Monday Market Minute | Sep 16, 2019

Federal election called — markets assess policy risk for private markets

What Moved

Prime Minister Trudeau called a federal election for October 21, launching a 40-day campaign period. The major parties presented divergent platforms affecting private markets: the Liberals proposed a national housing strategy expansion, the Conservatives offered tax incentives and deregulation, and the NDP's platform included wealth tax proposals and restrictions on foreign real estate ownership. Capital gains taxation, housing policy, and financial regulation emerged as the key policy areas for private markets.

Why It Matters

Election uncertainty historically suppressed deal activity in the weeks surrounding a vote. PE sponsors typically delayed major transactions until policy clarity emerged. For real estate investors, the housing policy proposals — particularly any changes to the mortgage stress test, foreign buyer rules, or rental regulations — carried direct implications for property values and MIC collateral. The wealth tax discussion, while unlikely to pass, introduced a new variable for HNW investors structuring their alternative allocations.

Signal to Watch

Polling data would determine the probability of a majority versus minority government. A minority outcome — increasingly the base case — would limit the scope of any radical policy changes, providing relative stability for private markets.

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