There is no doubt that the resounding win by the federal Liberal Party reflects a mood for change among many Canadians. From the perspective of financial markets, the prospect of some change was largely factored into the picture over recent weeks with a negligible impact on equities, bonds and the Canadian dollar. What wasn’t known was whether the newly elected administration would govern as a majority or a minority. In immediate terms, a majority position for Justin Trudeau’s team reassures markets, which do not like uncertainty, that there will be consistent government over the next several years.
So what then does a new Liberal government mean for markets, and ultimately for your portfolio, moving forward?
MD’s Investment Management and Strategy (IMS) team believes several global themes will continue to play a more significant role in terms of investment performance over the next 12 months than the election result itself. Regardless of the political outcome, the risks to Canada’s stock-market performance relative to other regions are unchanged: the continuing impact of weak commodity prices; a potential decline in spending for the heavily indebted consumer; and a growing interest-rate differential (compared with the U.S. where rates are likely to rise in the near term) that poses a potential risk to the Canadian dollar.
Similarly, central banks’ monetary policies and specific economic data globally will likely impact the markets more than the Canadian election alone. Upcoming decisions on interest rates in Canada, Japan and the U.S. will provide insight into specific economic conditions and therefore the extent to which policy makers will provide economic stimulus or tighten conditions.
Certainly, specific platform decisions and policies implemented by the new Liberal government will impact Canada’s economic development and investment climate in the medium term. However, the election impact over the next 12 months will likely be muted as the new government transitions into power.
Our IMS team continues to monitor both domestic and global market activity on your behalf with a view to effectively managing any risks to your portfolios. Our ongoing insight and discipline help us to build and maintain portfolios that are appropriate for the time horizon you have established with your advisor. Ultimately taking this longer-term approach allows MD clients to weather any periods of political uncertainty and possible market volatility.
If you would like to learn more about MD’s investment methodology and the impact of both domestic and global trends on your investment portfolio, we encourage you to reach out directly to your MD Advisor.