Four more years

If the opinion polls were accurate, the overwhelming majority of Canadians were disappointed by the re-election of President George W. Bush. I cannot recall any U.S. president who has met with such widespread disapproval in our country mainly, it appears, because of his hawkish foreign policy in general and the Iraq war in particular.

However, like it or not, we are in for four more years of the same. So instead of crying in our Molson Canadian, let’s try to look on the brighter side of things. Hard as it may be for some to accept, the Bush re-election isn’t all bad for Canada, at least when it comes to finance and investing. In some ways, the glass is half-full rather than half-empty. Here are some positives to consider.

Less risk of protectionism. The Bush Administration has not been kind to Canada on such issues as softwood lumber and cattle imports. But a Kerry-Edwards White House would likely have made such issues look like small potatoes. John Edwards is as rapid a protectionist as we’ve seen in some time. John Kerry is somewhat more moderate but one of his campaign pledges was a review of all U.S. trade policies, specificly including NAFTA, which could have led to some very tense talks between Washington and Ottawa in view of our massive trade surplus with the United States.

It’s easy to say that Kerry would have softened his position had he been elected but intense pressure from Edwards and the powerful trade union movement would have made that difficult. In this case, we may be better off with the devil we know.

Reduced threat to outsourcing. The issue of outsourcing became a key theme for Senator Kerry during the campaign, especially in battleground states in the mid-west. India was usually singled out as the main culprit but the fact is that Canada has been a significant beneficiary of U.S. outsourcing, especially in areas like call centres.

Kerry had promised to introduce legislation that would provide tax incentives to corporations that keep jobs at home. There’s no way of knowing how effective that might have been, but with Bush retaining office any such initiative is unlikely.

A stronger loonie. Whether you think a strong Canadian dollar is good news or bad news depends on your perspective. The reality is that our industries appear to have coped much more effectively with the rapid rise in our currency than anyone might have expected. They have also benefited from lower costs for importing technology and machinery, so the net result appears to be positive for our country.

The re-election of President Bush prompted an immediate rise in the value of our dollar to over US83c and suggests that the loonie will continue to move higher. Kerry had promised to roll back some of the Bush tax cuts and to take a more aggressive approach to tackling the U.S. fiscal deficit. With Bush in the White House and the Republicans again in control of Congress, none of that is likely to happen.

Up to now, the Administration’s main tactic for dealing with the situation had been to let the U.S. dollar devalue and there is no reason to expect that to change. The Canadian dollar will rise as a result.

Higher gold prices. The price of bullion tends to move inversely to the value of the U.S. dollar. If the greenback continues to decline in currency markets, watch for gold prices, which topped US$435 recently, to move higher. Since Canada is a major gold producer, that will benefit us.

Positive news for U.S. stocks. As commentators on CNN repeated endlessly, the stock markets hate uncertainty. A prolonged electoral limbo, such as occurred in 2000, would have been terrible news. As soon as it became clear that Bush had been re-elected and that Kerry was not going to launch a prolonged legal battle, Wall Street went on a tear that continued right through to mid-November and included the biggest one-day gain in the Dow in more than a year! 

Looking ahead, historically the year following an election has not been a good one for U.S. stocks. But the negative trend is much more pronounced if the incumbent loses. In this case, some sectors could actually experience strong rebounds as a result of the Bush re-election including pharmaceuticals (investors are always leery of the impact of a Democratic government on the industry), defence-related companies, and energy firms.

In the latter case, watch for a boom in the ethanol industry; although Bush is thought by many to be anti-green, the fact is that the use of ethanol as a fuel component has increased dramatically during his watch and will likely continue to do so.

The bottom line is that, whatever your personal view of the Bush victory may be, we have to live with his Administration for another four years. We may as well make the best of it and find some solace wherever we can.