Canadians are heading to the polls in two weeks and just like the lead up to past elections, investors are asking how this might affect their portfolios.
The short answer (so you can stop reading here if you want) is it likely won’t matter that much. The Canadian federal election should have very little impact on your investment accounts.
Let me explain.
First of all, the Canadian stock market represents just three per cent of the global markets, so a well-diversified investor should have low exposure to Canadian equities. So if the election did impact Canadian companies in a big way, your portfolio should be well-insulated.
Secondly, the major political parties in this race all intend to provide the economy with ample fiscal support until the COVID recovery is complete. While their policies differ substantially, all three major parties are committed to keep helping our economy along.
Third, the performance of Canadian equities, bonds and our dollar are largely hitched to external global factors and our domestic markets are less impacted than our general economy is by federal decisions. I think it’s important to understand that our economy and our markets are not one and the same.
There is no question that certain sectors of our markets will be far more directly impacted by the election results though. Our commodity industry for example has a lot riding on this race and over-exposure to these types of investments requires far more careful consideration.
Could we see a major stock market pullback this fall or winter? Absolutely! It’s always possible but the cause of a pullback or correction would be from some other catalyst and not our election.
Ultimately, the upcoming election is unlikely to have any significant short-term impacts on your investment portfolio so stick to your properly diversified investment strategy and sound financial plans.
And make sure to get informed and get out to vote.
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.