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Top Links: ‘Cons far outweigh the pros’ for Trump and the Canadian economy

A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web

Citi economist Dana Peterson assesses the Trump administration's likely economic effects on Canada, concluding "the cons far outweigh the pros",

"In our view, the cons far outweigh the pros given Canada's status as a small, open, commodity-producing nation, coupled with the outsized share of Canadian trade (76 percent of total Canadian exports) with the United States. As the Canadian economy is highly dependent upon elevated domestic consumer sentiment and exports to its southern neighbor, possible deterioration of the long-standing trade and diplomatic ties between the two countries is a significant threat to the Canadian growth outlook… The Trump Presidential victory supports our view that the BoC may cut interest rates again: if not this December, then in the first half of 2017."

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"@SBarlow_ROB Citi on Trump economic effects on Canada, "the cons far outweigh the pros" – (research excerpt) Twitter

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The Economist attempts to forecast the worst case scenario of a Donald Trump presidency,

"If you set out to design policies to hamstring the economy, you might end up with something resembling Donald Trump's agenda. America's next president threatens to erect trade barriers, which would disrupt supply chains and dampen productivity growth. He wants to deport many of America's 11m illegal immigrants, which could reduce the size of the labour force by up to 5%. And his tax plan is ruinously expensive, costing almost $7-trillion over a decade, or around half of America's outstanding national debt. How much damage can President Trump do? … While Congress might rewrite the Trump tax plan, it has much less power to restrain Mr Trump's protectionism."

"Congress can constrain only parts of Trump's economic policy" – The Economist

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For all the negativity surrounding the U.S. election, global markets continue to ramp higher. Metals, notably copper, are sharply higher on hopes for a massive U.S. fiscal spending initiative focused on infrastructure.

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"Trump's Revamp of America to Boost Metals to Gas: Goldman" – Bloomberg
"Commodities' outlook depends on if Trump reality matches rhetoric: Russell " – Reuters
"Stocks Surge With Metals as Trump Win Revitalizes Growth Outlook" – Bloomberg

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The resource-based optimism does not extend to the energy sector this morning after the International Energy Agency warns that global markets are still 'awash' in excess crude,

"In its monthly oil market report, the group said global supply rose by 800,000 barrels per day in October to 97.8 million bpd, led by record OPEC output and rising production from non-OPEC members such as Russia, Brazil, Canada and Kazakhstan … "If no [OPEC production] agreement is reached and some individual members continue to expand their production then the market will remain in surplus throughout the year, with little prospect of oil prices rising significantly higher. Indeed, if the supply surplus persists in 2017 there must be some risk of prices falling back." "

"IEA sees global market awash with oil in 2017 if no OPEC cut" – Reuters
"Oil Output Surge Piles Pressure on OPEC as IEA Warns on Price" – Bloomberg
"IEA warns of 'relentless' oil supply growth without Opec accord" – Financial Times

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Canada's ambassador to the United States noted that the Trudeau government was "willing to discuss" changes to the NAFTA agreement. As an opinion salvo in the negotiations, I can see where this conciliatory tone might be wise as Mexico, not Canada, is likely to be the primary target for new U.S. trade restrictions.

"Ambassador says Canada is willing to discuss NAFTA with Trump" – Report on Business

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Tweet of the Day: @mark_dow [That thing where] ppl berate forecasters and in the next breath predict w confidence what someone with no ideology or experience will do as #POTUS " – Twitter

Diversion: "What is the Bicameral Mind? Westworld's secret philosophy" – Youtube

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About the Author
Market Strategist

Scott Barlow is The Globe's in-house market strategist. He is a 20-year veteran of Canadian investment banks, including Merrill Lynch Canada, CIBC Wood Gundy and Macquarie Private Wealth (MPW). He was a highly ranked mutual fund analyst for 10 years and then, most recently, the head of a financial adviser support team at MPW. More

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