by Michael Arbow, MBA
Partner, RSD Solutions Inc.
May 2nd was a rather busy day for the global news junkie but here in Canada, international events took a back seat to the Federal election. What started as a snooze fest was anything but in the last two weeks of campaigning and provided political risk managers – spin doctors (?) with some valuable lessons. The end result was the Conservative Party received a majority government after three tries, the number three (New Democratic Party) unexpectedly become the number two and the nation’s number two, the Liberals may be going the way of the 1935 British Liberal party. A special mention should also go out to the Bloc Quebecois which enjoyed one generation of staying power and was wiped out – perhaps joining the Liberal party in the history books.
A week after the fact and the dust has settled, a clearer picture of where that leaves Canada’s people and organizations is beginning to emerge. With a strong left wing opposition, expect the right wing Conservatives to move a little closer to the centre on some issues, but fundamental to the Conservatives is low corporate and personal taxes and continued support for the energy sector (read; oil sands) and possibly agriculture. Also expect the Conservatives to push for a national securities regulator and be pretty hands-off on the financial and greater business community. End result: the Canadian dollar will continue to strengthen against the US dollar and likely most OECD currencies. Expectations for yearend are already $USD 1.09 (CAD .92/1.00 USD) and I can see Patricia Croft’s and David Rosenberg’s three year expectation of $1.20 still a possibility.
So the story of the loonie’s rise continues and if anything is now reinforced. For Canadian exporters, the argument for delaying effective hedge strategies is continuing to get weaker. The question then is: what discussions does your risk department have prior to and after an election? Canada has shown, the unexpected can happen and the results can be significant.
For more on this story click on the link to the Globe and Mail article:
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