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Avery Shenfeld, chief economist at CIBC.

This is certainly going to be a year, in 2020, where politics continues to be an interesting driver for markets — not only because we have a fresh minority government here in Canada at the federal level, but also we’ll get into the meat of the U.S. primary season. And then, of course, the general election in the U.S. in November.

Canada’s gotten used to running minority governments in the past. They typically run two years. We do have a sense of what the Liberal platform entails, which is a bit more spending, a go-ahead on the pipeline in Alberta; continuing on the process of having carbon taxes be part of the solution to fighting climate change. So the basis of the platform is certainly there.

In Canada, I think the more interesting news is coming at the provincial level. We have fiscal restraint in Alberta. We’re going to see Ontario roll out a budget, again, designed to contain deficits, so that could be a little bit of a drag on economic growth in the coming year.

In the U.S., obviously the elections are of interest, but I think the bigger political stakes are involved with the impeachment process. Not that Trump is likely to be removed from office, but the extent to which that dents his prospects will be important. And we’re also watching the various Democratic platforms. Some of them lean quite to the left — some might be a bit more scary for certain segments of the equity market than others, so we’ll be keeping an eye on who’s leading in the polls in that primary season to get a sense of which of the various Democratic contender platforms is likely to become reality or at least threatened to become reality after those November 2020 elections.

We now have Elizabeth Warren sitting near the top of the Democratic contenders, along with Joe Biden. They’re quite a different story in terms of how radical a departure they would be, for example, from the policies of the Obama administration. Of course, both would diverge from what we’ve seen under Trump, particularly on issues like climate change, so we’re certainly going to be paying attention to that. I think it’s fair to say that some are worried that some of the proposals that Warren has put out with regard to re-regulating the banking sector, wealth taxes, and so on would be a negative for U.S. equity markets, but at this point it’s a bit premature for markets to price in the risks associated with any particular Democratic candidate — first, becoming the nominee, and of course then becoming president. But we certainly are seeing investors start to talk about how they might trade if Warren were looking like she was going to get the nomination as opposed to a more moderate contender like Joe Biden.

Typically, markets will start to take a more laser focus on the primary season when we get through the Iowa caucuses. At that point, the list of Democratic contenders is likely to start narrowing down considerably and we’ll see who the real front-runners are as opposed to the front-runners in November or December, which is a bit too early. You have to remember that in the last primaries, for example, Donald Trump was nowhere near the top of the list at this stage, and of course he eventually became the Republican nominee. So I think the markets will be hesitant to price in any risks for bank stocks or pharmaceutical stocks or companies that are subject or potentially subject to regulation. The tech sector also worried about some potential political outcomes. But none of that [is] really likely to be much in focus until this spring when we get those early primaries and start to narrow down the list of Democratic contenders.

In Canada, we’re hoping that U.S. politics, whether under Trump or an alternative, eventually heal some of the wounds that we’ve opened up on trade pacts. Particularly, we think that the impending election is putting some pressure on Donald Trump to show some signs of progress on the trade issues with China, if only to get U.S. agricultural exports to China moving. While that’s overall a winner for Canada in terms of getting a more positive global growth environment that would help commodity prices in particular, it does carry some risks that, for example, the U.S. will negotiate a trade deal that compels China to buy U.S. agricultural products at the expense of what they might have otherwise bought in Canada. So we have to close eye on the details.

We also have to remember that we will hear over the course of that campaign issues relating to Canada. For example, will the U.S. join Canada in fighting climate change or step away from the Paris Accords? So those are some of the issues that are relevant for Canada because a more active regulatory hand in the U.S. would actually avoid Canadian business being at a competitive disadvantage against U.S. regulations that are more lax.

But we also have to remember that when we watch the U.S. system, don’t forget that the president doesn’t have all the cards. The Senate has a lot of power, particularly to block legislation. And so we’ll have to keep an eye not only on who’s running and winning for president, but actually whether the balance of power in Congress is going to shift from the current split with the Democrats in charge of the House and the Republicans in the Senate — whether it shifts towards an overall Democratic tilt, where there might be some more meaningful change in U.S. policy.

It’s interesting that in this election battle, there seems to be no candidate who’s really putting emphasis on reducing the U.S. budget deficit. And actually for Canada, that’s probably a plus because the additional spending or tax relief that either side wants to propose will actually be a little bit of a positive for North American growth that would benefit Canada. We’re also waiting to see whether Congress approves the new Canada-U.S.-Mexico trade deal. But it’s important to remember that we already have a side deal with the White House that prevents tariffs being put on Canadian autos, and the existing NAFTA remains in place. So as long as Trump doesn’t threaten to rip that up, we could live with the continuation of the original NAFTA deal that protects Canada’s status in the U.S. market.

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