The U.S. presidential election's perceived impact on market volatility was front and center during a session Thursday at the Association of Canadian Pension Management conference in Charlottetown, Prince Edward Island.
But it could lead to upside volatility, said David Long, senior vice president and chief investment officer, asset-liability modeling, derivatives and fixed income, at the C$63.9 billion ($48.3 billion) Healthcare of Ontario Pension Plan, Toronto.
“As for the election, there is the potential for increased volatility,” Mr. Long said. “But when I think of some of the political disruption, these votes represent referendums on current policy direction. I see upside volatility rather than being too worried about the downside.”
Mr. Long said that from a “market practitioner” point of view on economic policy, tougher regulatory rules in the developed world have been a cause of sluggish growth, driving business to emerging markets. Also, “taxation remains a concern,” he added.
Mr. Long also said there should be a focus on candidates' “appetite and conduct of costly wars. There's been C$4 trillion to C$6 trillion spent by the U.S. on foreign wars (in Iraq and Afghanistan) that have lasted longer than World Wars I or II.”
Derek Burleton, vice president and deputy chief economist for TD Bank Group, said from a Canadian perspective, U.S. elections are tough to gauge. “Canadian elections are clearer on platforms,” Mr. Burleton said. “In (the U.S.) case, you have to deal with Congress. (Donald) Trump says he wants to cut taxes, and he says he wants to balance the budget. Some of what he wants to do is pro-growth, some is contrary to growth.”
Mr. Burleton said the outcome of the election could spur the same market reaction as the June U.K Brexit vote, which led to immediate but short-lived volatility. “Brexit came and went,” he said. "Markets might have the same reaction" to the presidential election.
One concern for Canadians in the U.S. election is on foreign trade, Mr. Burleton said. “The president can move unilaterally on what's seen as unfair trading,” he said, although Mr. Trump's opposition of the North American Free Trade Agreement and Hillary Clinton's less direct opposition to some free trade deals might change once either is elected.
“(President Barack) Obama said the same trade rhetoric when he campaigned for president, and then he became a trade champion, with (the Trans-Pacific Partnership) and all that,” Mr. Burleton said. Still, he added, “As Canadians, we're a bit concerned about the trade impact on us.”
Neither Mr. Burleton nor HOOPP's Mr. Long predicted who would win the U.S. presidential race or which candidate they preferred. “I'll leave it to audience members and others to try and understand their stances and outcomes,” Mr. Long said.