Market Crash 2020: Did Biden’s Victory Increase the Odds of a Canadian Recession?

Canada welcomes the election of the new POTUS, although his victory could still deepen the country’s recession. Investors are closely monitoring the possible repercussions of Joe Biden’s win on the TC Energy stock.

| More on:
thinking

Image source: Getty Images

Will Canada be in the good graces of America? Canadian prime minister Justin Trudeau congratulated President-Elect Joe Biden and Vice-President-Elect Kamala Harris on November 7, 2020. It might leave a positive imprint on the incoming administration, because Trudeau was the first world leader to speak with and congratulate Mr. Biden on the pair’s election victories.

Biden’s inauguration is on January 20, 2021, which means starting his four-year term as the 46th president of the United States. Despite the preliminary pleasantries, Canada’s recession could still deepen in 2020 and lead to a market crash.

Fresh challenges

Canada had disagreements with the Trump administration on sensitive issues such as the NAFTA negotiations and tariffs but is facing fresh challenges with Biden. The president-elect ran on the platform, “the future is made in all of America.” It implies protectionist measures against countries, including its next-door neighbour.

The Canadian manufacturing sector, for example, might be in a bind. Biden’s administration could redirect critical supply chains back home and tighten domestic content rules. Some obstacles could emerge once it announces changes to trade policies.

COVID-19 remains a pressing concern. The Trudeau administration hopes better management of the pandemic comes about. Market certainty and economic recovery hinges on the potential future pandemic stimulus of Biden’s team.

A developing flashpoint is a multi-billion-dollar project involving a prominent Canadian pipeline operator. Biden vowed during the campaign that he would scrap the project.

Core dividend stock in focus

The American media declared the Biden-Harris team as the victor, although it’s the U.S. Congress that will announce the winner in early January 2021. Meanwhile, the S&P/TSX Composite Index has been on a rally since November 3, 2020, rising 834.9 points (+5.24%) to finish at 16,774.10 on November 11, 2020.

All eyes are on energy stock TC Energy (TSX:TRP)(NYSE:TRP) and its Keystone XL pipeline. Biden once said that tar sands are very, very high pollutants America doesn’t need. While the pipeline would carry crude from Alberta to refineries on the Gulf Coast, the incoming POTUS is opposed to the product.

In late October 2020, six major American union contractors won more than $6.1 billion worth of contract awards from TC Energy. In 2021, these contractors will execute the Keystone’s pipeline construction spanning 800 miles in three U.S. states. The project will give jobs to over 7,000 union members.

Aside from being one of North America’s largest natural gas pipeline operators, TC Energy is also one of the leading energy infrastructure companies in the region. The energy stock is popular with dividends investors due to its dependability as an income provider. Currently, it trades at $53.66 and pays a generous 6.02% dividend.

Sound advice to Canadians

According to Bloomberg Economics, the Canadian economy is better positioned to recover more ground than its G-7 peers. Furthermore, economists don’t expect any extraordinary increase in bond yields. They are also calling for the availability of a widespread vaccine by mid-2021.

The Financial Consumer Agency of Canada advises Canadians to minimize debt and perhaps know the distinction between good and bad debt. Thus far, the consumer debt level appears to be manageable. Otherwise, the Bank of Canada wouldn’t cut rates as an incentive to borrow.

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 Christopher Liew has no position in any of the stocks mentioned.

More on Dividend Stocks

Couple relaxing on a beach in front of a sunset
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »