate tax rate to 21%, for example, Trump has floated cutting it as low as 15% for companies “who make their product in the USA.” He has not offered key details on how his plan would address goods finished in the U.S. but made with imported components.
The TCJA’s individual provisions, meanwhile, expire at the end of 2025. The nonpartisan Congressional Budget Office estimated the 10-year cost of extending that tax relief will come in at $4.6 trillion. Trump has suggested the shortfall can be made up, at least in part, by tariffs on foreign goods.
Going deeper
“Robots are taking over low-skilled jobs—and changing votes,” is a new article in the business journal from the Wharton School of the University of Pennsylvania. A new paper co-authored by Wharton marketing professor Pinar Yildirim finds that as automation worsens job prospects in an area, long-term investments in housing and education decrease. Those residents, she said, increasingly vote for candidates with populist agendas like Donald Trump.
Overheard
“[President-elect Donald] Trump is expected to be largely inheriting a pretty decent economy, with one exception, while inflation rates have fallen back down to earth, price levels are still pretty high. And that’s ultimately what matters for households.”
— Michael Reynolds, vice president of investment strategy at Glenmede, told Fortune’s Paolo Confino in an interview about the effect of negative economic sentiment on the election.
