The “Three Amigos Summit” on Nov. 18 in Washington D.C. appeared to reinforce President Joe Biden’s shift towards Trumpian protectionism. Biden refused to budge from his position of using tax credits to support domestic production of electrical vehicles, potentially damaging over 50 years of voluntary cooperation and trade integration between U.S. and Canadian firms in the automotive sector. On Nov. 24, the U.S. Department of Commerce stated it will impose duties of 17.9% on imported softwood lumber from Canada, which is twice the previous rate of 8.99%. This shift towards protectionism should be of grave concern for investors as less-open

U.S. consumers are paying record levels for gasoline according to the Energy Information Administration (EIA).  Average gasoline prices across the country are $3.17 per gallon, up 45.7% since last year and are currently at a 7-year high. Even with oil prices hovering around $70 per barrel, demand for gasoline has also recovered from pre-pandemic levels.  According to the EIA, gasoline demand is approximately 9.1 million barrels per day (bpd), up from 5.8 bpd in May 2020. Last week, The White House recommended that OPEC increase oil production to curb gasoline prices for consumers.  OPEC has already announced a series of

The world looks rather different than it did at the start of the week, after news emerged of a potentially game-changing coronavirus vaccine and a winner in the US presidential election. Pfizer and BioNTech told the world’s press on Monday that their coronavirus vaccine was 90% effective in initial results. That is nearly twice as effective as vaccines against influenza, which are estimated to work in 40% to 60% of cases. If the early findings hold good, this is excellent news, and it duly triggered bullishness in equity markets, with indices gaining around the world. Refresh this chart in your

The United Kingdom faces a defining moment as it prepares for the grand finale of Brexit, a process that has lasted three and a half years.  During this time, it also needs to prepare for how it will negotiate trade deals with its global counterparts.  The U.S. is a key trading partner for the U.K. and will need to work on a future trading agreement. Negotiating a deal will be intensive for both parties and according to Reuters, Presidential Candidate Joe Biden has made it clear about one of the requirements for any trade deal with the U.K.  Biden has

The World Renewable Energy index has outperformed the MSCI global equity benchmark by more than 100% so far this year. Should he win the election this week, Joe Biden has signalled that he would rejoin the Paris climate change agreement and has earmarked $2 trillion towards spending on climate-related projects. These factors help explain why there has been a strong correlation between Biden’s polling and the relative performance of global renewable energy stocks. But the correlation between these two series only firmed up in in October – there was little relationship between the two earlier this year. Incoming legislation in

One of the Trump administration’s major accomplishments was corporate tax reform. U.S. presidential candidate Joe Biden proposes raising the corporate tax rate by 7 percentage points to 28%. If former Vice President Biden is elected and his corporate tax plan is enacted, the S&P 500’s current earnings estimates could see a roughly negative 10.6% impact. Exhibit 1: S&P 500 Y/Y CapEx vs. Effective Tax Rate Note: Based on current constituents and weights The Tax Cuts and Jobs Act of 2017 (TCJA) cut the U.S. corporate tax rate from 35% to 21%. One of the goals of this tax cut was

As the probability of a Biden win and a Democrat clean sweep has increased, markets have responded by moving out of US oil, gas and coal stocks. Biden’s spending plans are directed more towards cleaner infrastructure and renewable energy sources than his Republican opponent. Changing investor sentiment is shown by the outperformance of US alternative energy stocks, although this sector has also benefitted from its exposure to the tech rally. The underperformance of traditional energy stocks relative to the S&P500, in spite of the partial recovery in oil prices since the pandemic-related fall, provides more evidence that investors are no

Defense spending is an integral part of the U.S. budget.  Since 1950, consumption and investment on national defense has increased from $20 billion to of $877 billion in 20Q2.  This represents a 5.5% compounded annualized growth rate over the last 70 years. While gross spending has increased over the long-term, it appears that the rate of increase is largest during a Republican Presidency.  Defense spending has substantially increased over the last two Republican terms (excluding current term), doubling during the 1980s and 2000s.  Conversely, defense spending has remained stagnant during the prior two Democrat campaigns. Exhibit 1 below highlights defense