Key Takeaways
New President-Elect and Market Reactions
- Donald Trump has been elected as the 47th President of the United States, driving significant market optimism.
- Key sectors such as financials, industrials, energy, and technology saw strong gains, reflecting expectations of deregulation, tax cuts, and infrastructure spending.
U.S. Equities and Interest Rates
- U.S. equities have surged since the election: NDX is up 27%, SPX 26%, and Dow Jones 17% year-to-date.
- The Federal Reserve remains cautious but may adopt a hawkish stance if inflationary pressures from fiscal expansion emerge.
Currency Movements: USD/CAD
- The U.S. dollar has strengthened due to rising bond yields and expectations of inflation, while the Canadian dollar has weakened amid trade uncertainties and lower commodity prices.
- Canadian investors holding U.S. stocks benefit from currency gains alongside stock appreciation.
Canadian Market Performance
- The TSX is up 18% year-to-date, driven by gains in materials (especially gold), consumer staples, and healthcare.
- Canadian bond prices have been stable despite a 0.5% rate cut by the Bank of Canada to 3.75%, spurred by declining inflation.
Potential Impacts of Trump Presidency on Canada
- Trade & Tariffs: Potential U.S. tariffs could strain trade relations and impact Canadian exports.
- Energy: Increased U.S. oil production may lower prices, benefiting consumers but hurting Canadian producers.
- Sector Effects:
- Financials: Canadian banks with U.S. operations could benefit from deregulation.
- Manufacturing: Tariffs might disrupt supply chains, especially in auto and steel sectors.
- Technology & Agriculture: Mixed impacts from deregulation and potential tariff issues.
Global Perspective
- The MSCI All Country World Index is up 20% year-to-date, with U.S. markets contributing significantly to global gains.
Investment Strategy
- Maintain diversification and focus on companies with strong fundamentals.
- Actively manage portfolios to lock in gains and capitalize on market pullbacks.
- Monitor U.S. fiscal policies, global trade dynamics, and energy price fluctuations for potential market impacts.