The optimism that lifted investor spirits in the weeks after Donald Trump’s presidential victory receded Monday as stock markets pulled back from recent highs.
In Toronto, the S&P/TSX composite index fell 67.75 points to 15,480.13, led by declines in energy and grocery stocks. The Canadian dollar gained 0.33 of a U.S. cent at US75.37¢ as the greenback softened.
South of the border, the Dow Jones industrial average dropped 27.40 points to 19,799.85 and the S&P 500 slipped 6.11 points to 2,265.20. The Nasdaq composite dipped 2.39 points to 5,552.94.
U.S. indices have risen sharply since Trump was elected president in November, based on the belief that once in the White House, he will rein in regulation and taxes as well as implement business-friendly measures to help boost the economy. Trump was sworn in as president Friday.
On Monday, he reiterated plans to slash regulations on businesses and tax foreign goods entering the country. Trump also signed a memorandum announcing his intention to withdraw the U.S. from the Trans-Pacific Partnership and said he would renegotiate the North American Free Trade Agreement — moves that would both have ramifications for Canada’s economy.
Craig Fehr, a Canadian markets strategist who works in the U.S., believes the current dip in the markets shows that investors are taking a pause and don’t indicate a long-term downward trend.
“This is probably just a symptom of the euphoria wearing off a bit,” he said from St. Louis.
“I don’t think it necessarily reflects a shift in the view of what Trump’s policies might potentially do for economic growth. I still think the market largely still believes that those policies can be favourable.”
Fehr said markets rose quickly on the idea that Trump will be able to implement his policies quickly and without a large amount of disruption, but are now realizing that may not be the case.
“The market is sort of waking up to the idea that policy action is very different than policy proposals,” he said.
Over the next few weeks, it’s expected that investor attention will be turned towards the latest batch of earnings reports as a gauge on how the American economy is faring.
In commodities, the March crude contract fell US47¢ to US$52.75 per barrel despite reassurances over the weekend from OPEC and non-OPEC members that they’re nearing their production cut targets.
The February gold contract gained $10.70 at US$1,215.60 an ounce, February natural gas climbed US4¢ at US$3.25 per mmBtu and March copper contracts added US2¢ at US$2.65 a pound.