Which Canadian Sectors Are Set To Gain With Joe Biden's Presidency?

 @Kalkine image 2020

Summary

  • President-elect Joe Biden is likely to assume office in January 2021.
  • The anticipation around his victory saw stocks of cannabis, tech, renewable power, etc rally on the TSX in the first week of November.
  • The S&P/TSX Cannabis Index spiked by almost 15 per cent on Friday.

After a much-dramatic 2020 US presidential elections, President-elect Joe Biden is now expected to take over the White House in January 2021. This change of government south of border is likely to have a significant impact on Canada, especially in the economic landscape.

While the fossil fuel sector expected to see some complications, especially with a possibility that Biden will scrap the Alberta government-commissioned Keystone XL pipeline project, Canada’s cannabis and industrials sectors could see an added boost. At the same time, Canada is also counting on less restrictions and tariffs in terms of US trade. Though some trade and political analysts say Biden’s presidency will have no bearing on taxes and tariffs.

Let’s take a detailed look at the impact of a Biden victory on Canadian sectors:

Cannabis Sector

Pot stocks on the TSX saw quite a rally ahead of the US elections results. The Biden administration is expected to quicken the legalization process of adult-use recreational cannabis in the US. Most Canadian pot producers are looking forward to this move as it will help more companies expand their businesses in the US market.

The Cannabis Consumer Policy Council (CCPC), which is an affiliation comprising marijuana advocates, supporters, veterans, etc, in the United Stated, said in a statement recently that it is working on making sure that pot users are heard in the policy-making process. The states of New Jersey, Arizona, South Dakota and Montana have also voted for the decriminalization of adult-use weed, while Mississippi green-lit the use of medical cannabis. Some media reports said that more than 33 per cent of the American population are currently residents of states that allow legal adult purchase of pot.

The S&P/TSX Cannabis Index is currently down 25.95 per cent this year, though it reflects a growth of 44.84 per cent quarter-to-date (QTD). The anticipation around the US elections saw the index jump nearly 36 per cent in November. On Friday, November 6, it spiked by almost 15 per cent at closing.

YTD chart of the S&P/TSX Cannabis Index (Source: Refinitiv/Thomson and Reuters)

YTD chart of the S&P/TSX Cannabis Index (Source: Refinitiv/Thomson and Reuters)

Stocks of Canadian pot companies such as Aurora Cannabis (TSX: ACB), HEXO Corp (TSX: HEXO), Aphria Inc (TSX: APHA), Cronos Group Inc (TSX: CRON), Canopy Growth Corporation (TSX: WEED) etc, have been trending on the Toronto Stock Exchange in the light of the US presidential elections.

Technology Sector

Tech stocks have strong impacts on major North American equity markets, be them the Silicon tech giants of Facebook (NASDAQ: FB), Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT), or the home-grown Shopify Inc (TSX: SHOP). Hence, it is natural that investors and analysts are waiting to see what effect a Biden presidency will have of the major tech industries.

During his election campaigns, Biden had promised to roll back the tax cuts that Donald Trump had introduced. He had also said that he would raise corporate taxes from 21 per cent to 28 per cent. There is also anticipation around the regulatory measures a Biden administration may implement on tech companies.

However, tech stocks registered a jump despite the absence of a clear winner as Biden led the race on Friday. The S&P/TSX Capped Information Technology climbed 1.4 per cent on Friday. In November so far, the index shot up by over nine per cent.

Renewable Sector

Under Donald Trump’s regime, clean energy and energy regulation initiatives remained in the backseat for a long time. That is expected to change under president-elect Biden. And with the hope that the Democrats-proposed New Green Deal will see the light of the day, it could benefit Canadian Prime Minister Justin Trudeau’s renewable power dream as well.

Biden, during his campaigns, had promised to invest about US$ 2 trillion on clean energy and technology initiatives over the next four years, with the goal of reaching net-zero greenhouse gas emissions by year 2050. Rejected by Trump a few years ago, Biden has also promised to get back on the Paris Agreement on his first day in the White House.

The S&P/TSX Renewable Energy and Clean Technology Index rose over nine per cent in November amid all the excitement around US elections. This recent spike saw the index climb over 36 per cent YTD and over five per cent QTD so far.

Biden’s proposals regarding clean energy align with those of Trudeau’s, who has also in the past spoken publicly about “transitioning” from oil and gas industry to greener alternatives. While the notion has been cheered by environmental activists and clean tech companies, it has not been a welcoming news for fossil fuel producers in Canada.

Exactly how much impact Joe Biden’s presidency will have on Canadian sectors is yet to be seen. So far, it cannot be denied that the anticipation of him coming to power has been quite impactful.

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