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:

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

Canadian dollars in a magnifying glass
Dividend Stocks

3 High-Yield Dividend Stocks That Are Screaming Buys Right Now

Are you looking for great income stocks? Here's a trio of high-yield dividend stocks that pay insane yields right now.

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

Transform a $5,000 TFSA Into a $50,000 Retirement Nest Egg

The TFSA is a powerful tool that can grow a small investment into a substantial retirement nest egg over time.

Read more »

A meter measures energy use.
Dividend Stocks

Is Fortis Stock a Buy, Sell, or Hold for 2025?

Fortis has increased its dividend annually for the past five decades.

Read more »

analyze data
Dividend Stocks

3 Dividend Stocks That Are Screaming Buys in November

Here are three top dividend stocks long-term investors won't want to ignore during this part of the market cycle.

Read more »

senior relaxes in hammock with e-book
Dividend Stocks

Generate $175/Month in Passive Income With a $30,000 Investment

Dividend aristocrats offer reliability, and many of them also offer generous yields. With sizable enough discounts, these yields can become…

Read more »

dividends can compound over time
Dividend Stocks

Best Dividend Stocks to Buy Now for Canadian Investors

These three stocks would be excellent additions to your portfolios, given their solid underlying businesses, consistent dividend growth, and healthy…

Read more »

data analyze research
Dividend Stocks

3 Undervalued Stocks to Watch in November

Not all undervalued and discounted stocks are destined or poised to make a comeback soon, and a protracted timeline can…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

The Perfect TFSA Stocks for Long-Term Growth

Two industry heavyweights are perfect stock holdings in a TFSA for long-term money growth.

Read more »