Will There Be Any Fallout In The Markets From The Canadian Snap Election?

By Orbex

Back in mid-August when snap elections were called in Canada it mostly seemed like a formality.

At the time, PM Trudeau enjoyed improved popular support and good prospects at the polls. Despite the resolution in May to not hold an election in the middle of the pandemic, it seemed that the electoral calculus was favorable.

The underlying issue was that the Liberals governed as a minority since 2019, after Trudeau’s refusal to enter a coalition government.

Since then, they have been relying on the informal support of the further left-leaning NDP and the Greens. Polling suggested they might have a chance at getting back a full majority.

Where things stand

However, after they declared an election, the polls started moving against Trudeau.

This happened after the withdrawal from Afghanistan and the rise of covid cases. Throughout the rest of August and the beginning of September, opposition leader Erin O’Toole’s Conservatives were leading in the polls by 6%.

However, as the count out to election reached the last days, polls have once again narrowed. And it appears both Liberals and Conservatives are dead-even in support.

The final push will be over the weekend. Canadians will vote on Monday and we will be seeing the results throughout Tuesday.

What can we expect from the results?

The polling situation now almost mirrors the situation just before the 2019 election. This suggests that most likely everything is staying the same.

Last time, the Conservatives won the popular vote in a plurality, but the Liberals secured the highest number of seats. Should the Liberals obtain once again ~33% of the votes, that would put them in pretty much the same position as before the election.

Even if the Conservatives manage to increase their vote share by high-single digits, it’s still unlikely they’d have the chance to form a government. This is due to left-leaning parties having over 50% of the vote.

The more likely scenario of an increased vote for Conservatives is that Trudeau would have to form a coalition with one of the other parties and shift this government further to the left.

What does this mean for the markets?

The Conservatives are generally more favorable towards business. In fact, they’d propose less regulatory burden and lower taxes.

When it comes to the major policy issues that could impact the markets more directly, such as trade, petroleum production, and covid response, however, most parties are broadly in agreement.

In the improbable event of a Conservative government, they are not any more likely to forego lockdowns should the covid situation worsen. And it’s unlikely the BOC will revise any of its forecasts as a result.

The only potential issue is the highly unlikely event that Trudeau opts to form a coalition government with the Greens. In turn, this could influence Canada’s position on oil production.

Although the Greens have called for an end to the fossil fuel industry, they tend to have a much more pragmatic approach. Specifically, they prefer to fund alternatives more than reducing production.

Article by Orbex

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