Monday Market Minute | Nov 04, 2024

Trump wins — markets rally, but Canada faces trade uncertainty

What Moved

Donald Trump won the US presidential election on November 5, securing a decisive victory. US equity markets rallied sharply, with the S&P 500 hitting record highs on expectations of deregulation, tax cuts, and business-friendly policy. However, the Canadian dollar weakened immediately as markets priced in tariff risk — Trump's campaign had repeatedly threatened broad tariffs on Canadian imports, particularly energy, automotive, and agricultural products.

Why It Matters

For Canadian private market investors, the election created a bifurcated outlook. Domestic rate cuts and economic normalization remained supportive. But the threat of US tariffs introduced a new, significant risk variable for Canadian businesses — particularly those in PE portfolios with US export exposure. Cross-border deal activity could slow as policy uncertainty chilled investment decisions. Portfolio stress testing against tariff scenarios became urgent.

Signal to Watch

The transition team's trade policy appointments would signal how aggressive tariff implementation would be. A hardline USTR appointment would escalate Canadian risk premiums; a pragmatic choice would suggest negotiation over confrontation. The uncertainty alone was damaging.

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