Canada's Looming Election: A Boon for Equity Investors

As Canada gears up for its federal election on September 20, investors are keeping a close eye on the political landscape, hoping that the right government will lead to increased returns in the equity market. With the Liberal Party currently in power, led by Prime Minister Justin Trudeau, the election is expected to be a close race, with the Conservative Party led by Erin O'Toole nipping at their heels.



The performance of the Canadian equity market under different political parties and government structures has been mixed. According to a report by National Bank, the S&P/TSX composite index has shown solid performance under Liberal governments, with a near-50% cumulative gain since the Liberals were first elected. However, under Justin Trudeau, the TSX has lagged the S&P 500 significantly, with a cumulative difference of 70 percentage points. On an annualized basis, the relative underperformance is more extreme than under previous Liberal prime ministers like Jean Chrétien.

On the other hand, Conservative governments have shown more mixed results. Stephen Harper's three terms (two minority and one majority) saw an underperformance of 44 percentage points compared to the S&P 500, while Brian Mulroney's two majority governments resulted in an underperformance of 107 percentage points. However, on an annualized basis, Harper's performance gap was less than Trudeau's.

The upcoming election presents an opportunity for investors to consider the potential impacts of different political parties and their policies on the equity market. Some of the key policies and initiatives proposed by the major political parties that could have significant impacts on the equity market include:

1. Liberal Party (Justin Trudeau) - Green Economy and Infrastructure Investments:
- The Liberal Party has proposed a significant investment in green economy initiatives, including renewable energy and infrastructure projects. This could lead to increased demand for companies involved in these sectors, such as renewable energy producers, electric vehicle manufacturers, and infrastructure development firms.
- The Liberal Party has also proposed measures to support the technology sector, such as increasing research and development (R&D) funding and attracting more talent to Canada. This could benefit tech companies and startups, as well as related industries like software development and cybersecurity.
2. Conservative Party (Erin O'Toole) - Resource Sector and Tax Cuts:
- The Conservative Party has proposed a focus on the resource sector, including oil and gas, mining, and forestry. This could lead to increased investment and activity in these sectors, benefiting companies like Suncor, Enbridge, and Teck Resources.
- The Conservative Party has also proposed tax cuts for businesses and individuals, which could lead to increased consumer spending and business investment. This could benefit companies across various sectors, including retail, finance, and manufacturing.
3. New Democratic Party (Jagmeet Singh) - Universal Pharmacare and Housing:
- The New Democratic Party (NDP) has proposed a universal pharmacare program, which could lead to increased demand for pharmaceutical companies and healthcare services.
- The NDP has also proposed measures to address housing affordability, such as increasing the supply of affordable housing and providing tax incentives for developers. This could benefit real estate development companies and related industries, such as construction and materials.
4. Green Party (Annamie Paul) - Carbon Pricing and Green Economy:
- The Green Party has proposed a more aggressive approach to carbon pricing and reducing greenhouse gas emissions. This could lead to increased demand for renewable energy and green technologies.
- The Green Party has also proposed measures to support the green economy, such as creating green jobs and investing in green infrastructure. This could benefit companies and industries involved in renewable energy, energy efficiency, and sustainable transportation.

These policies and initiatives could have significant impacts on various sectors and industries, affecting stock prices and overall market performance. However, it is essential to remember that the actual effects will depend on the specific implementation of these policies and the broader economic context. Additionally, other factors, such as global economic conditions and geopolitical events, could also influence the equity market.

In conclusion, the upcoming Canadian federal election presents an opportunity for investors to consider the potential impacts of different political parties and their policies on the equity market. By staying informed and conducting thorough research, investors can make well-informed decisions and potentially capitalize on the market's reaction to political changes. As the election approaches, investors should keep a close eye on the political landscape and be prepared to adapt their portfolios accordingly.