Donald Trump’s election victory was a bonus for Federal National Mortgage Assctn Fnni Me (OTCMKTS:FNMA), fondly known as, Fannie Mae. After the U.S. election, both Fannie and Freddie responded really well in the share market. The shares went over double from $1.5 levels than what they were before the elections.
The volatile and moving Fannie and Freddie
What has created uproar is one tweet. Charles Gasparino from Fox Business tweeted yesterday, “Shares of $FNMA and $FMCC could move based on Steve Mnuchin’s testimony during Thursday confirmation hearing!”
Steve Mnuchin is an important person in question here because if reports are to be believed, he is Trump’s nominee for U.S. Treasury Secretary Post. He was also the hedge fund manager and former partner in a renowned Goldman Sachs.
What could it mean for Fannie and Freddie?
When his nomination was announced, Steve Mnuchin had declared that the Obama administration ensured structuring and safety of the government sponsored enterprises. He indicated that it would be ensured these enterprises are not acquired by others and that they should be kept under the government control.
Now here is an interesting aspect. When Mnuchin’s nomination came to light, Fannie Mae shares climbed 49%, almost 3% higher than Freddie Mac’s shares. It is believed that the administration of Trump may choose to ensure that these enterprises enter the private market, while also retaining their profit.
So now, if there is any comment that hints towards confirmation hearing of this government sponsored enterprises, the stock is most likely to dwindle and move.
So, if the savvy investors are trading on these two, it is most likely that they are playing with volatility. The unravelling policy and uncertainty around Fannie and Freddie is suggesting ho-hum in the market, as far as these stock are concerned. It is only a matter of day or two to see whether the tweet has credibility or the hearing has to wait for much more time to come.