USMCA will be ratified within a year say Canadian investors

Most institutional investors believe the deal will be agreed but there may be changes

USMCA will be ratified within a year say Canadian investors
Steve Randall

The long-awaited replacement for NAFTA should be ratified by the end of 2020 but not necessarily in its current form.

That’s the view of Canadian institutional investors, 64% of which expect the USMCA trade agreement to be ratified within a year according to a survey by currency manager Record Currency Management.

But among 29% of respondents who say the Conservatives will win the federal election, 88% say that the agreement will not be finalized in its current form.

While many may be expecting a Liberal victory in the election, 61% of the institutional investors responded that they don’t expect either major party to have an overall majority.

The poll also asked respondents about interest rates with 83% expecting them to fall by June 2020 as the Canadian economy is impacted by the global slowdown.

“We are actively engaging with investors who are considering the positioning of their portfolios in case of any surprise outcome to the election and sharp market moves, as well as the overall Canadian macro-economic framework,” said New York-based John Floyd, Record’s Research and Strategy Director. “On the back of unexpected outcomes in the US election and UK Brexit referendum in 2016, coupled with relatively sanguine markets, investors are absolutely right to prepare for unexpected results and to consider the broader global macroeconomic and geopolitical backdrop.”

For the most part, the results supported consensus views around monetary policy, exchange rate volatility, and election outcomes. However, this finding itself highlights the risk of alternative outcomes confounding expectations, potentially leading to marked shifts in markets.

The poll of Canadian institutional investors included asset owners, asset managers, consultants and economists, including some who are Record’s clients.

North American expansion

UK-based Record expanded in North America earlier this year with the opening of its New York office.

Commenting on the expansion, James Wood-Collins, Record’s Chief Executive Officer said: “North America has long been a core market for Record’s currency risk management and investment services. The US and Canada present compelling opportunities for growth and we are excited about the additional value we will be able to deliver to clients with the increased presence we now have in the region.”