TORONTO – Stock markets in Canada and the U.S. fell Friday as investors began to digest the implications of a Donald Trump presidency.
His policies around tax cuts and tariffs could be inflationary, creating less certainty about the path for interest rate cuts, said Konstantin Boehmer, head of fixed income and portfolio manager at Mackenzie Investments. That means investors are asking many questions these days.
“We’re digesting the news of what is happening on the election side, and who are the (cabinet) nominees and what are the odds of them actually being confirmed,” said Boehmer.
“You just have a lot of uncertainty (about) where this will go next, and taking the foot off the pedal (as an investor) is probably not such a bad call to make.”
Markets were also weighed down on the interest rate outlook after U.S. Federal Reserve Chair Jerome Powell said there was no rush to lower them further, said Boehmer.
“We had yesterday a fairly significant comment from Powell, and I think that it is still lingering also in markets today, which is saying that there is no real need to cut rates all that aggressively.”
The S&P/TSX composite index closed down 158.99 points at 24,890.68.
In New York, the Dow Jones industrial average ended down 305.87 points at 43,444.99. The S&P 500 index was down 78.55 points at 5,870.62, while the Nasdaq composite was down 427.53 points at 18,680.12.
Energy led the TSX lower as its index fell 1.14 per cent, weighed down by a drop in the price of oil. The health care index was also down 1.26 per cent.
Pharmaceutical stocks in the U.S. were under pressure after Trump said he wants Robert F. Kennedy Jr., a prominent anti-vaccine activist, to lead the Department of Health and Human Services. Moderna tumbled 7.3 per cent, and Pfizer fell 4.7 per cent amid concerns about a possible hit to profits.
The potential for a slower decline in interest rates in the U.S. has weighed on the Canadian dollar lately.
The Canadian dollar traded for 71.03 cents US compared with 71.29 cents US on Thursday. It’s down from trading at over 74 cents US in September and is at its lowest level since the early days of the COVID-19 pandemic.
“We’ve seen the Canadian dollar weaken dramatically” said Boehmer.
“So that has been a meaningful breakout out of the range…certainly it doesn’t make the decision for the Bank of Canada easier.”
Governor Tiff Macklem will have to carefully weigh the economic need for lower rates with the pressure it puts on the currency, said Boehmer.
While Boehmer had previously expected the Bank of Canada to make a 0.5 percentage point cut, he’s now leaning more toward a 0.25 percentage point cut for its Dec. 11 decision.
“We are in oversold territory for the currency and that might not be the (rate decision) where you add one on top to give it another push toward becoming weaker. So odds are on my side more toward the 25 basis point cut.”
The December crude oil contract was down US$1.68 at US$67.02 per barrel and the December natural gas contract was up four cents at US$2.82 per mmBTU.
The December gold contract was down US$2.80 at US$2,570.10 an ounce and the December copper contract was down two cents at US$4.07 a pound.
This report by The Canadian Press was first published Nov. 15, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
