For Canada Investors, Liberals Have Been Better Bet Than Tories
For Canada Investors, Liberals Have Been Better Bet Than Tories
If history is any guide, a win by Justin Trudeau and the Liberals in next week’s election bodes well for Canadian stocks.
Stretching back to 1922 and the time of William Lyon Mackenzie King’s first term in office, stock returns have been three times higher under Liberal prime ministers than with Conservative leaders, according to monthly data to August 2015 compiled by Bloomberg from TMX Group Ltd., operator of the Toronto Stock Exchange.
Over about 63 years in power, the Liberals of Pierre Elliott Trudeau, Jean Chretien and Louis St-Laurent witnessed a weighted compound annual growth rate of 6.8 percent for the Standard & Poor’s/TSX Composite Index and its predecessor TSE Index. That compares with a 2.2 percent annual gain for the Tories of Stephen Harper, John Diefenbaker, Brian Mulroney and others, the data show.
“Is it timing? Have the Liberals been lucky over 100 years to do so well?” said Livio Di Matteo, an economist at Lakehead University in Thunder Bay, Ontario. “Over 100 years there does seem to be a pattern. It could be that when economic growth is poor, people want austerity and think Conservatives are better managers. Then when things improve people get tired of that and they vote the Liberals in.”
The data, which covers the tenures of more than a dozen prime ministers of both major parties, compares the compounded annual growth of Canadian stocks weighted relative to the amount of time a particular leader was in office. The longer the time served, the greater the impact on the resulting figure.
Erik Hertzberg/Bloomberg
Under Harper, Canada’s leader since 2006, the benchmark gauge has posted compound annual growth of 1.5 percent, the second-worst performance of any prime minister since Richard Bennett. Bennett, a Conservative who ruled during the time of the Great Depression from 1930 to 1935, is the only prime minister with a negative stock return of 9.7 percent. Pierre Trudeau’s second term was weaker than Harper’s for stock performance but his overall tenure was better.
As with other leaders, Harper’s stock market record reflects events that are beyond his control. The incumbent Conservative led the country through the worst global financial crisis since the Depression and more recently witnessed a 50 percent drop in the price of oil, one of the nation’s biggest export products. As a result, Canada’s economic growth will be about 1.1 percent this year, one of the weakest in the Group of Seven countries.
For Canada Investors, Liberals Have Been Better Bet Than Tories - Bloomberg Business
David Coletto @Colettod 
