After a highly contested election that was observed all over the world, Joe Biden – the Democratic Party nominee –  was elected as the 46th President of the United States . Leading up to the election, North American markets continued to see weeks of stagnant trading as investors held back due to the prevailing uncertainty. However, markets recovered on the eve of the vote, with the S&P/TSX composite index closing up 116.23 points.

Historical Trends

In the past, the S&P/TSX has generated better returns one year after the election of a Democratic president (+12.3%) as compared to a Republican president (+3.2%). Republican presidents generally garner more positive results for the Canadian energy, consumer staples, financials and utilities sectors. On the other hand, Democratic presidents tend to be more favourable for industrials, consumer discretionary, technology and telecom sectors. Furthermore, Canada’s economy has generally performed better under a Democratic president. Since 1961, the average annual real GDP growth per capita has been 2.02%. A year after the election of a Democratic president, average growth increased to 2.92%, whereas the average growth under a Republican president was 1.34%.

Impact of the 2020 U.S. Election

On November 9, world markets climbed following the news of Biden’s victory. Although it remains too early to truly measure the impact that the new administration will have on Canadian markets, we have summarized some of what to expect:

Trade: Although trade uncertainty is expected to decrease, President-Elect Biden campaigned on a pledge to “Buy American”. Such a policy could adversely affect Canadian markets. Currently, Canadian companies can bid on public infrastructure contracts in the U.S., however, this may no longer be possible. Furthermore, the President-Elect signaled his intention to end the Keystone XL Pipeline project, which would result in thousands of lost jobs in Alberta’s oil patch.

Taxes: President-Elect Biden’s proposed increased tax rate will have notable implications for the financial industry, as well as M&A activity broadly.

  1. Financials: It is not surprising that Canadian banks with large U.S. exposure benefited when President Trump introduced corporate tax cuts. Although President-Elect Biden’s corporate tax rate increase could negatively impact these same banks, his office also plans to raise the minimum federal hourly wage. This should generate greater demand for investments, deposits and other financial products.
  2. M&A Activity: On the whole and amidst the COVID-19 pandemic, global M&A activity had declined, with the most exaggerated drop occurring during Q2. However, in June 2020, there was a marked increase in M&A transaction volume – a hopeful and rising trend that has continued ever since. Now, with Joe Biden as the incoming president, more stable regulatory and financial policies are expected, which will create an environment conducive to deal-making. In addition, the Democratic tax plan could create further incentives that would see an increase in deals in the short-term, as investors may consider entering into transactions before the increased corporate tax rate and capital gains taxes take effect. Nevertheless, it is thought that M&A activity will hold steady in the upcoming years, particularly in Canada’s renewable energies industry, and the oil and gas sector.


Since the uncertainty following the election, the Canadian and global markets have fared well, but fears of a double-dip recession due to record COVID-19 cases may cause markets to lose steam.

The author would like to thank Nareesa Nathoo, Articling Student, for her contribution to this legal update.

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