Will Trump win? Biden? Gordon Pape takes a hard look at the market fallout from both scenarios

By midnight tomorrow night we may know who the next president of the United States will be.

Or maybe not.

It’s possible we may not even know until December. The Electoral College is scheduled to vote on Dec. 14, and it is feasible the fight over disputed ballots will go on until then.

If so, it wouldn’t be the first time. The 2000 election wasn’t finalized until Dec. 12 of that year, when the U.S. Supreme Court ruled in favour of George W. Bush and halted the Florida recount. The decision moved the state’s electoral votes into Bush’s column, providing him with the margin of victory he needed.

Had the court ruled for Al Gore, we would likely be living in a different world today. In that parallel universe, President Gore would have launched an immediate campaign to combat climate change, which would have been carried on by President Barack Obama (assuming he had succeeded Gore) and the world would have been well on its way to dealing with global warming.

Of course, that’s not how things unfolded. But it shows the impact on history that a U.S. election can have.

On the eve of tomorrow’s vote, Democratic nominee Joe Biden is leading in the polls. That means nothing. Hillary Clinton was ahead in 2016 and in fact won the popular vote by almost three million ballots. It didn’t matter. The presidency is decided on the basis of Electoral College votes, which are determined on a state-by-state basis. Donald Trump won there handily, 304-227.

So, take nothing for granted. Tomorrow’s election could go either way, with different implications for Canada and for investors.

If Trump wins

The polls tell us that most Canadians would like to see the president ousted, but the oil and gas industry would cheer his re-election. A second term would guarantee TC Energy’s Keystone pipeline would be completed. It would have the capacity carry 830,000 barrels a day from the oilsands to Gulf Coast refineries, breathing new life into a moribund sector of the economy. Fossil fuel stocks would get a shot in the arm, although it is unlikely we will ever see them retest their all-time highs.

A second Trump administration wouldn’t revisit the new United States-Mexico-Canada Agreement (USMCA), which the President is very proud of, sparing us a gut-wrenching repeat of the North American Free Trade Agreement (NAFTA) renegotiation. But that doesn’t mean our trade problems with the U.S. would be over. Trump loves using tariffs to get his way, as we have already seen with steel and aluminum. Those tactics will continue in a second term, leaving Ottawa scrambling whenever the president decides he doesn’t like what we’re doing. The resulting uncertainty could put pressure on the stocks of export-oriented companies, especially those in the auto parts business.

We should also expect Trump to continue his isolationist and Buy America policies. These also hurt Canadian industries — remember that 75 per cent of our exports go to the U.S.

If Biden wins

Say goodbye to Keystone. One of the former vice-president’s first promises was to immediately kill the permit for cross-border construction. Alberta Premier Jason Kenney has said he believes Biden would change his mind once he looks at the number of jobs involved and considers the implications for continental energy security. I think Kenney is dreaming. In the last presidential debate, Biden said he is committed to an eventual phaseout of the fossil fuel industry. To flip-flop on Keystone after that statement would be hypocrisy of the highest order. It won’t happen.

What will happen is the launch of a major program to promote green energy. Biden believes this will achieve two desirable objectives: create new jobs while accelerating the move away from fossil fuels. If he follows through on his campaign pledges, this will be the greenest White House in U.S. history. The cost at the end of the day will be in the trillions.

Several Canadian or Canadian-owned green energy companies have operations in the U.S. and could benefit from this initiative. They include Brookfield Renewable Partners (BEP.UN-T), Algonquin Power & Utilities (AQN-T), Innergex Renewable Energy (INE-T), and Boralex Inc. (BLX-T).

On the trade front, Biden is not a big fan of tariffs, so it is unlikely that he’d use that as a cudgel against us. Relations between Ottawa and Washington should be much smoother, since Biden is on the same philosophical wavelength as Prime Minister Trudeau. But disputes will continue to pop up. The softwood lumber disagreement, which has been ongoing for years, would not disappear under a Biden presidency.

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A President Biden could be as disruptive to global trade as Trump has been. The Democrats have never been strong advocates of free trade and protectionist trade unions are one of the key components of the party’s coalition. That means Biden is unlikely to rejoin the Trans-Pacific Partnership or reach a comprehensive trade deal with the European Community. He has clearly stated he will not enter into any trade agreements until the government has made major investments in U.S. workers and communities.

Taking all this into account, I see a clear benefit for Canada’s green energy sector if Biden wins. A victory for Trump would boost the traditional oil and gas sector.

The most immediate concern for investors would be a long delay in resolving the vote count. The stock market hates uncertainty. Nothing would be worse than having this drag on for weeks. Let’s hope we get an answer tomorrow night.

Gordon Pape
Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters. His website is www.BuildingWealth.caFollow Gordon Pape on Twitter at twitter.com/GPUpdates

TORONTO STAR