(Bloomberg) -- Bay Street analysts and portfolio managers believe Donald Trump’s victory will strengthen Canadian stocks in the long run, even as initial market reaction left Canadian equities trailing US stocks.
Commodities and resource stocks weighed on the S&P/TSX Composite Index, which initially fell at the market open and was up 0.3% as of 12:00 p.m. Toronto time, trailing the 2.1% gain of the S&P 500. Strategists expect the hit to commodities will be short-lived and see metals and oil rebounding.
Market watchers and economists cited uncertainty for the Canadian economy, which relies heavily on trade with the US and is likely to be caught in the crosshairs of Trump’s tariff policies.
Brian Belski, chief investment strategist, BMO Capital Markets
“It’s a mistake to be a reactive investor in general. We are investment strategists, we’re not political strategists and we have been firmly in our belief that politics has nothing to do with the absolute promise of stock markets. It’s all about what’s happening in terms of the underlying stocks and the underlying economy. Clearly, what’s happening with the overall trend in Canada is more of a recovery side of things... As America goes, so goes Canada from a fundamental perspective. And remember, too, the big growth engine remains the US for the Canadian banks.”
Philip Petursson, chief investment strategist, IGM Financial
“You have to weigh valuation against policy and that’s where Canada still has the edge. Financials in Canada are still attractive,” Petursson said, noting that TSX-listed companies are already trading at discounted valuations to US peers. “Valuation is a poor predictor of short-term performance but it does matter in the long run.”
Laura Lau, senior vice president and chief investment officer, Brompton Corp.
“At one point, I thought the TSX might outperform the S&P, but with this, maybe not. It’s like the center of gravity has shifted,” Lau said, noting that fund managers are positive toward Trump’s pro-growth outlook.
Gillian Wolff, equity strategist, Bloomberg Intelligence
“I think the biggest problem could be that Trump is threatening to raise tariffs on goods imported from the rest of the world to 20% (and 60% for China).”
Ian de Verteuil, managing director and head of portfolio strategy, CIBC
“To be clear, an America First policy is meant to increase economic activity in the U.S., and this typically has positive read-throughs for the Canadian economy. This will be mitigated by some of the trade issues and Canada’s disappointing commitment to defense spending – a major irritant to hawks in Washington.”
Derek Holt, vice president and head of capital markets economics, Scotiabank
“I think C-suites and markets have reason to be very cautious toward the future. A surge of protectionism is all but assured to hang over the global economic outlook as a downside to US and global growth.”
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