It's Your Money  

Election impact on portfolio

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.

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About the Author

Brett, designated as a chartered investment manager and certified financial planner, is the regional director (Okanagan) for IG Wealth Management.

In addition to his “day job," Brett was appointed to the board of directors of FP Canada (formerly FPSC) in 2014, named as the board’s vice-chair in 2017 and took over as board chairman in 2019. 

Brett has been writing a weekly financial planning column since 2012 and provides his readers with easy to understand explanations of the complex financial challenges that they face in every stage of life.

Enhancing the financial literacy of Canadian consumers is a top priority of Brett’s and his ongoing efforts as a finance writer and on the regulatory side through the FP Canada board focus on this initiative.   

Please let Brett know if you have any topics that you’d like him to cover in future columns by emailing him at [email protected]

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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