How the “Trump Effect” Is Impacting Economic Current Events

economic current events

A month after the election determined that Donald Trump would serve as the next president of the United States, the economy continues to thrive. The stock market is up, consumers are more confident, and the housing market looks strong. Economic current events all signal a positive outlook.

Below, find out how an upcoming Donald Trump presidency has impacted different facets of the U.S. economy.

Stock market

Since the election, the S&P 500 stock index, which experts use as a representation of the overall stock market, has been up 5.6 percent. Much of the increase is because executives believe that Trump, a long-time businessman, will be more friendly to corporations than the previous administration.

His priorities include increasing spending on national infrastructure, like roads and bridges, and defense. As a result, big banks like Goldman Sachs and Bank of America have boomed on the stock market.

With big spending in those areas, the economy will thrive. But some strategists caution that it could lead to inflation, warning that this stock market surge is a bubble that could burst.

Mortgage rates

In other economic current events, mortgage rates continue to climb since election night. At the end of November, mortgage lender Freddie Mac announced that their 30-year mortgage rate average had jumped to 4.03%, up from 3.94% just a week before.

As of the first week of December, rates had gone up again. On December 8, Freddie Mac reported their rates had increased again to 4.13%.

The cause of the rising mortgage rates is multilayered. After the housing crisis and recession in 2008, lenders slashed interest rates in the hopes of attracting new buyers in a struggling market. With a stronger economy, there is no need for them to do so, and rates go back up.

Also, because Trump is so focused on infrastructure and expansion, concerns about inflation could also drive mortgage rates up as well.

Car loan interest rates

According to Ford Chief Financial Officer Bob Shanks in an interview with the Detroit Free Press, the assumption is that interest rates will steadily rise, which may impact automobile pricing.

Higher interest rates would cause monthly car payments to go up, making previously affordable vehicles unattainable for some buyers.

While interest rates would only go up slightly at first, over the course of the next couple of years the price hike could be substantial. That could make buying a new car impractical for many consumers.

For years, the car industry thrived because the economy was struggling. To incentivize people to buy and revitalize the industry, the government cut interest rates, making it possible to get a car loan for as little as one percent. With a more robust economy, higher interest rates will become the norm.

Taxes

One of the biggest areas of change in a Donald Trump economy is his proposed tax plan, which would reduce taxes for a large percentage of the population.

Under his proposal, he would reduce the number of individual tax brackets from seven to just three: 12 percent, 25 percent, and 33 percent.

For young millennials, his tax plan could help you save money. Currently, if you’re working, unmarried, and do not have children, you get a standard deduction of $6,300 and a personal exemption of $4,050.

Under Trump’s plan, he would boost the standard deduction to $15,000 and eliminate personal exemptions altogether. That would put more money in your pocket.

But there are concerns that his plan could negatively impact others, especially low-income families or single parents. In some scenarios, his tax plan could actually raise what they owe the IRS.

Future impact

Regarding economic current events, a Donald Trump presidency will likely have an impact on your day-to-day life — and your paycheck. He has not yet served a day in office, yet he has significantly caused a change in stock prices, mortgages rates, car loans, and more.

As we get closer to inauguration day and form a clearer idea of his policies and intentions going forward for the economy, the public will have a better understanding of the long-term consequences of his proposals.

You might feel like rushing out to purchase a house, buy a car, or try and time the stock market, but it’s important to take a step back. The economy always ebbs and flows, so the best thing you can do to prepare for this presidency (or any future one!) is to build an emergency fund, pay down debt, and invest regularly in your retirement.

For more information about what Trump’s presidency might mean for you, learn about his proposals for student loans.

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Published in Mortgage, Taxes