The Bank of Canada is approaching Donald Trump cautiously.
Stock markets in the United States have surged about 5% since Trump won the presidential election in early November. That enthusiasm is based almost entirely on the prospect of big tax cuts, which Trump promised and the Republican majority in Congress is eager to deliver. Barack Obama’s replacement, “wants to, and probably will, shift the environment from one that makes profit makers villains with limited power to one that makes them heroes with significant power,” Ray Dalio, chairman and chief investment officer at Bridgewater Associates, the world’s biggest hedge fund, wrote in a December 19 post on LinkedIn. One of the biggest reasons U.S. economic growth has been so weak in recent years is the absence of significant business investment. That could soon change.
The Bank of Canada acknowledges the possibility, but it is unprepared at this stage to assume Trump will inspire animal spirits to the extent imagined by investors such as Dalio.
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