Trump or Biden: How the U.S. Election Will Impact Canadian Stocks

Whether Trump or Biden wins, investors should be prepared for either outcome. Watch stocks like Enbridge Inc. (TSX:ENB)(NYSE:ENB) closely.

Dollar symbol and Canadian flag on keyboard

Image source: Getty Images

The United States presidential election has global consequences. However, the result may have a deeper impact on Canada than any other foreign nation. This is why Canadian investors should be watching the showdown between Donald Trump and Joe Biden closely. 

Here’s what the election matters and what the outcome could do to Canadian stocks.

Why does this matter?

Canada’s economy is unbelievably exposed to the politics of our southern neighbour. Roughly 75% of our exports flow to the United States. U.S.-based companies employ a significant number of Canadians. Meanwhile, the U.S.’s tight immigration policy has helped Canada attract more migrants (and thus more economic growth) in recent years. 

Some of the largest banks and technology companies in Canada derive a significant portion of their earnings from the states. 

This year, the exposure to the U.S. economy has been magnified. With over 8.5 million COVID cases, the U.S. is clearly the epicentre of this pandemic. The next president will have to negotiate with our prime minister to determine border restrictions in 2021, which could have an impact on our own caseload.

These are just some of the reasons investors should be watching the election closely. While predicting the outcome is nearly impossible, I believe investors can prepare for either outcome. Here’s what you can do.

If Trump wins

A Trump victory would imply a continuation of the policies we’ve seen over the past four years. That means aggressive stimulus, low interest rates, low taxation, and a pro-energy policy. These policies enhance the prospects of Canadian energy and private equity stocks. 

Brookfield Asset Management, for example, should have an easier time finding U.S. assets to add to its immense portfolio. With a strong U.S. dollar and low interest rates, they should also find it easier to finance these deals. 

Meanwhile, energy infrastructure companies like Enbridge should find it easier to have their pipelines approved by a Trump administration. Trump’s support was a critical element for the company’s Line 3 pipeline this year. If he wins re-election, future Enbridge projects should have little trouble getting approved. 

If Biden wins

Early polls indicate a Biden victory; however, that is far from certain. If Biden does win election, Canadians should brace for a sudden swing in U.S. economic policies. For one, the ongoing trade war is expected to come to an abrupt end. That means more trade flowing across the U.S.-Canada border, which is great for stocks like CN Rail and Canadian Pacific Rail.

A Biden administration would also focus heavily on renewable energy, which could be excellent for Canadian stocks like Transalta Renewables. Indeed, if the Democrats can successfully launch a Green New Deal, several Canadian renewable stocks could soar. Canada already exports renewable energy across the border, and this wave could surge if Biden beats Trump next month. 

Bottom line

Like most Canadians, I’m rooting for my favourite candidate to win this crucial election. However, I need to be prepared for either outcome. The best way to do that is to reduce exposure to any stock that hinges on this election and bet on stocks that have great prospects regardless of who wins. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Brookfield Asset Management. The Motley Fool recommends Canadian National Railway.

More on Investing

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: 2 Stocks to Buy Now for a Personal Pension Fund

RRSP investors can find top TSX dividend stocks at cheap prices today.

Read more »

Hand writing Time for Action concept with red marker on transparent wipe board.
Stocks for Beginners

Buy the Dip: 2 Insanely Cheap Growth Stocks to Buy Today!

Many Canadian growth stocks are looking insanely cheap today. Here are two stocks that have long histories of making investors…

Read more »

Cogs turning against each other
Dividend Stocks

1 Passive-Income Stock to Counter Volatility

Looking for a stock that can counter volatility now and tomorrow? This stock is a reliable option for growth and…

Read more »

edit Real Estate Investment Trust REIT on double exsposure business background.
Dividend Stocks

A Top REIT for High-Yielding Income

This top REIT on the TSX offers investors a considerable amount in shareholder dividends through its massive dividend yield.

Read more »

edit Four girl friends withdrawing money from credit card at ATM
Bank Stocks

Should You Buy Canadian Bank Stocks in the Face of a Potential Recession?

Royal Bank of Canada (TSX:RY)(NYSE:RY) stock a is a great blue-chip name that investors should not hesitate to buy on…

Read more »

analyze data
Metals and Mining Stocks

3 Under-the-Radar Commodity Stocks to Buy

Three commodity stocks are likely to break out soon if inventories in metals markets continue to decline or demand outpaces…

Read more »

Oil pumps against sunset
Energy Stocks

Is it a Good Time to Buy in the Energy Sector?

Boosted by a very bullish supply/demand environment, energy stocks like Canadian Natural Resources and Tourmaline have much further to go.

Read more »


2 Stocks to Buy Offering Better Value Than Air Canada

Air Canada has been a popular stock for years, but despite its low price, these two picks are much better…

Read more »