3 Big Questions After Trump’s Surprise Victory

What a week. The conventional wisdom on Monday was that Hillary Clinton would probably win the presidency and the financial markets would react positively. A Donald Trump upset was thought to be a remote chance and would be a shock to investors. But it wasn't a conventional election night.

Instead of Donald Trump's victory sending investors into a bond-buying panic, the opposite happened. We've seen two days of gains in the S&P 500 and the Dow Jones Industrials closed at a new all-time high of 18,807 on Thursday.

What's happening on Wall Street?

For now, investors are beginning to think pro-business Trump might be good for equities and the economy. But there's a lot more at play, so don't get comfortable. I expect lots of volatility in the months ahead.

One clear theme I've seen is that markets expect Trump's promises — cut taxes, increase infrastructure and military spending — will power more economic growth, but they would also be inflationary. Bond markets are preparing for more federal spending and less monetary stimulus. That's why the 10-Year Treasury yield has climbed to 2.15 percent, from  1.77 percent last Friday.(see chart below) It's the fastest weekly rise we've seen in more than two years.

There are also major questions about Trump's protectionist trade stances. Could that offset growth from spending and tax cuts, or worse, lead to trade wars and recession? That's certainly on the mind of bears.

I expect the 10-Year Treasury yield to increase to 2.25 percent before the end of the year. As you know Mortgage rates tend to follow the 10-Year. So I do believe in the near-term our refinance window will close. The good news on mortgage rates  is that we're still looking at historically low rates overall, a stable housing market and the chance that Americans will soon have more cash in their pockets if Trump's aggressive proposals become reality.

What will happen with regulation?

It remains to be seen but, now that Republicans control Congress, the table is set for an unwinding of Obama-era regulation. Because of Trump's pro-business stance, investors expect an improved environment for the financial services industry, which felt stifled under heavy constraints the past eight years. Of course, that won't become clear until the names of his cabinet appointees surface and his policy agenda manifests.

During his campaign, Trump vowed to eliminate all vestiges of Obama's policies, which includes dismantling regulation stemming from the 2010 Dodd-Frank Act that created the Consumer Financial Protection Bureau.

Even before Trump clinched the presidency late Tuesday, Republicans spearheaded efforts to change the structure of the CFPB and repeal Dodd-Frank. Last summer, a House representative from Texas proposed a measure that would change certain provisions of Dodd-Frank, such as replacing the CFPB's director with a five-member bipartisan committee and limiting the government's power to place restraints on big non-banks considered "systemically significant."

That bill cleared the House Financial Services Committee but seemed unlikely to pass under Obama, or a Hillary Clinton presidency. But now with Trump at the helm, it's possible Republicans will feel emboldened to go after Dodd-Frank again.

How will Trump change the housing climate?

We really don't know.

As I've said before, Trump has no policy track record. He's a wild card who seems to favor Republican pro-business policies. But he's also championed heavy government spending — something that doesn't gel with conservative balanced-budget priorities.

David Stevens, president of the Mortgage Bankers Association, released a statement this week urging Trump to focus on three areas pivotal to the industry: Ensuring an adequate supply of affordable housing, bringing first-time homebuyers back to the housing market and ensuring certainty in regulations.

But we've still not heard Trump mention housing or home buying. We do know the president-elect is interested in cutting taxes for all income groups and repealing the Affordable Care Act.

Right now, all we can do is speculate and look forward to seeing who our new president chooses as economic advisers. That will give us a better indication of what policies he hopes to unveil over the next four years.