With the US election less than a week away, Karen Routledge's phone is ringing off the hook with clients wondering what will happen to their investments after Tuesday.
The Calgary-based investment advisor is feeling broad concerns about the potential price impact, rising US debt levels and interest rates. There is some curiosity about the volatility of the loonie and what happens if it takes a few days or weeks before the results are known.
The election is “definitely on people's minds,” Routledge said. “It is not about who is in charge, but what they will do when they are in charge.”
Not only do many Canadians invest south of the border, but the state of the US economy, currency and trade policies affect Canada and many countries around the world.
“Our view is that you don't want to let politics influence what your long-term portfolio should be. It's like a lot of things, it's just market noise. It's not something you want to react to,” he said.
Political analyst Rosetta Okohson says the media's focus on the seven states that will determine who will win the presidency can affect voter turnout and mean that other races and important voting programs can be overlooked. What questions do you have about the upcoming US election? Tell us by email at ask@cbc.ca.
Canada and the US are each other's largest trading partners with goods and services worth $3.6 billion crossing the border each day by 2023.
The election of Kamala Harris could mean a continuation of the situation, experts say, and the return of Donald Trump could bring back the prices of US stocks.
The fall of the election
Even a Democratic sweep of the presidency, the House of Representatives and the Senate, “will not look very different from a policy perspective,” wrote economists at Desjardins in a report last month.
But a Republican sweep could bring about “Trump's decline” and hurt both the US economy and the world, especially because of the expected decline in trade. Since the 1930s, trade experts say, no president has used tariffs as heavily as Trump during his time in the White House.
Under President Joe Biden, the two countries have had trade wars that include tariffs on Canadian lumber. However, another Trump presidency poses a greater risk, experts say, because of his history of favoring core values (including Canadian steel and aluminum) and his opinions this campaign – calling himself “tariff man” and saying “tariffs are the greatest thing ever invented.”
Combined with higher tariffs on US exports, Canada's GDP could decline by 1.7 percent by the end of 2028, compared to Harris' victory, Desjardins economists wrote.
“While a recession may be somewhat avoidable, it cannot be ruled out.”
The low loonie
The Canadian dollar is already trading at very low levels. Slowing Canadian economic growth could weaken the loonie, even pushing it under 70 cents, further down habit of the past few years.
“The US election could have a significant impact on market volatility and the performance of the US dollar and the Canadian dollar,” said Shaun Osborne, chief currency strategist at Scotiabank.
In addition to the uncertainty of who will win, there is uncertainty of when the winner will be announced. Both candidates are very close and, in 2020, announcing the winner took several days and even then Trump was opposed.
“More importantly than who won, do we know who won? And is it clear or contested? Should we be in a period of continued uncertainty and an uncertain election outcome that will have a disruptive effect on financial markets,” said Travis Shaw, senior vice president at DBRS Morningstar, an agency measuring debts.
Some market experts believe there will be political problems with the White House, Senate and House being controlled by the same party.
“That would be great so that no one can get any of their reckless ideas passed and then, all politicians can focus on what's important, growing the American economy,” said Barry Schwartz, chief investment officer at Baskin. Wealth Management in Toronto.
Before the 2016 election between Trump and Hillary Clinton, experts had warned that the markets he can sink if Trump is elected. A few days after his victory, the markets were there not a disaster and keep them working well while in the office.
Investors are also worried about next week's election, but Schwartz urges clients to look ahead to the road.
“There's no question, short term, there may be volatility, but it doesn't really matter. If you look at the history of stock market performance, the market did well under Trump. The market did even better under Biden. The market did very well under [Barack] Obama,” he said.
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