The U.S. elections results will likely impact Canadian firms and investors regardless of who wins, with some experts warning proposed tax hikes from former vice president Joe Biden and concerns over foreign investment restrictions under U.S. President Donald Trump are among the top risks.
“Taxes will have a profound effect on U.S. public equity markets and likely private equity markets too,” according to Jack Ablin, chief investment officer at Cresset Wealth Advisors.
Ablin, who also served as chief investment officer at BMO Harris Bank for almost two decades, cautions U.S. firms that have benefited from Trump’s Tax Cuts and Jobs Act of 2017 could likely see a large tax bill under Biden.
Biden has campaigned on raising the corporate tax rate to 28 per cent from 21 per cent, taxing companies who move U.S. operations offshore, and has proposed doubling the tax rate for corporate foreign income gains to 21 per cent. He has also pledged to raise taxes on capital gains for high-net-worth individuals.
The impact of these tax hikes could weigh on firm valuations and business sentiment, Ablin says. However, he notes that to enact these types of measures, Biden will need a Democratic Senate.
When it comes to M&A, Curtis Cusinato, partner at the law firm Bennett Jones, who is the co-head of the mergers and acquisitions practice, believes activity in Canada will remain robust regardless of who sits in the Oval Office.
In the case of a Biden win, Cusinato anticipates heightened activity in renewable energies, while he expects consolidation in Canada’s oil-and-gas sector to continue under either candidate.
“In terms of cross-border deals, there will probably be more activity in the private equity side, or financial buyer side,” Cusinato said, in reference to both candidates.
Private equity activity between the two countries should be healthy for the next four years, given the cost of cheap money in a low-interest rate environment, says Benjamin Tal, deputy chief economist at CIBC World Markets.
According to the Canadian Venture Capital and Private Equity Association, private equity activity in Canada was up 33 per cent in the first half of 2020, compared to the same time last year despite the pandemic.
However, Tal says tensions between China and the U.S. would likely continue under both Biden and Trump, which would ultimately lead to reduced diversification options for Canada in terms of private investment – and would increase the country’s dependence on the U.S.
“Ironically, no matter who wins the election, Canada’s investment reliance on the U.S. will rise, not fall,” Tal said, adding that could be offset by more activity in Europe.
For Elaine Kunda, an experienced venture capitalist who is a managing partner at Disruption Ventures, the biggest question mark for Canadian investors is what would happen with investment regulations if Trump were to stay in power.
Kunda is concerned about how the current administration will choose to move forward with tightening foreign investment into the U.S. – a threat she says Canadian investors have feared before.
“It’s almost as if having a limb chopped off for Canada if deeper investment regulations in the U.S. were to persist,” Kunda says.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
