Well, it is almost two months since Justin Trudeau became our prime minister. While it is obviously too early for political commentators to base observations on that short a period, it is interesting to note that another group of experts, namely the investment community, have clearly been displaying votes of non-confidence in the new government’s policies and performance.
On the last day prior to the election, the Canadian Dollar traded at US$0.7740. As this is written on Dec. 17, Canada’s currency has plunged to US$0.7175 – a drop of 5.65 cents – or a stunning seven per cent against the Greenback since Trudeau took over. In currency trading, that is a massive move within a short time frame of just two months.
On the last day prior to the election, the Toronto Stock Exchange Index closed at 13,838. As of Dec. 17, the TSX Index is hovering very near 13,000 — a drop of more than 800 index points or about six per cent, again a stunning decline.
I believe there is a sound reason for this demonstrable scepticism among the investment community. One of the major sources for the Canadian government’s tax revenues has been the petroleum complex — and that immensely important industry is contracting at a frightening rate, at least in terms of tax revenues for the government. And yet, despite this sharp decline in revenues, the Trudeau-led Liberals have been announcing one dramatic spending splurge after another.
Where do they think the money is going to come from unless the government plans to market horrendous levels of new debt to finance the now-certain onrush of deficit spending?
The investment community is clearly ruminating about the same question.
Leonard Melman
Nanoose Bay