U.S. Election - Impact on Canada
Avery Shenfeld explains how each outcome of the election could impact the market. He also reveals why mail-in votes could spur market volatility.
U.S. Election Impact on Canada
[Soft music plays]
[Avery Shenfeld, Chief Economist CIBC World Markets]
[Avery speaks to camera in an office]
It's still obviously a horse race with this many weeks to go. And with Trump, we get what we've already seen, which is perhaps, sometimes on-again, off-again trade issues between Canada and the U.S., that are some concern.
[Canadian parliament buildings at dusk. The White House at night. A computer-generated image of the democratic donkey mascot. Canadian parliament buildings during the day.]
With Biden, he doesn't have a specific candidate platform. In fact, the Democratic platform barely mentions Canada. But there are a few items on the Biden and Democratic agenda that are important to note. One is that they intend to raise taxes on business, that is corporate income taxes. And the issue for Canada is, while that might initially attract some capital spending here, it also could set a backdrop for Canadian governments to be tempted to raise corporate taxes. We'll certainly have to watch for that and its stock market implications.
[A factory smokestack. The smoke from burning branches on the ground. A drone shot of a hydroelectric plant.]
The Biden administration would also, if elected, be tougher on the issue of climate change. The plus is that that will put US energy companies on a more level platform with Canada's energy sector. But at the same time, it again poses some risks for Canadian investors. Biden has spoken out against the Keystone pipeline, which would help carry more Canadian oil more effectively to US refiners. That's certainly an issue. And if the US is getting tougher on climate change, it certainly means that they'll be eyeing their neighbors here in Canada, to make sure that we're living up to our commitments.
[Drone shots of a wind farm.]
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So, perhaps a plus for green energy and other environmentally friendly companies, but also a challenge to Canada to make sure we're living up to our share of the bargain in meeting the commitments that Canada has made. And again, for both countries then, that would imply a somewhat tighter regulatory environment that will be a plus and minus, depending on what sector a specific company happens to fall into.
[Challenges for U.S. economic growth]
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One of the risks that we're facing right now in terms of progress in the U.S., is that the current fiscal stimulus has run out in the U.S.
[U.S. currency whirrs through money counters]
Congress is still haggling over what kind of additional package they could provide to make sure that those who are unemployed--and remember, there's still a lot of those people--continue to have some spending power in the U.S. Economy.
[A sheet of U.S. 100 dollar bills.]
Remember that for Canadian investors, growth in the U.S. economy is key. Whether or not you're investing in U.S. equities, or even in Canadian companies, where the U.S. is a major export market. If a new stimulus package is really short term, or is delayed until after the election, then the key will be really getting a White House and a Congress that can work together post-election, to pass that additional stimulus leg, to ensure that we don't see a dramatic slowing in consumer spending or consumer confidence south of our border.
[What to watch for in election day]
One other thing to watch for in this particular election, is because so many Americans are expected to vote by mail.
[Envelopes are sealed mechanically. Ballots are distributed in ballot boxes and counted.]
And the counting of those mail-in ballots could well come after the actual election day. We're going to face, potentially, days and days where we simply don't know who is the new president of the United States? We experienced that when we had Bush running against Gore and it could get even worse and more litigious this time. Equity markets, one thing they don't like is a lot of uncertainty. They'll be happier when a winner is declared. So, we do expect to see a fair bit of market volatility around that Election Day. Potentially a week or two after Election Day while we battle it out, even potentially in the courts, to find out who's the next president of the United States.
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