President Trump Just Made a Big Move That Could Benefit 1 of My Top Stock Picks for 2026

President Trump directed his representatives to purchase $200 billion of mortgage-backed securities to push MBS prices up and yields (and therefore mortgage rates) down, a move that could materially ease borrowing costs amid existing U.S. home sales near a five-year low (Redfin reports 529,770 more sellers than buyers in November). Douglas Elliman, a luxury-focused brokerage that sold $30.1 billion of real estate in the first nine months of 2025, reports trailing-12-month revenue of $1.03 billion against a market capitalization of $220 million (P/S ~0.2) and its stock rose 42% in 2025; the article argues the MBS purchases and anticipated Fed rate cuts could accelerate sales growth and further lift the stock in 2026.

Analysis

Market structure: A $200bn public-market MBS buy is an asymmetric shock that should compress agency MBS yields and mechanically lower conventional 30-year mortgage spreads versus USTs by an estimated 10–50 bps over 1–6 months, directly benefiting mortgage originators, homebuilders, luxury brokerages (DOUG) and proxy equities that rely on transaction volume. Losers include short-rate carry strategies, some bank deposit margins (regional banks) and MBS sellers; pricing power will shift toward originators and brokerages if volume returns, but pass-through to borrower rates is imperfect and lagged.

Risk assessment: Tail risks include legal/regulatory challenge to FHFA-directed purchases, a Fed policy counterreaction, or a prepayment surge that erodes MBS investor returns—each could unfold 0–12 months and produce >30% swing in MBS-sensitive equities. Short-term (days–weeks) expect volatility as front-runners repriced MBS and mortgage locks; medium (3–9 months) is when transaction volumes and DOUG commissions should show up in reported sales; long-term (12–24 months) depends on inventory and wage-driven affordability.

Trade implications: Favor equities that lever to transaction volumes and cheap valuations—DOUG (cheap P/S 0.2) and select homebuilders—while hedging duration and macro beta. Use agency-MBS ETFs (e.g., MBB) to capture compression; offset with short regional-bank exposure or interest-rate steepeners if Fed resists. Time entries over 4–12 weeks to average through headline-driven volatility.

Contrarian angles: Consensus underestimates pass-through friction and operational lags; DOUG’s cheap P/S reflects concentrated luxury exposure, agent payout pressures, and cyclical commissions—so full multiple expansion requires sustained volume recovery and margin stabilization. Unintended consequences include policy backlash if house prices reaccelerate and prepayment-driven returns that blunt MBS buyer economics.

Key Decisions for Investors

• Establish a 2–3% long position in Douglas Elliman (DOUG) common stock, scaled in over 4 weeks; target a 12-month hold with upside if P/S re-rates toward 0.4–0.8 (implies 2x–4x from current), set a hard stop-loss of 35% and trim at +100%.
• Implement a relative-value pair trade: go long DOUG (2%) and short Compass (COMP) notional 1–1.5% to hedge market beta; close if the DOUG/COMP market-cap-adjusted P/S spread narrows by 50% or after 9–12 months.
• Allocate 3–5% to agency MBS ETF exposure (e.g., MBB) to capture expected price appreciation if yields compress; hedge with a 1–2% short position in regional bank ETF (KRE or similar) to protect against NIM compression. Rebalance after 3 months or if 30-year mortgage rate moves >25 bps.
• If prefer options: buy 6–9 month DOUG call spreads (debit) sized to equal a 2% delta-equivalent long equity exposure, or sell cash-secured DOUG puts at ~25% out-of-the-money for yield. Exit or roll if DOUG declines >30% or after the May 2026 Fed chair appointment clarifies policy.