Tomorrow happens to be Canada Day, which celebrates the 1867 unification of Canada, Nova Scotia and New Brunswick into what we now know as Canada. I have just returned from a trip to Canada, attending a number of conferences and meetings with our group clients and colleagues. It was my first visit to the country and, perhaps most surprisingly to me, was the difference in the prevailing political environment.
In contrast with the populist rhetoric emanating from the United States, Europe, and indeed the UK, Canada has been governed by Justin Trudeau’s Liberal Party since October 2015. Trudeau’s party took 184 seats, up from just 36 in the previous parliament. Indeed, many Americans are undoubtedly looking longingly across their Northern border, wishing they too had a charismatic, moderate anti-Trump candidate to fight their corner.
However, what does politics ultimately mean for the economy? We only have to look back to Trump’s election in November last year to witness the famous ‘Trump bump’, as sectors such as industrials and financials delivered astonishing gains as investors believed that a huge infrastructure package, higher inflation and higher interest rates would change the economic landscape.
Despite his popularity with the people, Canadian equities actually tumbled post Trudeau’s election, as the market feared he would be less business-friendly than his predecessor, the Conservative Stephen Harper. They have since recovered, but question marks still remain over Trudeau’s economic track record, with GDP growth remaining sluggish and an overheated housing market two issues Canadians are currently grappling with. This brings us full circle back to Trump. Although his election triggered a reflationary impulse, very little has been delivered as the embattled President fights controversy after controversy. In addition, economic indicators are slowing in the US, with slowing auto sales the latest sign of weakness.
This highlights that both ends of the political spectrum often end up facing similar issues, economic fears are shared by all. Ultimately, it is the economy that dominates mindset, news flow and investor sentiment with scant regard for the political tendencies of the governing party, whether they may be the Liberals in Canada, or the Republicans in the US.
Ian Goulsbra is sales and marketing director at Canada Life Investments