The 2024 US presidential election has concluded with Donald Trump securing another term in office. This outcome introduces a range of potential impacts on the economic landscape, trade policies, and market dynamics. 

 

Economic policies

 

Under a Trump administration, we can expect a continuation and possible intensification of the economic policies seen during his previous term. One of the key areas of focus will be trade policy, particularly with China. Trump's administration is likely to maintain, if not escalate, the tariffs on Chinese goods. This could lead to increased global trade tensions and potentially spark a tit-for-tat tariff war, which may have negative implications for global economic growth and inflation. Higher tariffs could result in increased costs for businesses and consumers, leading to higher inflation and potentially higher interest rates.

 

Trump is expected to renew the personal tax cuts introduced in January 2018, which are set to expire in 2025. Additionally, there may be further corporate tax cuts. While this could provide a short-term stimulus to economic growth, it raises concerns about the long-term sustainability of the US federal debt, which is already on an unsustainable path. Higher debt levels could lead to higher interest rates over time.

 

Impact on Canadian markets

 

For Canadian markets, the re-election of Trump could have mixed implications. On one hand, the potential for increased tariffs on Canadian goods could pose challenges for certain sectors, particularly manufacturing and export-dependent industries. However, the energy sector might see continued demand for Canadian heavy oil, which is crucial for US Gulf Coast refineries.

The Canadian dollar (CAD) is expected to remain relatively weak against the US dollar (USD) in the short term. Factors such as the relative central bank interest rate policies, commodity prices, and productivity trends will play a significant role. The Bank of Canada is likely to maintain a more dovish stance compared to the US Federal Reserve, which could favor the USD over the CAD. Additionally, weak investment spending and poor productivity growth in Canada compared to the US could further support the USD.

 

Equity and fixed income implications

 

From a Canadian equity perspective, sectors such as engineering and construction (E&C) with large environmental practices might face challenges under a Trump administration due to less emphasis on green policies. However, lower taxes and reduced regulatory burdens could benefit Canadian companies with operations in the US.

 

In the fixed income market, higher yields in the US compared to Canada could mean better yield opportunities in the US over Canada, whether through government or corporate exposure. However, larger US deficits would result in more funding needs for the US Treasury, with a deluge of supply introducing further interest rate volatility. US corporates remain well-funded and we see minimal short-term impacts outside of market noise.

 

Stay focused on long-term goals 

 

Given the political and economic uncertainties, the best course of action for investors remains to stay invested and focused on long-term goals. Historical data suggests that market timing based on election outcomes is not a reliable strategy. Instead, maintain a well-diversified portfolio and focus on high-quality companies with strong financial positions and competitive advantages

 

At CIBC Private Wealth, we take a comprehensive approach to managing, building and protecting your wealth. If you'd like to discuss this market and economic update in more detail or have questions about your investments, please get in touch with me anytime.