Canada election 2025 result impact on stock market

Time of India

25-04-2025

Canada's upcoming federal election on April 28 could significantly impact financial markets. A Liberal victory, expected by THINK economic analysis, may cause minimal disruption. However, a Conservative win might rally the Canadian dollar. Both parties propose tax cuts, but differ on fiscal plans. US-Canada trade relations, vital for investor confidence, will be closely watched.
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Liberal Majority Expected — Limited Market Disruption
A Conservative Win Could Stir the Markets
Tax Cuts and Fiscal Plans
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As Canada's federal election is scheduled for April 28, the political result may have profound implications for the nation's financial markets, specifically the Canadian dollar and investor sentiment.Polls and betting odds are strongly favouring a Liberal Party victory , with Prime Minister Mark Carney set to win with an absolute majority, as per THINK economic and financial analysis. According to the THINK report, "This scenario is likely priced in by markets, and should have a limited short-term impact on CAD."But a Conservative Party surprise victory , led by Pierre Poilievre , might spark a rally in the Canadian dollar, as per the THINK analysis. That might also prompt market action, as the Conservative entails bigger tax cuts and more stringent deficit projections than the Liberals, according to THINK.Both have promised tax reductions, but the Conservatives are promising more drastic cuts, 2.25 percentage points from the lowest income group compared to the Liberals' 1-point reduction, as per the report. The Conservatives also commit to a "Taxpayer Protection Act" and intend to eliminate the corporate carbon tax, lower home sales taxes, and slash federal spending, according to THINK. Their budget projects a C$75 billion tax cut offset by C$56 billion in savings, resulting in a much smaller deficit than the Liberals' forecast, as per the analysis.The Liberals, meanwhile, plan to widen the fiscal deficit slightly in 2025 and 2026 but aim to reduce it steadily by 2029, according to THINK. They're also splitting the budget into a balanced operating budget and a modest capital spending plan, as per the analysis.The market impact of the election would be most strongly felt in Canada's trade relationship with the United States, according to the report. After US president Donald Trump announced high tariffs on imports, Carney's government retaliated with C$60 billion in duties, as per THINK. The Liberals are also advocating a C$5 billion Trade Diversification Corridors fund to cut trade dependence on the United States, according to the report. By comparison, the Conservatives are seeking early renegotiation of the USMCA and seeking to suspend tariffs while doing so, as per the report.Since 76% of Canada's exports flow to the United States, about 20% of its GDP, the outlook for US-Canada trade will be closely tied to investor confidence. Though a Liberal victory is unlikely to unsettle markets, any variation from the forecast could inject near-term volatility, particularly in the Canadian dollar, as per the analysis.Likely minimal, since markets have already priced in a Liberal victory.Yes, a surprise win could trigger a short-term rally in CAD.