Although the Conservatives won only a slim minority in the federal election, the “swing to the right” is positive for Canadian financial markets, says BCA Research.

There have been nine minority governments in Canada’s history, with an average life of just 18 months, BCA points out. But, it says, the next government may last longer because, “The Liberals will not wish to bring down the Conservative-led government in the near future, as the party will need time to rebuild its badly damaged grassroots support.”

On the policy front, the Conservatives will be more predisposed to economic liberalization and have promised tax cuts, BCA notes.

“The new government will be forced to compromise on its platform, given its tenuous hold on power. Nonetheless, even policy gridlock could be positive for the Canadian dollar and equities, given the favorable structural backdrop for both,” it concludes.