Okay, jokes aside (and trust me it was hard to think of a joke) the purpose of this quick newsletter is to inform you, as our loyal and incredibly important client, about the events unfolding real-time in our neighbourhood and how they impact your investments. This is based on several conference calls I have had this morning with Chief Economists, market analysts, and our investment partners who manage your portfolios.

As always, if you want a 10-second read, just skip to the summary at the end.
 
Diverse

This newsletter will not be political and not about the societal impact of this American election. It will be about what this means for your investments, the markets, and your finances.
 
Trump Trade On Steroids

If you are watching the markets today: it is clear that the “Trump Trade” is back, and it is on steroids. US stocks are doing very well. Most are at all-time highs and keep going. Traditional industries such as manufacturing, big banks, oil & gas, pipelines, healthcare, and coal are all doing well and we can expect will do well moving forward.

It is less clear how big tech firms will do, they might suffer from “vengeance” against them for perceived censorship, but they may also benefit quite a lot from a now very pro-business anti-regulation landscape he will usher in.

The companies that will suffer the most are mostly environmental firms, and so called “ESG” companies (environmental, social, and governance). Firms who do consulting in these fields and well as firms involved in solar, wind and other alternative energies.

The one bright spot is the EV transition. Most states have already adopted binding regulations around the transition to EV cars that will continue. Not to mention one of Trump’s biggest supporters, Elon Musk, has most of his personal fortune tied to Tesla (whose shares are up about 13% today). One cannot imagine Trump doing anything that would endanger EV production, manufacturing, and adaptation in the USA. In fact, he will likely encourage it in his “America-First” fashion.

 
USD and CAD

The USD will clearly outperform now. The Canadian dollar will have to go down in value in the coming years in order to help Canadian exports to remain competitive in light of future trade issues. This will happen naturally as our GDP growth will likely lag the USA, and we will be less competitive. This will unfold slowly.

Tax Cuts

The first thing we can expect is big tax cuts. Not for all, but for large corporations (and some small businesses) and the wealthiest households. Middle class households may see some tax relief also. This will further encourage the bull run of the US stock market and profitability of American firms. Households will spend more, businesses will pay less tax, and this will create an economic tailwind.
 

Inflation and Interest Rates

Trump is notoriously anti-high-interest-rates. If I had as much debt as him, I would also. I mean, I have a Vancouver-sized mortgage so I already hate high interest rates but I digress…

Trump will possibly attempt to fire Powell (the current head of the US Federal Reserve – their central bank) or at least replace him at the end of his term. He will encourage interest rates in the USA to drop as fast as he possibly can. This will encourage business investment and consumer spending (in addition to the tax cuts above, so supercharging this boom). I do not imagine this to be a catalyst for a return of high inflation, but I do think that it will result in the US economy doing better than previously expected. I also suspect inflation will remain slightly elevated, but still within healthy parameters.
 
Return of the BLOC

One of the most important themes of the next 4 years will be President Trump’s desire to build a USA-centric trading bloc to rival China and it’s power. One can envision a return to the cold-war style world order of two main trading blocs centred around two world powers. In this world Canada and Mexico (and Western Europe) benefit. There may be tense negotiations between the countries at times (Trump loves a hard-won “good deal”), but ultimately the USA needs itself to be centred in a bloc with like-minded allies. This is a world order Trump very frequently talks about. And, this will benefit Canada with our resources and proximity.

Along this line, we can also expect big defence spending. Trump is very pro-business and therefore has to be pro-peace in regions that are economically important to the USA. But, he likes to do so by projecting power and strength to “force a peace” that benefits the USA and it’s trading partners. One needs a strong military to do so, and so we can expect large defence spending.
 
     

Tariffs & USMCA

Trump is the “master of the art of the deal”. *insert eye roll*

So, what this means is that Trump loves a strong opening move. Think haggling at a Middle Eastern Souke. He will start out with ridiculous offers, and want a long negotiation process he can “win”. This is how this man loves to deal with negotiations, and this is our reality for the renegotiation of the USMCA in 2026 and his opening rhetoric about tariffs.

Now, keep in mind what I just said about blocs.

The reality is, a lot of this is hot air and rhetoric. In reality, the punitive tariffs will be against trade adversaries and “enemy states” (China and friends). This shows him as winning against “America’s enemies”.

A lot of Congressional Republicans sit in districts with farmers, manufacturers, and businesses that are strongly tied to trade. They need good trade deals and good business opportunities for exports and imports if they wish to keep their rural voters happy… and they will be keenly aware of this. They, for example, need Canadian raw materials and they need Mexican cheap hardworking labour.

The ultimate goal is a trading bloc to rival China, but how we get there will be messy and full of posturing. But, remember through it all that Congress and ultimately Trump himself want manufacturing and business trades to be back in the USA or it’s closest of allies. Not abroad in non-allied nations. This way of thinking absolutely benefits Canada, though how we are treated through the negotiation process may not feel like it.

 
Head of Agencies

With Republican majority control of Congress and the White House it will be smooth sailing for Trump to appoint his personal favourites to be heads of government agencies. Think national security, securities and exchange commission, environmental protection agency, etc. Because those appointments are solely controlled by those two bodies (the House of Representatives, which may still go Democrat, is not). The amount of loosening of restrictions and regulations that is coming will be swift and very pro-business.
 
Fiscal Responsibility

The USA has not understood the meaning of this term for a long time. But, as the main default currency of the world, and safe haven for bank deposits: it really hasn’t felt any pain for spending like a drunk sailor. The deficit will get worse under Trump, but likely there will be very little repercussions for this.
 
Summary

We will be repositioning portfolios where necessary with these themes in mind, and adjusting financial plans where necessary:

• Bonds have done well, and will continue to do so for a short time, but ultimately you want to own stocks rather than bonds in the future.
• Large American stocks will do well, especially in traditional industries.
• Canadian and other foreign stock markets will lag.
• Big American banks will do very well from lesser regulation, a very Wall Street friendly regime, and lowering interest rates.
• Defence contractors and weapons manufacturers will do well.
• Crypto assets will likely do well, whereas gold will not.
• The EV transition will continue, if not ramp up.
  • Other environmental transitions will be hindered significantly.
• Canadian dollar has more to fall, another reason to own US stocks and USD denominated investments.

• Matthew