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The polls are closed and the results are in. Justin Trudeau will once again be Canada’s prime minister.
The Liberal Party has been downgraded to minority status, however, with the party’s seat count at just under 160 as I write this, a little short of majority status of 170 seats. The Conservatives are right around 120 seats, which was a little short of expectations. The big surprise was the Bloc Quebecois, which surged forward with 32 seats in La Belle Province. The NDP came in fourth, with a slightly disappointing result of just 25 seats. And finally, the Green Party made great strides, picking up three seats and a big increase in the party’s popular vote across the country.
The focus now is on governing, with Trudeau’s Liberals likely entering a coalition with Jagmeet Singh’s NDPs. Together these two parties will have majority status, although Trudeau may be forced to entertain some big ideas in the NDP platform to keep the party’s support.
Here’s what investors can expect from a Justin Trudeau minority government.
Bearish on oil
Big parts of Trudeau’s platform focused on climate change, introducing concrete plans to lead Canada into a cleaner future. A Liberal government will continue to take steps to ensure Canada is a net-zero carbon emitter by 2050 — a standard that is the core goal of the latest United Nations climate summit.
This will also mean a continuation of the party’s controversial Carbon Tax, much to the chagrin of voters in places like Alberta and Saskatchewan: two provinces where the tax has remained very unpopular.
All this adds up to bad news for Canada’s energy sector. It’ll likely be even worse with Singh’s influence, while a key component of the Bloc Quebecois platform was an anti-pipeline position.
Essentially, the Conservatives were the only party running on a pro-energy platform. The party won just over one-third of total seats with approximately one-third of the popular vote. That means two-thirds of Canadians voted against the energy sector.
I would not be surprised if Canadian oil stocks slumped for a few days after this disappointing setback for the sector.
Taxes
Trudeau’s tax platform was pretty simple. There will be a small tax break for middle-class Canadian families, while the richest 1% will be asked to pay a little more. Tax breaks will include a reduction in the middle-class tax bracket from 22% to 20.5%, as well as a small increase in the personal exemption for folks making under $147,000. Tax increases will be aimed primarily at businesses and closing tax loopholes as well as a 10% luxury tax on any cars, boats, or aircraft worth more than $100,000.
Housing
A Trudeau government should be bullish for real estate as well.
The Liberal platform announced the party would implement a vacant property tax on houses owned by foreigners that currently sit empty. This is designed to help curb speculation in certain markets.
But another Liberal policy will likely help raise home prices. The First-Time Home Buyers’ Incentive is designed to make homes more affordable by lending certain first-time homeowners up to 10% of the value of the property. Unfortunately, this will likely drive up prices. After all, that’s what happens if you make qualifying for a mortgage easier.
The bottom line
A Liberal win will likely mean a continuation of the last four years for Canadian investors, a time that has been relatively bullish for the TSX Composite. I don’t see any major changes on the horizon, even if Trudeau will have to work a little harder to ensure support for his minority government.
The big loser will likely be the energy sector. The majority of Canadians seem to support a more anti-energy strategy, a mandate Trudeau will remember over the next few years. This probably won’t be good news for Canada’s largest oil stocks.
