The investment pros who manage our mutual funds, pensions and other forms of savings tied to the stock market are now sizing up potential outcomes of the Oct. 19 federal election to determine what it means for the TSX and ultimately for returns on our investments.
“Overall, we view the Conservatives as friendly to businesses, especially resource producers. On the other hand, the Liberals promise the most stimuli to the economy and consumers through a large budget devoted to infrastructure spending along with tax cuts for the middle class,” said Dvai Ghose, global head of research at Canaccord Genuity, a Bay Street financial services firm.
The NDP meanwhile are proposing a two-percentage point increase in the federal corporate tax rate, to 17 per cent from 15 per cent – a clear negative for all businesses, and could put more environmental restrictions on the energy patch, Ghose said in a report Wednesday.
MORE: Latest coverage — Federal Election 2015
Here are the sectors and companies that stock experts at Canaccord and elsewhere suggest will benefit or face pressure depending on what happens Oct. 19.
Banks
A Harper majority would benefit banks and financial firms the most, experts suggest. There would be no change in tax rates nor to the hike to tax-free savings account limits. The increase to TFSAs to $10,000 would be repealed under the Liberal platform.
An NDP government would likely seek to cut fees customers pay, which would benefit consumers but cut into bank earnings, Canaccord analysts said.
MORE: RBC drops plan to charge new fees after customers complain
Dollar sensitive
The dollar has been in a tailspin for more than a year. Experts suggest the loonie’s descent could continue lower if either the Liberals or NDP win power, though the Grit plan to go into small deficits over the next few years to fund infrastructure projects poses the bigger downside risk. That contrasts with a Conservative plan fixated on keeping the books balanced.
“In general, a balanced budget would probably prove relatively beneficial to the Canadian dollar,” Canaccord’s Ghose said. “Conversely, deficits could mean further Canadian dollar depreciation.”
MORE: Cheaper gas, costlier food, clothing — welcome to the new normal, Canada
An even lower loonie – which has bounced around the US$0.75 level in recent weeks – would hurt sectors and firms with foreign-exchange exposure, like travel firms and airlines, and even grocers and retailers importing goods into the country.
Energy and pipelines
“While the Conservative government has been supportive of export pipelines such as Trans Mountain, Keystone XL, Northern Gateway and Energy East, the NDP and Liberal parties have vowed to be selective in supporting export pipelines,” Canaccord Genuity energy analyst Anthony Petrucci and team said.
MORE: Federal leaders talk XL pipeline, relations with U.S.
In addition to less support for pipeline construction, both the Liberals and NDP want to put a price on carbon emissions, with the latter calling for a cap-and-trade system.
Big greenhouse gas emitters such as TransAlta, Suncor, and Imperial Oil would be negatively impacted by a Liberal or NDP government.
“Overall, we see anything other than a Conservative majority government as a headwind for the Canadian energy and conventional power space,” Macquarie analysts said.
More delays in pipelines would hurt energy companies but would likely benefit Canadian National Railway Co. and Canadian Pacific Railway Ltd., with increased shipments of crude by rail.
Construction
A Liberal plan to double infrastructure spending over the next decade would benefit construction, engineering and equipment firms.
Firms like SNC-Lavalin, Stantec and WSP Global would be beneficiaries of the spending increase, as would public construction companies such as Aecon, Stuart Olson and Toromont Industries, experts say – which would seek to hire more workers to handle the jump in job sites.
The NDP are also looking to raise infrastructure spending, and experts at Macquarie Securities suggest a Liberal minority would win support from New Democrats on increased spending to build bridges, roadways and transit systems.
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