Kingsmill’s Investment Miscellanea: Friday, January 24 ,2020

Jan 23, 2020 | Joshua Kingsmill


For Canadians that spend time in the US at this time of the year, they often look at the exchange rate. The Canadian dollar weakened to a near four-week low against the USD, after the most recent Bank of Canada interest rate announcement on Wednesday.

The central bank says in this latest forecast that the Canadian economy will grow by 1.6% this year, which is a slower than expected start to the economy. They did point to the ratification of the new North American free trade deal, and a partial trade detente between the United States and China should help stoke economic fires in Canada.

RBC Bank projects an April cut in rates, which they believe is now about 50% priced in. It’s interesting that the Central bank noted that perhaps Canadian consumers have turned more cautious, perhaps from the recent international developments (Impeachment proceedings, Middle East escalations, the Ukraine passenger jet with Canadians aboard, fears of another China virus outbreak)

To the extent that all of this will affect the market is yet to be seen, but certainly there is a lot of news that will provide the market with a lot of potential outcomes. I always caution my clients that what one thinks should matter to equities and what actually matters may not be the same things.

Specifically on the markets and news, I have included an interesting piece about the single biggest event that will shape the news in 2020: the U.S. presidential election. This election will no doubt be a meaningful source of volatility. Some of the S&P 500 historical performance under different presidents since 1929 is interesting and perhaps not what we would expect, but there is no evidence to suggest that the relationship between the President’s party affiliation and stocks markets is statistically significant.

There are a few key things that are important in this piece that I use to point out when people ask me: “What do you think will happen if Trump gets back in, or if the Democrats win”.  First, we should always resist the impulse to make major portfolio adjustments based solely on what we think of the prospects of one party winning or the other. And second, try to keep our attention focused on economic and corporate fundamentals. These are the true drivers of equities.

I don’t have a prediction this week (I will save my Superbowl prediction for next week), but I did want to send an interesting link that allows you to bet on the outcome on all kinds of mostly US election outcomes: enjoy! (link)


Have a great weekend