Outside the Beltway — What We’re Hearing from Americans and Canadians

October 18, 2019

5 minute read

WE CONTINUE TO BELIEVE that the best way to understand politics and markets is to get outside of the Washington Beltway and talk with ordinary people — it’s always illuminating. If it’s October, we’re on the road, getting an earful; here are some quick observations:

THE ECONOMY IS GOOD, WITH ONE BIG PROBLEM: In most of the country, the economy is solid (see Seattle, Nashville, Charlotte, Austin, etc.). We sense pervasive optimism in these regions, far greater than portrayed in the media. But there’s one big problem: companies can’t find enough workers, and when they do, they fear rivals will poach their work force. All of the business leaders we talk with — to a person — want more immigration.

THE PROBLEM WITH TARIFF WARS: There’s no love for China in the U.S.; most people think Beijing doesn’t play fair. But we’ve talked with dozens of small business owners in the past few months, all of whom can’t plan ahead with any confidence because of the uncertainty generated by tariffs. Donald Trump is a great deal-maker? Well, he needs to finalize some deals, it would make a huge difference for the slumping manufacturing sector.

UNCLE JOE IS GOOD ENOUGH: The pundits (including us) think Joe Biden has lost a step, but most Democrats we talk with genuinely like Biden; their warmth toward him is striking. And their apprehension about Elizabeth Warren is widespread — her agenda is simply too rich for many voters, who don’t understand how she can pay for her ambitious goals. In the past few weeks, we have sensed a major new theme among Democrats: isn’t there someone else, a fresh face?

TRUMP FATIGUE: This sentiment is overwhelming; most people we talk with are tired of the Trump tweets and the bombast. They’re not thrilled at the prospect of a bruising impeachment trial, either. Some angry activists rant to us about a “coup” by the “deep state,” while others want Trump out of office immediately. Most Americans are in the middle — and it simply comes down to this: they want some peace and quiet, not the daily drama.

TRUMP SLIPS AMONG TWO KEY VOTING BLOCS: The “saver class,” mostly senior citizens, wants HIGHER interest rates, not lower. They tell us they’re looking for better yields, and many are distressed to hear Trump call for zero percent rates. And Trump has another voting bloc that may turn against him — veterans, most of whom are aghast that he abandoned an ally that fought courageously against ISIS.

THE VOTERS AND THE MARKETS: Most people we speak to are cautious about the markets; many don’t appreciate the ten-year economic recovery, and fear this year’s remarkable rally could end at any moment. When we hear such nervousness, our reaction is that the market could go higher — there’s no froth to worry about. Irrational exuberance is the last thing we detect when we leave the Beltway.
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CANADIANS AREN’T THRILLED WITH MONDAY’S CHOICES: We’re in Canada a lot with our colleagues at AGF, enjoying the country’s unspoiled beauty and its people — and we’re always eager to take the pulse of voters who will head to the polls on Monday. Prime Minister Justin Trudeau is in trouble — even many of his supporters concede he’s been a disappointment.

FORTUNATELY FOR TRUDEAU, his main opponent, Conservative Andrew Scheer, generates little enthusiasm (although Scheer’s anti-tax, small government beliefs resonate in much of Canada, especially in Alberta, where Trudeau is vilified for
his energy policies).

A MINORITY GOVERNMENT IS LIKELY — there’s little chance that either candidate will come close to a majority of the vote, which means at least two smaller parties — the leftist New Democrats and the Greens — will be kingmakers. An awkward coalition is likely in Parliament; such arrangements usually don’t last for long, so still another election is likely within a couple of years.

WHAT WILL BE THE TAKE-AWAYS ON MONDAY NIGHT? First, Trudeau may form a minority government, but he no longer is a rock star; his charisma can’t compensate for his flaws. Second, will there be a signal to Democrats in the U.S. — is a carbon tax, even in a country that takes climate change seriously, a blessing or a curse for politicians? As Emmanuel Macron discovered, the desire to confront climate change doesn’t always translate to public support for raiding their pocketbooks.

The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), Highstreet Asset Management Inc. (Highstreet), AGF Investments America Inc. (AGFA), AGF Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA). AGFA is a registered advisor in the U.S. AGFI and Highstreet are registered as portfolio managers across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF AM Asia is registered as a portfolio manager in Singapore. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.