Canada’s 2018 Budget Has No Effect on Declining Canadian Stocks

The 2018 budget tabled on Tuesday, February 27, went practically unnoticed on the Canadian stock market. This was because, for better or worse, the budget had no big surprises related to the macroeconomic outlook – be it taxes, international trade or interest rates. It also contained no changes regarding registered investment accounts such as TFSA or RRSP. 

On Tuesday, the big downward factor for the movement of North American stocks, including Canadian ones, were the words by the Chairman of the United States Federal Reserve Jerome Powell who said that he was feeling more optimistic about the economy and reaffirmed plans to raise interest rates.

Some experts are calling this year’s Canadian budget “a placeholder” meaning that the government postponed bigger economic moves until the pre-election year and still had not decided on what measures to take regarding the NAFTA uncertainty and tax reductions in the U.S. It is also unclear what the government would do if economic growth slows more that the budget’s sensitivity analysis allows for or Canada enters a recession, given that the economic recovery has already been going on for eight years. Current economic growth helped the government put deficit and debt issues on the back burner. As long as the Debt-to-GDP ratio drops in the forecast, the government is ready to borrow more.

However, the markets consider these economic risks to be serious and if they materialize, it could further weigh on Canadian stock values, which are struggling this year – the S&P/TSX Composite Index is currently down by over 3% since the beginning of 2018.

 

Ukrainian Credit Union Limited