WP talks with Mackenzie Investments’ fixed income chief strategist
It’s something of an understatement to say that relations between Canada and the US have been tense since President Trump decided to scramble established world trading norms. But at least talks have begun.
Reporting of last week’s inaugural meeting between Mark Carney and the president has been heavily focused on the the new Canadian prime minister’s robust and repeated take down of Trump’s aspirations to add Canada to the United States.
But beyond that, cooperation between the two will be closely watched for signs of what may be to come.
Mackenzie Investments’ chief strategist for fixed income, Dustin Reid, has been sharing his views with WP on how talks between the two neighbours may impact investors.
“The most significant takeaways were the constructive nature of the meeting, and the impression that not only further discussion would take place, but that it would likely also be constructive. Investors were concerned the first meeting would not be overly productive or constructive,” he says.
Reid notes that the meeting has not moved the dial on interest rates for either the Fed or the BoC, and the two central banks will likely forge their own fiscal paths. But the renegotiation of the USMCA will be the big economic alignment – or not!
On cross-border capital flows and foreign investment between the two countries, Reid says there is a “general view in the market at the moment that US dollars will likely need to be further hedged in the context of global portfolios, but the meeting itself likely did not contribute to speeding up or slowing down those flows.”
While there was some short-term lift for market sentiment following the meeting, it was just one meeting and Reid expects future talks to shape medium and long term sentiment.
But is now the time that investors and their advisors should make any changes to portfolios to seize on risk or opportunity for what may transpire?
“Not yet,” cautions Reid. “It does look like the US wants to make some deals, and since the meeting we have had a soft agreement between the US and UK which has been seen overall by the market as constructive. But the Canada – US trade pact likely has a while to go since USMCA will be a part of the discussion, and it is a complex document.”
Overall, the strategist says that this is likely to be the first in a long series of meetings between staff and leadership of Canada and the US and we are too early in the game to see exactly where the opportunities lie.
“But this conversation in conjunction with positive trade news is likely to positively impact global market sentiment if it continues,” he concludes.
