Trump 2.0
Download MP3Welcome to Making Sense with Dustin Lamontagne from Research Capital. My name is Bryn Griffiths. I'm your host, and joining us is Dustin. How are you doing today?
Dustin Lamontagne:Real good. How's yourself, Brynn?
Bryn Griffiths:Fine. Thank you. We've taken about a 6 month break, and we're getting back at it here, and so much has happened. It's it's crazy. Donald Trump is back in office in the US.
Bryn Griffiths:It's Trump 2 point o. What's going on with that?
Dustin Lamontagne:Yeah. Well, it's, you know, it's been an interesting 6 months. Kinda took the summer off, and we we both had some schedule conflicts and going into the fall. So we're just getting back into, recording these, these pods now. And, wow, what a difference the 6 months can make in the, in the world, geopolitical landscape.
Dustin Lamontagne:Trump, you know, that that win in November was something else, probably unprecedented, for, you know, a president to win then lose, and then come back and win basically everything, the House, the Senate, the presidency. So I just thought it'd be a good intro topic to, to discuss coming back because, of course, Trump is looking at all sorts of tactics to, to target Canada. He's talking about taking back the Panama Canal, Greenland, wants to make Canada the 51st state, right? So, obviously, I've had a lot of questions from clients in regard to, you know, what will happen if Trump slaps, you know, massive tariffs on on goods and services coming out of Canada. So you know, what what to expect?
Dustin Lamontagne:I think if, if Trump goes full, full fledged with his tariffs, you could probably see a pretty good hit to Canadian GDP. I think I've read anywhere from 2 to 2 a half percent, like right now, which would equate to, you know, maybe 4 to 500000 job losses. I don't know that I think I think they're going to be smart about it. And the US is not like Canada. And in Canada, a Prime Minister has a lot of executive power.
Dustin Lamontagne:In the US, anything that is very important has to go through the the House and the Senate. Now the Senate generally just rolls over whatever the House decides to put through in the majority of cases, but the House is very, they're calming presidents, presence in the United States, because, you know, if you're a Republican, and you don't like a bill, there's a very strong history of, you know, by bipartisanship, in the US. So, whereas if you if you go against the the party line in Canada, you're basically kicked out of caucus or kicked out of the party. Yeah.
Bryn Griffiths:There's a penalty for that. Yeah.
Dustin Lamontagne:Yeah. It's not really democratic. Right? So in the US, if you're a Republican and you don't like a bill and it's a Republican sponsored bill, you just vote against it. And it it happens quite regularly down there.
Dustin Lamontagne:So I think if there's something very negative that, is not in the best interest of, you know, a certain sector. For example, I was reading Pennsylvania is the the largest trading, Canada's the largest trading partner with, with Pennsylvania. Wow. Like a like a massive amount of goods, something like 30% of their, you know, imports.
Bryn Griffiths:Yeah. The weird part
Dustin Lamontagne:is translate.
Bryn Griffiths:He he needed to win Pennsylvania to, to to to get to this point. So it's funny how that works, isn't it?
Dustin Lamontagne:Yeah. And and and I was reading this article. I forget who it was by, but it was, it was a reputable source. I think it was Globe. And, basically, they looked at all the swing states that he won, and they all have massive trade with Canada.
Dustin Lamontagne:In fact, Canada is the biggest trading partner of, you know, Michigan, Wisconsin, Pennsylvania. Even even Georgia has massive trading ties to Canada. So, I think they're gonna be very, probably surgical with their tariffs. He talked about, you know, just across the board, but, I I could see, and then I could see a carve out for energy. You know, Danielle Smith has indicated, in Alberta that she doesn't think that, tariffs on Canadian energy going south is a good idea.
Dustin Lamontagne:It's just gonna raise inflation for everybody. So when when I look at Trump 2.0, the best we can do, I think, is look back and see what his presidency did in 2016.
Bryn Griffiths:Right.
Dustin Lamontagne:And and he basically turned out to be a pretty lame duck president. Not a lot happened on his watch. There wasn't really a a whole bunch of world conflicts. The economy the economy did quite well. So when we're looking at Trump 2.0, you know, trying to predict in our crystal ball, what what are going to be the good sectors for the next 4 years while Trump's in power, it's probably going to be the same sectors that did well in 2016.
Dustin Lamontagne:So I'm thinking banks, transportation will probably do quite well, the airlines and the rails. Utilities are likely to pick up steam. If if the central bank keeps lowering rates, you're gonna see, you know, a rebound in probably the telecoms and real estate trusts. And then, you know, probably energy will do quite well, because I think the US is really going to be focused on energy independence. And the swing swing barrels are no longer in the shale.
Dustin Lamontagne:They're in they're in the Middle East. So pricing will probably stay quite firm for the foreseeable future. Getting getting to, you know, a little bit talking about world politics and diplomacy. Right. I I think you're probably gonna see an end to the the conflict between Russia and Ukraine, and that'll be a good thing.
Dustin Lamontagne:People will stop dying on on both sides. The these tariffs are gonna be, you know, an an issue. And and last time, I think Trump put some tariffs on softwood lumber and and steel, iron ore. So it's not like we haven't been through the, you know, cup couple of these situations before, and Canada will just manage through it. They'll probably put some retaliatory retaliatory tariffs on to match whatever the US, does.
Dustin Lamontagne:Right? So
Bryn Griffiths:Yeah.
Dustin Lamontagne:That's not gonna be good for business on either side. So and I think the the states especially will recognize this, and and it'll be somewhat of a tempering effect.
Bryn Griffiths:Will that be will that be sooner rather than later, or will I just let it go for a while to see where it sits? What do you think on that? Yeah.
Dustin Lamontagne:I think I think as soon as tariffs are are put on Canadian goods, we'll we'll slap counter tariffs. The problem is we're, you know, Trump coming into office. We don't we don't have a, an effective prime minister at the moment Yep. And and or a functioning parliament. So we're gonna have to wait until the end of March to to get really anything done.
Dustin Lamontagne:And then there's gonna be likely, a spring election in Canada. Right? So
Bryn Griffiths:Hey. I gotta ask you. So with that little, that soft part of the schedule, is it to use a hockey term here, where we're kind of stuck, do you expect that people are gonna get a little panicky over that, or are people understanding exactly what's gonna happen and you just gotta kinda hang tight?
Dustin Lamontagne:Well, nothing really happens quickly in in politics anyhow. Right? Generally, there's there's always a lag because these politicians talk about something, and it seems to take a year to, you know, go through the the proper channels for bills to become laws. A good example of that is the proposed capital gains tax
Bryn Griffiths:Right.
Dustin Lamontagne:Right, that that the Liberals wanted to put in. I think they mentioned it, last summer, and it it didn't get put through. So now CRA has basically said they're going to, have corporations and and personal, personal citizens file their taxes as if the the capital gains tax was was already initiated. And if it gets repealed, people will get refunds. Okay.
Dustin Lamontagne:So which I don't entirely agree with, but CRA can do whatever they want. I mean, what are you gonna kidding. Sue CRA? Yeah. So they carry a big stick.
Dustin Lamontagne:Right? Okay. And and I think if if there's a Canadian election in the spring and by by some miracle, the conservatives get a majority and we're able to get business back on track in this country again, you'll probably see the the capital gains tax, you know, the proposed capital gains tax just scrapped altogether because it's it's not good for business.
Bryn Griffiths:Can I can I ask you about currency too? Because we've got the US dollar, the Canadian dollar. I'm off to Mexico here for a couple of weeks in in the month of February. And I'm I know I'm gonna take a hit when I I do that change because I don't know what it's sitting at now. Just under 6 70¢, I think, is the I don't know where it's at.
Bryn Griffiths:And things the other thing we gotta tell people about Donald Trump is a bit of a wild card, so we're taping this just before he takes office. Who knows where this, this podcast could go over the next few weeks? It's it's just crazy times there, Dustin.
Dustin Lamontagne:Yeah. Exactly. You know, when you talk about currency, it's it's very hard to predict short term. But, if you look from 2016 to 2020, Trump was actually a weak dollar president. And probably the primary reason is because he ran huge deficits, and he's indicated he's gonna run huge deficits again.
Dustin Lamontagne:So if I'm the US and I owe you a bunch of money, you being China, for example, or any other nation which owns, you know, US debt, if I devalue my currency a little bit, I've made I've made the amount that I need to pay back a little bit cheaper. So I think that, you're probably gonna see a strengthening Canadian dollar over the next couple of years. Of course, it's weak right now. And and if the tariffs get put on, it could maybe drop into the 65 to 67¢ range, something like that.
Bryn Griffiths:Right.
Dustin Lamontagne:I think the all time low I remember is in the early nineties. It got down to 62¢, something like that. So not a great time to be going to Hawaii or Florida or or Phoenix, but
Bryn Griffiths:Or Mexico?
Dustin Lamontagne:Mexico. Yeah. I think the Canadian dollar will hold up relatively well to the peso. We're talking really, really US versus Canadian dollar. But I think as time goes by, if the price of oil stabilizes, you'll start to see those policies that the US is enacting weaken the currency.
Dustin Lamontagne:And you're probably gonna see a 75 to 80¢ Canadian dollar at some point again. So I wouldn't be betting on 50¢ Canadian dollars, although anything is possible. I think the the propensity for it to go up over the next couple of years is much higher than than lower.
Bryn Griffiths:Okay. So with this Trump 2.0, if anybody's got concerns, how do they get ahold of you?
Dustin Lamontagne:You can give me a call on my cell phone, 780-905-7729, or, on email. I, re reply quite quickly. I get get, email questions all the time. So, dlamontang@researchcapital.com.
Bryn Griffiths:Great to be back with you, and we'll talk to you on the next episode. Okay?
Dustin Lamontagne:Yeah. You bet, Brynn.
Bryn Griffiths:Well, that's it for today. We'll have more helpful hints coming your way on our next episode. And don't forget, all opinions expressed are solely Dustin's and do not reflect those of Research Capital. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Research Capital may maintain positions in the securities discussed in this podcast.
Bryn Griffiths:Thanks for listening to Making Sense. Have yourself a great day.
