Yes, there are polarizing ideological differences related to immigration reform, energy policy, and a variety of social issues. Trump’s nationalism could
particularly imperil prosperity. Even Canada’s status as a privileged trading partner would be jeopardized should reforms take place (e.g., such as
scrapping the NAFTA agreement). But in a globalized world defined by a move toward closer interconnectedness, the “biggest loser” would undoubtedly be the
Rising above the rhetoric and dueling polemics, however, there is one striking similarity: Both candidates support massive fiscal expansion. In yet another
“new reality” in the post-crisis world, the Republican nominee is actually pledging to spend at least twice as much as the Democrat on infrastructure. But
bear in mind – both will wildly blow out the budget deficit. This is the main event.
Presidents aren’t unimportant. But they don’t dictate the innovation, work ethic, and creativity of businesses and consumers. Ultimately, big political
events are almost never worth churning a portfolio over. Instead, our clients will always remain globally diversified with a tilt towards longer-running
megatrends that are supported by positive fundamentals.
Today, that means reduced exposure to North America. For Canada, the overriding risk factor has been an ongoing commodity bear market. Politics –
domestically or south of the border – cannot change that meaningfully. We have also rotated away from U.S. equities. It has been a long (and well-earned)
period of outperformance. However, the drivers of U.S. equity performance – an accommodative Fed, a cheap currency, and attractive valuations – no longer
Clients are also hedged against U.S. nationalism. Countries enlarging their economic ecosystem will benefit in either scenario. Asian equities, including
China and India, are well represented in client portfolios.
Finally, a return of fiscal stimulus will initiate some economic growth (borrowing demand from the future). This is not a development isolated to the U.S.
In Canada, the Liberal government was elected on a platform that placed austerity and balanced budgets on the back burner. Globally, more developed
economies plan to loosen rather than tighten fiscal policy (16 countries for the former, while only 9 for the latter). As such, clients are overweight
global cyclicals, with an emphasis on non-resource exporting countries like Sweden and emerging Asia. We have also reduced bond exposures as government
bond yields will likely start to edge back up, albeit glacially.
Given the above positioning, our investment team continues to track a variety of different scenarios (including the outcome of the election) and remains
prepared to shift strategies.
Tyler Mordy, CFA, is President and CIO for
Forstrong Global Asset Management Inc., engaged in top-down strategy, investment policy, and securities selection. He specializes in global investment strategy and ETF trends.
This article first appeared in
Forstrong’s Gobal Thinking feature. Used with permission. You can reach Tyler by phone at Forstrong Global, toll-free 1-888-419-6715, or by email at
email@example.com. Follow on Twitter at
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