Monday Market Minute | Jan 20, 2020

US-China Phase One trade deal removes a key overhang for Canadian exporters and PE portfolios

What Moved

The signing of the US-China Phase One trade deal on January 15 removed one of the most persistent risk factors that had weighed on global markets through 2019. For Canadian PE-backed companies with cross-border supply chains, the agreement reduced tariff uncertainty that had delayed capital expenditure decisions. The TSX Composite climbed past 17,000 for the first time. Canadian VC deal flow also started the year strong, with several notable early-stage raises in fintech and cleantech announced in the week's first filings.

Why It Matters

Trade policy clarity mattered directly to private market valuations. PE exit multiples in industrials and manufacturing had been compressed by trade war uncertainty through 2019. The Phase One deal — while incomplete — gave portfolio companies a more predictable planning horizon. For Canadian venture-backed companies targeting US market entry, reduced friction was a tailwind worth pricing in.

Signal to Watch

CVCA's Q4 2019 data, expected in February, would reveal whether the trade détente had already unlocked delayed PE deal activity in late 2019.

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