Who’s better for my portfolio?

Harper, Trudeau or Mulcair? It depends on your goals

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From the Summer 2015 issue of the magazine.

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Illustration by Sebastien Thibault

(Illustration by Sebastien Thibault)

While Canadians won’t hit the polls until October, it’s safe to assume that the economy—and people’s pocket books—will be a top election issue. As federal parties continue rolling out their platforms, we can tell from past history which ones might be able to kick-start our struggling GDP and get our investments in gear.

On the surface, neither Liberal nor Conservative governments have actually had much of an impact on the Canadian stock market, says Perry Sadorsky, an associate professor at the Schulich School of Business. Going back to 1950, the market’s equity risk premium is 4.5%, and it seems to make no difference who’s occupying 24 Sussex Drive. However, the Canadian economy is in a funk right now—possibly even in a recession—and that’s putting pressure on jobs and wages.

Boosting economic growth takes infrastructure spending, not deficit reduction—and in that case the NDP (which says it will lower the small business tax rate from 11% to 9%) and the Liberals (who have promised to spend $200 million a year in clean technology investments) may be better for your portfolio. “The current government is fixated on balancing the budget so it can’t do any fiscal expansion,” notes Sadorsky.

Trudeau vs. Harper: Who has the better tax plan for you? »

Ian Russell, head of the Investment Industry Association of Canada, has a different view. Government spending won’t help Canadians, he says, but giving them better options on how they can save their own money will. To that end, the Conservatives have been better for investors. For one, Stephen Harper introduced the TFSA in 2009 and then upped annual contributions from $5,500 to $10,000 this year. His party has also lowered the RRIF’s minimum withdrawal rate.

“The Federal government has unshackled the tax system,” says Russell, who expects the Conservatives to throw more bones to savers in the future—and believes other parties will inevitably follow suit.

But Sadorsky says it doesn’t matter whose pushing the initiative. “A political party can say they’re going to increase saving accounts or offer more subsidies, but those impacts are never as direct as going out and building something.”

 

10 comments on “Who’s better for my portfolio?

  1. I would have expected a much more in depth analysis from Money Sense. What will the implications to be of the capital tax be ,which several parties have hinted at? As well some parties intend to hit some segments of the population with significant taxi crease. As we know capital today is very mobile. How will this affect thee economy? Many promises have been made to enrich and expand social programs. These are expensive and will require broad based tax revenues to fund. Will we expect a 2 percent ( really 40 percent ) increase in the gst ? It’s a good idea to address our infrastructure debt ,but a comprehensive plan to fund it is needed. Do you think any of these questions require answers or have an impact on the economy ?

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  2. Spending money on a losing cause like clean energy is a waste of tax payers money. Look at Europe and the U.S. They spend, spend, spend and nothing but debt. That’s one reason the world is in this whole in the first place. You can be giving away subsidies to technology that can’t stand on its own forever. The Liberals and the NDP would be the worst to vote for.

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    • TAX AND SPEND THAT HAS BEEN THE NDP PLATFORM FOREVER, WHEN WILL PEOPLE SOCIALIST GOVERNMENTS ‘JUST DON’T WORK!!!!! LOOK AT THE PAST NDP GOVERNMENT IN ONTARIO UNDER ‘BOB REA’, IT TOOK THE ‘CONSERVATIVES’ TO CLEAN IT UP!!!! JUST LOOK AT GREECE AND ALL SOCIALIST GOVERNMENTS, IT JUST DOES NOT WORK! HIGHER TAXES ON THE RICH AND CORPORATIONS JUST CAUSE ONE THING ‘A LOSS OF JOBS AND INVESTMENT PERIOD!!! AND FOR THE LIBERALS ALL YOU HAVE TO DO IS LOOK AT ‘ONTARIO,’ E-HEALTH – ORANGE AND THE ‘GAS PLANT SCANDAL. ‘A LAW FOR THE PREMIER (DALTON WHO!!!!) HE SHOULD HAVE GONE TO JAIL, ANYONE ELSE THEY WOULD HAVE BEEN PROSECUTED AND SENT TO JAIL!

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    • Yes Ralph because clean air from renewable energy is “a lost cause”. Hopefully the new governments invests in clean energy and weans us off the dino fuel. No sense being on the back side of new technology how about we become industry leaders in this field. Hopefully with the NDP’s small business taxes and investment in new businesses we can get our highly educated workforce working. This will not be happening with the Conservatives at the helm.

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      • Sorry for the typing errors in my post. As someone who has run small businesses many years under an NDP government I can tell you unequivocally they are an impediment. Even though you make less than your employees and sometimes less than minimum wage you are viewed as one of those “rich” business people.

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    • Well said Ralph. I suppose some voters would prefer to see money flow on green energy initiatives that fail to produce any sizeable volume of energy. Perhaps they enjoy the panic when accumulated budget deficits bring national debt to an unmanageable level with all hell breaking lose when international creditors come calling. Personally I can do without that excitement in my life.

      Overall, I do not buy into the Keynesian theory that a government can spend its way out of recession. In a free market economy things will not change until the fundamentals underlying the economy shift. It takes time. Spending by government will create economic activity, albeit false, that will have to be paid for by future generations through taxation.

      I say let’s focus on necessities so everyone is looked after, keep the budget balanced and taxation in check. If this is the path followed we will all be fine down the road when this world slowdown turns around, and it will as nothing ever stays the same. Can you imagine what people were saying in 1930? We all know how The Great Depression did not last forever.

      Of course, I do not expect many voters to buy into what I have said as human nature dictates that people want instant gratification. As well, we live in an age when people expect government to look after them from cradle to grave. Personal independence is on the decline, and at the same time people are quite willing to give up their freedoms in return for being looked after.

      CD

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  3. When will someone start “The cumulative taxes are too Damn high” Party? I’ll vote for them. You all realize what any party giveth, they simply taketh away with another tax somewhere else… Ontario is a great example of that. I’m still angry about the “debt retirement charge” on my Hydro bill. You know the one where the Fiberals quietly added 3B$ extra to, that they used in general revenues but did not tell anyone. How is that even legal?

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  4. With the current Federal pubic debt at $616B (yes Billion), we can’t afford the NDP or Liberals. Both parties’ platforms would either add greatly to the Federal debt or increase taxes to enable them to spend, spend, spend (and even more likely, both). At some point, carrying the Federal debt will cripple out country’s ability to pay for even the basics including national security. Expand green energy, Mr. Trudeau? That Green Energy Plan has been a major factor in the increase in Ontario’s provincial debt to $291B (yes Billion). The huge increase in our hydro rates under the provincial Liberals is also responsible for many small businesses closing up shop and larger ones being unwilling to locate in Ontario. It is a job killer!

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  5. If Justin or Mulcair wins, I expect a big drop in the Canadian dollar and the TSX and a big rise in unemployment over the first 6 months. Only Mr Harper’s policies are business and prosperity-friendly.

    Reply

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