After 40 days and 40 nights, election won't shift economic tides

October 28, 2019 James Virgo

Our Canadian election process is mercifully short compared to the drawn-out affair south of the border.

It took just 40 days of drama and distraction to arrive at last week's vote to elect a minority Liberal government. In that time, nothing surprised us to change our outlook on the Canadian markets and economy. We do not foresee any major changes in policies that would materially affect the country's growth or inflation prospects.

Regional divide is no surprise

The vote split divided across regional lines made for a colourful election-night map, but it also mirrored a few of the themes and challenges we've already seen dogging our national economy.

From weakness in the western oil and gas sector, to obstacles in inter-provincial trade, to extreme weather and mixed messages on climate change policy—the ballot results delivered a sense of deja vu on sentiment coast-to-coast.

Markets largely unfazed by result

Monday night's election didn't elicit any strong reaction from investors to affect markets. Prime Minister Justin Trudeau won what can be considered a strong minority, with the NDP as his most likely ally. There's no apparent reason for opposition parties to trigger an election anytime soon, reducing some of the uncertainty that can drive market volatility.

Seeing Canada in context of a global view

Canada saw solid growth over the past four years, led by a Liberal government. That was largely supported by the effects of a long and sustained global economic cycle — one of the most enduring on record. Today, as we approach the later stages of the business and manufacturing cycle, we expect growth to slow, yet see few signs of economic imbalance that typically lead to recessionary conditions.

More influential, at home and abroad, will be the outcome of issues, such as ratification of the renegotiated U.S.-Mexico-Canada Agreement, the effects of Brexit, China trade, and of course—any unusual turns in the "America First" presidency in the many months before the 2020 U.S. election.

As always, we will continually analyze these scenarios and others, and monitor events which could impact the positioning of MD portfolios and the markets at large.

If you have any questions about your portfolio, please contact your MD Advisor*.

* MD Advisor refers to an MD Management Limited Financial Consultant or Investment Advisor (in Quebec), or an MD Private Investment Counsel Portfolio Manager.

About the Author

James Virgo

James Virgo, CFA, CFP, MBA, is Vice President and National Lead with MD Private Investment Counsel at MD Financial Management. He oversees the practice of investment counselling and delivery of investment advice across MD PIC.

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