Western Standard - Will Donald Trump be good for your RIFF？

00:00:00.000 Good evening, Western Standard viewers, and welcome to Hannaford, a weekly politics show.

00:00:21.900 After it was clear that Donald Trump had won the U.S. election last week,

00:00:25.960 the stock market roared. The Dow Jones Industrial Index surged 1,500 points, closing at a new record

00:00:33.100 high, 43,730. So regardless of whether they liked Trump or not, a lot of people made a lot of money

00:00:41.080 on November the 6th. My question then is whether this surge was an endorsement of Trump or a gasp

00:00:48.480 of gratitude for certainty and a clear result in a controversial election. Here to make matters

00:00:54.900 clear is peter piovic he is a calgary-based senior portfolio manager at wellington altus private

00:01:02.340 wealth canada i know what he drives so i think he's qualified to have an opinion what about it

00:01:08.660 peter does the market love trump well thank you nigel it's great to see you as always and i'm

00:01:15.300 really pleased to be on your show and uh regarding qualifications although i'm not a political

00:01:20.980 scientist or pundit i have been managing money for 27 years now and following global macro economic

00:01:28.420 trends and that's a foundational attribute for us here at wallington altus private wealth so

00:01:34.420 i hope i can answer all your questions and share some knowledge with your viewers

00:01:38.740 and great to have you here peter thank you what do you think what happened yesterday

00:01:44.660 yeah well you know i'll just answer bluntly uh yes so uh short answer is yes although many

00:01:51.220 see trump as a controversial figure the reality is is that his victory opens the door to a new

00:01:56.900 economic vision and part of that vision includes a policy of deregulation and that's that's a big

00:02:03.620 one there and markets appreciate that so as we witnessed this week both pre and post election

00:02:11.220 with the large gain seen in the North American stock markets, as well as other risk assets such as Bitcoin,

00:02:17.540 both of which now set at all-time highs.

00:02:20.760 Now, some people say that it was just the market responding to certainty.

00:02:28.020 Had Vice President Harris actually won, would we still have had a surge like that?

00:02:34.740 probably not the the certainty aspect of it does matter certainly I know from our perspective as a

00:02:44.020 money manager we try not to be let's just say take one side or the other we just need to know

00:02:50.840 and understand what the policy will be of that administration and as long as we know and

00:02:55.360 understand what the policy will be we know what to do next in terms of how we align our portfolios

00:03:02.320 you know, to meet that policy. But what we have here really is an opportunity for the White House

00:03:07.240 executive branch policy to better align with a more proactive monetary policy from the U.S.

00:03:13.260 Federal Reserve, which may have a profound impact on risk assets and financial markets

00:03:19.220 in the coming year. So, yeah, I mean, with Trump as president and his team featuring figures like

00:03:25.840 rfk jr and elon musk he claims to implement essentially a bold economic agenda which he

00:03:33.120 dubs uh american system 2.0 and the market likes that it's so you you talk about a bold economic

00:03:41.600 agenda now there's a graph that we see that shows that the market improved under mr trump's first

00:03:52.400 administration 2016 to 2020, I think it went up about the notes here, something like 15,000,

00:04:01.040 so I beg your pardon, yeah, about 15,000 points. But then it went up about that in the Biden

00:04:06.880 era as well. So does it actually matter who's president?

00:04:11.520 Historically, if you run the regression analysis, short answer is no. In most cases,

00:04:17.280 the answer would be no however there can be differences in policy agendas which during

00:04:23.920 certain market environments or call it macro environments may actually have an impact and

00:04:29.680 i believe this is one of those times you see we're we're at a time of essentially near unprecedented

00:04:38.400 fiscal deficit and obviously the highest levels of government debt we've even if adjusted for

00:04:46.000 for inflation, the highest levels we've seen really

00:04:49.240 since post-World War II era.

00:04:51.820 And that's got a lot of people concerned.

00:04:54.180 So the policy of this next administration

00:04:57.460 and how they handle that fiscal deficit

00:05:00.400 will be a huge clue to how money managers such as us

00:05:07.120 position our portfolios for the coming next four years.

00:05:11.600 So what are their alternatives?

00:05:14.060 In other words, what are you going to be looking for that's going to drive your decisions?

00:05:19.000 Yeah.

00:05:20.140 So this is going to be essentially very tricky for them to navigate, but it is possible.

00:05:26.260 It's been done before.

00:05:28.460 So if you look at the era post-World War II, we had actually a very similar environment

00:05:33.600 to we had now.

00:05:34.380 We just had a major war.

00:05:36.520 There was massive fiscal deficits.

00:05:38.760 There was massive amounts of debt.

00:05:40.100 um so um that has to be corrected for uh and if it's not then that can create a fiscal crisis

00:05:47.300 or massive recessions um so um so what are they gonna what do they need to do in the next coming

00:05:53.240 years and what are we going to look for is is essentially this they need to bring down the

00:05:57.740 fiscal deficit first and foremost um it's just too high and it's and it's at a level that's

00:06:03.280 wholly unsustainable for for the future our future and the future of our children um so um

00:06:11.040 trump did hire or he plans to hire elon musk as an example um and uh his primary role at least

00:06:18.880 what's been stated so far from what we know is to cut two trillion dollars um out of the

00:06:24.560 us fiscal deficit and um and that that in and of itself is going to go a long way uh to uh to give

00:06:32.160 give the market confidence that there will not be a fiscal crisis in the next coming years.

00:06:38.720 If that deficit's not cut, then people are going to start to get worried.

00:06:43.840 Now, that's a huge amount of money to take out of a budget, out of a government plan for expenditure.

00:06:52.800 Yes, it is.

00:06:54.460 Yeah. I mean, it was also a huge amount to inject.

00:06:58.140 but now that the people who were earmarked to receive it have got it they're going to expect

00:07:04.520 to get it again they've made plans on this basis what are the options say it's Mr. Musk

00:07:13.980 what options does he have to to do that just take money away and brush everybody off how does it go

00:07:20.980 No, definitely that's not the way it needs to go. So this is the tricky part that can also be

00:07:29.180 dangerous. Yes, there's a huge fiscal government deficit. However, that fiscal government deficit

00:07:36.620 is essentially financing most of the growth that we have in the US currently. So typically,

00:07:42.700 it's difficult to take that amount of money out of the fiscal deficit and out of the economy

00:07:47.860 without also impacting growth and if you if you impact growth you could end up with a growth scare

00:07:55.360 and a growth scare could end up leading to a recession could possibly and so that's one of

00:08:01.880 the major risks so the plan that they have at least from what we know is uh they they wish to

00:08:08.720 take it primarily out of um oh what they've used the word fraud essentially so they've actually

00:08:15.860 used word fraud uh and i'm not i'm not saying that but that's that's the word that they've used

00:08:20.500 um uh where they believe that there's a lot of um slush in the budget where money is basically

00:08:28.020 not going to where it's supposed to be going and they're not even quite sure where it's going in

00:08:32.820 some cases again according to to them um so they believe that they can take their words hundreds

00:08:40.020 of billions of dollars um out of the deficit simply by uh doing a more careful accounting

00:08:46.660 of where money is going to so that's kind of step number one step number two

00:08:52.100 i mean they've also campaigned on the prosperity for peace and uh and to end the wars uh whether

00:08:59.540 it be in ukraine or the middle east and certainly if um if if that's done uh that uh that could

00:09:07.300 result in less money essentially um uh being used for those purposes although the uh the the war

00:09:16.420 money if you want to call it's a bit tricky because a lot of that money actually does stay in

00:09:19.860 the u.s meaning that you know u.s might create bombs and planes and tanks and so forth and then

00:09:26.820 ship them off but the proceeds of that often do stay in the u.s so they need to in summary they

00:09:32.420 They need to reduce the deficit, but in a way that will impact growth as little as possible

00:09:38.140 to bring sanity back to the budget and achieve a prosperity for the future.

00:09:47.700 In the earlier Trump administration, 2016 to 2020, I think all of us recall that as

00:09:55.980 a time of prosperity and growth.

00:09:58.080 Is that something that was a consequence of what President Trump did at that time?

00:10:07.340 Can we expect the same kind of policy triumph in the four years to come?

00:10:16.340 So yes, but partially.

00:10:19.660 One of the things that he did in his first term was he reduced taxes

00:10:23.900 and he reduced as well regulation

00:10:28.080 or he proceeded upon deregulation.

00:10:30.900 So that's going to be an integral part of his plan

00:10:32.960 from what he has stated so far in his policy documents

00:10:35.680 that he does wish to reduce taxes,

00:10:38.740 which is a double-edged sword.

00:10:40.400 It's good for the economy and it's good for growth,

00:10:42.820 but it's bad for the fiscal deficit

00:10:45.140 unless done very carefully.

00:10:48.780 And then the other part of it,

00:10:50.300 and this is probably where he's going to

00:10:51.940 put his largest level of focus on is deregulation.

00:10:56.220 He plans on essentially doubling down on deregulation

00:10:59.620 and making it much easier for, say,

00:11:03.920 banks to lend money through deregulation,

00:11:07.140 which he would hope would spur the economy

00:11:10.360 in the coming years to come.

00:11:13.440 And I believe if it's done properly

00:11:16.720 with a balance of reducing the fiscal deficit

00:11:19.520 and deregulation and freeing up capital from the banks

00:11:24.340 to put into the general economy, he might be able to pull it off,

00:11:28.600 and that's what's got markets excited.

00:11:31.120 I think that's the key point.

00:11:32.600 So you're saying that it's his plans to deregulate

00:11:37.580 that are going to drive the economy, and that's what's got the market excited?

00:11:41.920 That's the plan.

00:11:45.000 Execution risk is always there, though.

00:11:48.120 As always.

00:11:49.520 I face that every day when I come to work.

00:11:53.360 I'm sure you do, too, in your own way.

00:11:56.380 So that's the plan.

00:12:02.220 You can't foresee the unforeseeable,

00:12:05.200 but what are the risks that he would be very well aware of as he sets forth on this?

00:12:11.420 Yeah, so some of the risks may have been reduced here

00:12:15.920 since it appears, at least, that the Republicans have a clean sweep.

00:12:20.580 They have both the House and the Senate as well as the executive branch.

00:12:23.700 So there might be less opposition to him being able to actually execute on his policies,

00:12:30.940 depending on how much opposition might actually still exist within his own party.

00:12:36.560 But the main risk would be, well, there's a few of them.

00:12:41.320 so um you know with uh increasing the amount of capital that's coming into the economy

00:12:48.120 uh future inflation is always a risk if again if it's done improperly uh because when you create

00:12:54.120 new money you know there is always a chance uh if if not done properly that that leads to inflation

00:13:00.520 which was would not be good if we return to that again uh the the bigger risk though i would say

00:13:06.360 is fiscal fiscal crisis uh so if if he cannot properly cut the deficit without um necessarily

00:13:15.960 harming growth we may end up possibly uh with the fiscal crisis by this time next year or early 2026

00:13:24.360 where essentially the bond market or the and or the currency markets you know might look at the

00:13:30.120 deficit. I mean, if he's cutting taxes, but he hasn't necessarily cut enough, you know, out of

00:13:36.920 the budget, where they just essentially balk. They say, no, no more. You know, we cannot continue to

00:13:43.160 finance this. It's too much, too much debt, too much deficit spending. And that could lead to a

00:13:50.380 fiscal crisis and possibly a recession as well. This is not something that he would be unaware

00:13:56.820 of or the people around him who are advising would be unaware of I would

00:14:01.760 hope not and I'm I would I would have confidence that he he has enough people

00:14:05.880 around him that he would be aware of this so I'm sure I'm sure the question

00:14:13.200 that everybody has who has anything to lose and a hope of gain is that's very

00:14:18.780 interesting peter what do i do as an investor so uh i there's there's probably a couple two-pronged

00:14:29.340 approach first of all uh it's it's important to have as many tools in your toolbox so to speak

00:14:34.860 as possible most people might have potentially either all their money in the stock market

00:14:43.180 you know that of course then makes you beholden to what happens in the stock market

00:14:47.740 some might have a balance of stocks and bonds which gives them a little bit more diversification

00:14:52.360 but even that might not be enough in a low interest rate environment to give you adequate

00:14:56.900 protection what we would advocate for is a much broader and diverse asset base where

00:15:04.540 clients have a portfolio of good quality stocks good quality bonds but also alternative assets

00:15:12.160 such as silver bullion or other precious metals and other alternative assets essentially that are

00:15:22.260 not correlated to either the stock market or the bond market. And if you can structure a portfolio

00:15:29.760 where you have a different group of assets that's not correlated or not similar to each other,

00:15:35.680 that'll give you a lot of protection depending on whether, say, Trump is successful in his

00:15:41.780 endeavors over the next four years or if he's unsuccessful or what's probably most likely the

00:15:46.860 case something in between. I noticed that when you began that answer you initially said gold and

00:15:52.460 then you caught yourself and switched to silver. Was that just to be inclusive or were you thinking

00:15:58.480 that silver's got more upside than gold? We have gold bugs who follow us so I have to ask the

00:16:04.940 question no it's a good question uh and um i i grew up uh with a father who's a geologist so i

00:16:13.900 grew up around gold and silver my entire life and this uh this topic is is you know very familiar to

00:16:20.140 me so uh i would suggest that uh there's probably a couple different reasons to own gold and silver

00:16:26.700 uh and probably silver does have more upside just to answer your question uh quickly at least in the

00:16:31.820 short term long term it's a little bit harder to say uh but short term silver has lagged gold

00:16:37.340 and there's a lot of people that believe myself included uh that at some point uh here there's

00:16:42.380 a reversion to the mean and silver plays catch up the gold and to play catch up the goals it

00:16:48.380 probably has quite a bit of runway room here to go uh to the upside uh it's also looking very good

00:16:53.660 it from a technical uh or charting uh perspective um but beyond potential upside i i think the main

00:17:01.780 there's two main reasons to own the the metal that's not quote-unquote speculative uh one would

00:17:07.580 be uh its uh correlation to both the stock market and the bond market especially gold uh gold is not

00:17:15.380 correlated uh to either the stock market or the bond market meaning that the stock market and the

00:17:21.680 bond market or do what they're going to do. And the gold market for what it's worth is going to

00:17:27.260 do what it's going to do. And it's not necessarily wholly related. So when you blend the two together

00:17:32.440 in a portfolio, you essentially get almost a magical outcome where volatility overall in the

00:17:38.660 portfolio greatly decreases, as long as it's blended in the appropriate amounts, where returns

00:17:44.840 do not go down. And they may even increase over time. So correlation is one reason to own gold.

00:17:51.260 The other reason is essentially insurance.

00:17:53.920 And that's another large reason why we own gold is insurance in case of any sort of major calamity,

00:18:01.100 whether it's war or whether it's a fiscal slip up, let's just say like we've been talking about.

00:18:09.240 It's good to know that one has gold as a backstop to give insurance to the overall portfolio.

00:18:16.080 Well, does it actually support your point there that as the stock market surged yesterday, when the news of the Trump victory was incorporated, as it surged, gold went down? Is that the kind of correlation that you're talking about?

00:18:32.340 So when I say it's not correlated, I don't mean that it's opposite. I don't mean that if stocks are up, gold is down, and if stocks are down, gold is up. That would be essentially like an opposite effect.

00:18:45.120 non-correlated meaning that it's very difficult to discern a pattern between gold being up and

00:18:50.780 stocks being down both can be true in a positive way an opposite way and anything in between which

00:18:57.760 which is why it has such a such a wonderful property when blended with with with stocks

00:19:03.100 but yesterday did not surprise me with gold going down essentially if you think of it this way

00:19:08.640 you know there was probably a moment there where there's a lot of investors in the sidelines that

00:19:13.800 were thinking about putting money back into the stock market. They were thinking about it. They

00:19:18.200 weren't sure. They were worried. They didn't know who was going to win the election. And then all

00:19:21.940 of a sudden, Trump wins the election. And they're like, oh, I got to get in. I got to get in like

00:19:26.880 yesterday and like right this very second. But to get in, you often need to sell something to get in.

00:19:32.820 And if you look at the performance of gold this year alone, I mean, it's up tremendously. So,

00:19:38.760 you know, why not sell a little bit of gold and put it into stocks at that point in time and take

00:19:42.640 some profits so that was essentially profit-taking on gold I see we're

00:19:47.320 getting close to time Peter but two questions to ask any thoughts on

00:19:52.540 Bitcoin under a Trump presidency and then we need to talk about the TSX so

00:19:58.900 Bitcoin first yeah now and I'll be brief since we're short on time Bitcoin has a

00:20:05.260 lot of things going for it right now typically it tends to do well post

00:20:09.640 election. So once an election has occurred and it's over, historically, it's almost always done

00:20:14.740 well right after the election. Secondly, Trump is considered to have a very, very favorable view

00:20:22.120 to cryptocurrencies. I mean, he's even suggested and the RFK has even suggested that maybe the

00:20:29.700 Federal Reserve should even be using Bitcoin as a reserve asset, which I'm not suggesting that

00:20:36.140 they will do. But if they did, that would certainly be extremely bullish for Bitcoin.

00:20:43.440 But also, Bitcoin is in its current seasonally strong period for the next, I'd say, nine months

00:20:50.120 or so. So overall, the prospects for Bitcoin look wonderful. And I believe you want to talk about

00:20:57.000 the TSX next? Yes, please. We've spent all this time on the American Stock Exchange. What's the

00:21:05.040 what difference did the Trump election make to the Toronto Stock Exchange and what are the linkages

00:21:13.480 there? Quite a bit. So first of all, the Toronto Stock Exchange has radically underperformed

00:21:22.020 all major U.S. indices, whether it's the Dow or the Standard & Poor's 500 and especially NASDAQ

00:21:28.520 during the Trudeau era, so it's already been a very huge laggard in terms of performance.

00:21:37.720 With a Trump presidency, it has the potential to even possibly make that worse unless things

00:21:45.080 change and change quickly here in Canada. But essentially, if the U.S. was already a more,

00:21:52.600 call it a free market type system than Canada, which is one of the reasons why

00:21:57.720 It had its own performance. If Trump comes in here and starts deregulating and also another one of his objectives is to boost innovation, particularly in the tech space, i.e. artificial intelligence and blockchain data centers in the U.S., that could further the gap between Canada and the U.S.

00:22:19.760 unless Canada also, quote-unquote, joins the party

00:22:23.500 and embarks on tax cuts, deregulation,

00:22:28.240 and basically an effort to spur productivity growth,

00:22:31.920 which is also something that's been lagging in Canada

00:22:34.080 for really the last decade.

00:22:36.280 Have you observed that kind of policy agility

00:22:39.080 in the government of Canada, in the Bank of Canada?

00:22:43.560 Oh, I mean, look at history.

00:22:45.560 I mean, during the Harper era, Harper, I believe,

00:22:48.600 We've had a set of policies that made Canada very competitive during the 2000s, and the Canadian stock market during the 2000s actually radically outperformed the U.S. stock market during that decade.

00:23:03.300 But unfortunately, the reverse has been true over the course of the last decade or so.

00:23:08.820 So it is fixable, but we do have to change policies, in my humblest opinion, here in Canada in order to remain competitive with the United States.

00:23:21.560 Peter, unfortunately, we could talk for a long time, and unfortunately, that's all the time we have.

00:23:28.060 Perhaps we can end on an optimistic note.

00:23:31.180 The U.S. Fed has cut interest rates by a quarter point.

00:23:35.220 I think that's good for us going forward, is it not?

00:23:37.460 well it's it's going to depend on how how much we cut interest rates next there's there's

00:23:46.780 certainly a lot of reason to suggest that if we are less competitive than United States that we

00:23:53.060 may actually need to cut interest rates more than they do in the United States in order to try to

00:23:57.840 bridge that gap so I do await to see the policy response in the Bank of Canada over the coming

00:24:04.280 weeks. But overall, we do believe very strongly that interest rates will be coming down in both

00:24:10.340 Canada and the U.S. in the coming months. Well, there's a lot of us who will take much

00:24:14.600 satisfaction from that. Thank you very much. That was Peter Piovic from Wellington Altus

00:24:23.080 Private Wealth Canada, giving us his insights on what the Trump presidency is going to mean

00:24:30.180 And in the years to come, for the Western Standard, I'm Nigel Hannaford.

Western Standard - November 12, 2024

Will Donald Trump be good for your RIFF？

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