What investors want to hear in election’s wake

With the federal election behind them, Canadian investors will be watching closely to see if Mark Carney’s Liberal Party can turn its promises into action, says Corrado Tiralongo, chief investment officer with Canada Life Investment Management.

“There is a difference between campaign promises and policy rollouts,” he said on this week’s Soundbites podcast.

Tiralongo expects the new government’s first post-election budget will be “a credibility test” for Mark Carney.

“Investors should watch closely for whether the government recalibrates its assumptions or doubles down on unrealistic growth forecasts,” he said. “Any sign of fiscal overreach or under-delivery could widen [spreads] and weigh on the Canadian dollar.”

He added that investors should remain skeptical of “rosy revenue forecasts” and watch for “signs of fiscal slippage.”

“A failure to align budgets with the actual economic environment, could result in higher Canadian bond yields, greater currency volatility and relative underperformance of domestic equities,” he said.

Tiralongo pointed out that the election was the most U.S.-influenced in recent memory, with tariffs and a bombastic Donald Trump administration partly setting the agenda.

“Every party had to respond to this, whether through calls for trade diversification, reshoring supply chains or tariff retaliation,” he said. “It framed the election to a question on how Canada positions itself in a shifting geopolitical and economic order.”

The Conservative Party failed to break through, he said, because voters were unconvinced they could offer change without chaos.

“While the economic message was clear — cut taxes, expand housing supply, shrink government — some voters may have drawn comparisons to Donald Trump and questioned whether the [Conservative] party’s tone, not just its platform, align with Canadian values and political culture,” Tiralongo said.

In the immediate aftermath of the election, markets were sanguine, a sign, he said, that the election results were largely baked in already.

The challenge now, for the minority government, will be to inject some stability and predictability into turbulent markets, Tiralongo said.

“The key for investors is clarity,” he said. “Who holds the balance of power and what concessions Prime Minister Carney must make to stay in office? Volatility remains elevated, with delayed fiscal planning weighing on the Canadian dollar.”

Tiralongo added that strategic investments in housing, defence and trade diversification would support select sectors. “However, the broader economic growth will remain subdued, with green infrastructure and affordable housing providing the clearest sectoral opportunities.”

He also suggested Canadian-dollar-hedged exporters could see potential upside, including firms that are less exposed to the U.S. and better positioned in trade-friendly regions, he said. “[These firms] may see valuation premiums attached to them due to strategic insulation from U.S. tariff risk.”

He said strengthened relationships in Europe and the Indo-Pacific could provide some insulation against the unpredictability of the U.S., and may attract investment supply chain reorientation, he noted.

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This article is part of the Soundbites program, sponsored by Canada Life. The article was written without sponsor input.