The fact that markets like predictability is no secret. With Trumps election there was an aura of doubt that markets couldn’t quite shake. Market rallies so far have been undermined by nervousness, but after the Trump-Trudeau summit, investors seem as reassured as they have been since November 9th 2016. Apart from a photo opportunity, the summit seems to have given the markets an additional boost. Just as the two leaders were shaking hands awkwardly, both the Dow Jones and the TSX were rallying confidently towards record highs.
Markets Hit Record Highs
The Dow Jones closed at its highest level yet on Monday, surpassing the 20,400 point mark. The TSX surpassed the 15,700 point mark and also closed at a record high. This market rally came about after both leaders spoke fondly about the relationship between their nations. Trump and Trudeau also emphasized the importance of economic relations between the countries, and pledged to work together in order to build upon it. This is important for both the US and Canada, but it is perhaps more than crucial for the latter. Around 75% of all Canadian exports are sold in the US and bilateral trade is worth about half a trillion dollars.
Despite the fact that Canada has shown its willingness to renegotiate NAFTA, now it is clear that Trump is not likely to scrap the deal altogether. Instead it seems that he wants to extract some concessions from Mexico in particular, which means that Monday’s rally could mark the beginning of a more positive note for NYSE indices and the TSX. Ultimately, it is entirely possible that Trump’s policy will slowly force Mexico out of a decade’s old free trade area, which could serve to strengthen Canada’s position vis-à-vis its most important international market, if it manages to fill part of the void that Mexico might leave behind.
From this point onwards, investors will likely continue to improve their positions to reflect a more robust trade relation between Canada and the US. Trump has also signaled his willingness to move forward with the controversial Keystone XL oil pipeline that would let Albertan oil flow directly to the Gulf of Mexico, where all the refineries are. Projects like these will serve to cement the relationship between both countries further under the leadership of both Trump and Trudeau, who might not see eye to eye in terms of social policy or even international relations, but surely understand the value of the economic ties between both their countries.