The Big Picture: Canadian Elections and the Equity Market

Insights and Market Perspectives

Author: The editor's desk

September 20, 2021

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Correlation is not causation, but there’s something about connecting the dots between political leaders and equity markets that many investors still find intriguing if not ultimately that helpful. With Canadians heading to the polls on September 20^th, here are five ways to slice and dice each Prime Ministerial term since 1968 through the lens of the S&P/TSX Composite Index, the country’s primary benchmark for stocks.

Party Performance

There have been 16 federal elections since Pierre Elliott Trudeau was first elected Prime Minister more than 50 years ago. Of these, eight of the 10 terms served by Liberal PMs corresponded with positive TSX returns, while four of the six served by Conservatives* did as well.

*The Conservative Party of Canada was formed in 2003 from multiple political parties including most notably the former Progressive Conservative Party of Canada that existed from 1942 to 2003. For the purposes of this blog, “Conservative” is a catch all for both of these parties.

Who Says Markets Don’t Like Minority Governments?

Minority governments have coincided with four of the five best-returning terms of any elected Prime Minister since 1968. That said, they also correspond to the two worst.

Third Time’s Not Always a Charm

There have been three Prime Ministers who have been elected at least three times since 1968, but when it comes to corresponding equity returns during this stretch of their tenure, the third term was a tough slog for two of them.

One Term? No Problem.

Joe Clark and Paul Martin are the only Prime Ministers to serve just one elected term in the past 50 years. They also happen to be the PMs with the two-best corresponding TSX returns over this same period.

Let’s Call it a Draw

It’s part of the Canadian identity to flaunt comparisons to the United States, but in this particular context, there is no reason for superiority or inferiority complexes. Indeed, for every elected Prime Ministerial term that has coincided with the TSX outperforming the S&P 500 Index, there is a term that has coincided with Canada’s main benchmark index underperforming its American counterpart.

The commentaries contained herein are provided as a general source of information based on information available as of August 17, 2021 and should not be considered as investment advice or an offer or solicitations to buy and/or sell securities. 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 investment decisions arising from the use or reliance on the information contained herein. Investors are expected to obtain professional investment advice.

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.

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), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

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