Donald Trump, who will be inaugurated as the next U.S president on Jan. 20, brings with him a high level of uncertainty for 2017, investment managers and economists say.
Following the election of Trump on Nov. 8, U.S. stocks took off, with key indices hitting multiple records highs. The Dow Jones industrial average — the benchmark index of blue chip companies — came tantalizingly close to topping the 20,000-point plateau for the first time before the rally petered out in the last trading days of 2016.
"To characterize the markets in this past year, I would say that the first three quarters have a been a grind, but the last two months have been like having the fun uncle come to visit — unexpected, a bit messy and surprisingly fun," said Sheryl Purdy, a vice-president and investment advisor at Leede Jones Gable Inc. in Calgary.
Trump campaigned on a populist message that was pro-business and protectionist at the same time, saying he would cut taxes, spend money on infrastructure, and scrap or renegotiate trade deals.
The incoming U.S. president is a "wildcard," said Marshall Auerbach, research associate at the Levy Economics Institute at Bard College in Annandale-on-Hudson, N.Y.
"You don't really know what he's going to do. You don't really know the extent to which we should take his protectionist threats seriously, and obviously that's going to have a significant impact on Canada if he does," Auerbach said.
While Trump has expressed support for the Keystone XL pipeline, which the Obama administration rejected, there are other areas, such as his stance on NAFTA, and his general contrasting approach with that of Prime Minister Justin Trudeau on immigration, that could bring some real problems, which could adversely affect Canada, he said.
Doug Porter, chief economist for BMO Capital Markets, thinks the big uncertainty remains in what exactly Trump will propose and what he will be able to get passed into law.
"Frankly, at this point, no one can be sure of what exactly he's going to ultimately get through Congress," Porter said.
"There's certainly great hope in the market that's he going to bring in stimulative policies, whether that is tax cuts, some deregulation or even infrastructure spending, and that's really what's given the market quite a bit of juice in the last month or so, but he's also sounded very protectionist, and you know for Canada that's a big potential negative."
Given Trump's behaviour so far, Purdy expects he will be "highly unpredictable and easily provoked, in my opinion."
Focus on impact of overnight tweets
Markets will have to pay attention to Trump's "2 a.m. tweets that have effects on publicly traded companies," she said, alluding to a series of his social media messages that led to a battering of the share prices of Boeing and Lockheed Martin.
Purdy suggested that investing strategies should concentrate on Trump policies that are voted in by the Republican-led Congress.
While the Trump presidency is expected to bring with it the unknown, money managers do see an upside.
Barry Schwartz, chief investment officer at Baskin Wealth Management, said Trump "seems to be the best pro-business president-elect that the U.S. economy has ever had, I mean as good as [Ronald] Reagan."
For an investor buying stocks to participate in better business and a better economy, "then the next four years may be incredible for stock market participants," Schwartz said.