Will Trump Pump Canadian Stocks?

Last Friday, the American stock market showed once again that it is fearful of a Donald Trump presidential victory. When the news came that the FBI reopened the case about Hillary Clinton’s emails, the perception was that this would weaken Hillary’s chances of defeating Trump in the November 8 Presidential election and the S&P 500 index dropped by almost 1% in the course of 1 hour.

The index gained back its losses shortly afterwards, but that reaction demonstrated that the market considers Trump as someone who may, if elected President, behave in unexpected ways which could be harmful to both markets and economic policies. In fact, it seems almost certain that Trump, if elected, will engage in trade wars with China and Mexico instead of working towards improving existing trade relations. During the hour after the FBI announcement, the Mexican peso dropped by almost 6% relative to the U.S. dollar.

Should Canada be as concerned, in economic terms, of a Trump presidency? Donald Trump has scarcely mentioned Canada in his speeches so far, which can be taken as a positive. The most reassuring factor here is, that even if Trump attacks the North-American Free Trade Agreement (NAFTA) and it is repealed, the earlier Canada – U.S. free trade agreement (FTA), which predates NAFTA, should remain in place.

Whatever might be any short-term effects of perceptions of Trump gaining in the polls, Canada’s stock market is much improved this year due to improved oil and commodity prices since January. Year-to-date the S&P/TSX Composite Index has risen by more than 13%. The recent report by Matthew Barasch from RBC Capital Markets suggests that a Donald Trump presidency could have a net positive effect on the Canadian economy and could provide some lift for Canadian stocks as Trump appears to be positive disposed to fossil fuels.

Ukrainian Credit Union Limited

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