Tariffs, Trade and Your Investment Portfolio

Canadians have an understandable bias towards building investment portfolios that own Canadian stocks and bonds. Our partners at National Bank Financial Economics suggest that the world of Trump tariffs and trade policies may require a new approach to how to analyze your investments.

In an article from Investment Executive Canada, National Bank Financial recommends, “In this new global environment, Canadian investors must do more than simply analyze a company’s fundamentals. They must focus on the country that the company considers its home base, and determine if that country’s relations with its main trading partners are strained in a way that might impact its bottom line. “

Technology, Tariffs and Trade are Linked

Angelo Katsoras from National Bank Financial warns that while “a trade deal between China and the United States would be good news for the markets in the short term, it would not change the long-term fundamentals fuelling tensions between the two countries. This includes the battle for geopolitical influence and dominance of tomorrow’s technologies.”

To enjoy Angelo’s in-depth analysis please review the report here. Make sure to contact your Hampton Securities Advisor to discuss your specific investment needs.

Trump Trades and Tariffs Update

After months of negotiations and looming tariffs, Canada finally agreed to a revamped trade deal with the U.S. and Mexico. The “United States-Mexico-Canada Agreement” (USMCA for short) will replace NAFTA. Financial markets were indifferent to the new NAFTA, as Canada averted deepened trade wars and was able to protect the essential auto industry from steel and aluminum trade impacts “NBF Economics Canadian GDP growth forecast for 2019, which had assumed a deal would be reached, is unchanged at 1.9%. But with this earlier than-expected agreement, we’ve brought forward the timing for C$ appreciation, now expecting USD:CAD to reach 1.25 by the first quarter of next year. While the trade deal is good news, that’s not to say the job of the Canadian government is done. There are competitiveness issues to tackle.”

Despite Tariffs, Business Remains Optimistic As Bond Yields Rise

Our partners at NBF Economics offer a remarkably detailed view of current economic conditions in the U.S., Canada and the Emerging Markets. Much of the outlook remains positive, lead by the “hot” U.S. economy.

Source: GMP Economics

A sixth consecutive quarter of above-2% real GDP growth is in the cards for the U.S. economy. Consumption spending remained strong in Q3 buoyed by a healthy labour market and personal income tax cuts. Understandably U.S. Business remains optimistic while Bond Markets anticipate a rise in rates to combat inflation expectations.

Enjoy the excellent Economic Report from NBF Economics HERE.

Yellow Light For Global Investors

Rising protectionism with emerging trade wars and tariffs are moving from the rhetorical to the possible over the summer. Concerns over protectionism have cast a financial funk over global markets despite record earnings in many cases. Downside risks to the Canadian economy have arguably increased amidst an apparent deterioration in the trade relationship with the U.S., the latter not only imposing tariffs on steel and aluminium imports but also threatening to slap additional ones on the crucial auto sector.

Our partners at National Bank Financial has outlined their revised expectations below, with a detailed

GDP and Inflation Estimates for Canada and US Aug 2018
GDP and Inflation Estimates for Canada and US Aug 2018

Enjoy the detailed discussion from our partners at National Bank Financial Economics HERE.

Oh, Canada? Business Is Positive But …

Trade wars and tariffs, and many other aliments don’t seem to be impacting Canada’s business owners, but? Gross Domestic Product (GDP) crept up mildly by .1% or 10 basis points with the Friday, June 29 Statistics Canada announcement. Results were modestly in-line with Canada’s economic expectations for April 2018. These results coincided with Bank of Canada (BoC) survey taken BEFORE the G7 June kerfuffle which also offered positive sentiment from private business, as outlined by Investment Executive Canada.

How have trade talks impacted business sentiment?

While we have no formal data yet, the Globe and Mail offer an opinion that Canada’s outlook would be rosy “if it wasn’t for that U.S. trade war.”  Before the ‘Trump’ tariff and trade friction, a focus towards full-employment and hiring had increased substantially. As outlined by the NBF Economics chart below Canadian firms were eager to hire at the expense of investment. However, the business outlook has weakened.

“Despite an upbeat outlook, the balance of opinion on investment moved downward and that even though “almost all interviews” were conducted before the announcement of tariffs on steel and aluminum imports from Canada by the U.S. Business optimism likely took a subsequent dive, especially after the disastrous G7 meeting of June 8th/9th when Canada-U.S. trade relations took a turn for the worse.”

Oh Canada! Business Sentiment Survey Before G7 Meetings and Tariff Talk

It may have become ‘Oh, Oh’ Canada as business sentiment survey before the G7 meetings enjoyed some of the most positive sentiment since 2011. What is next? For a fulsome discussion on how the recent geopolitical trade wars may impact our future economic outlook, enjoy the detailed discussion from our partners at NBF Economics, HERE.

Trade wars and counter measures never result in positive outcomes with the exception of local sourcing. Here’s a quick review of the potential provincial impacts from CTV News. As consumers we may wish to spend your summer travels and vacation supporting local producers to the benefit of many.

Global Economic Vital Signs for 2018

Our partners at National Bank Financial Economics has reflected on the year that was in 2017 from a global perspective as economists are want to do in order to set the stage for the balance of 2018. The economic vital signs of 2017 are robust and record setting. It’s becoming clearer why world GDP (Gross Domestic Product) growth accelerated sharply last year. Latest data from the CPB showed trade volumes not only reaching a new record but also growing in 2017 at 4.5%, the fastest pace since 2011.

 

What are Canada’s Economic Vital Signs for 2018?

National Bank Financial Economics offers a cautiously optimistic outlook for Canada as a result of U.S. policies and global growth. Barring the implementation of protectionist policies stateside, Canadian exporters should enjoy positive spillovers from the recently announced ramp up in U.S. fiscal stimulus. Domestic demand will also find support as business investment continues to recover, consumers enjoy higher incomes courtesy of housing wealth effects and a strong labour market,

Private sector investment spending is actually projected to rise 2% this year, the largest increase since 2014. Higher investment is planned in manufacturing, retailing, and real estate among others.

 

What are the economic vital signs for Canada in 2018?

National Bank Financial Economics explores the economic vital signs for Canada in 2018.

Enjoy the detailed global perspective from our partners at National Bank Financial Economics and Strategy Group.