Rounding Up Politics in Canada, Portugal and America

Editors’ Note: MarketMinder is politically agnostic. We assess developments for their potential economic and market implications only.

As the S&P 500 hit correction territory in price-only terms Thursday, passing -10% from its February 19 high, there are a lot of things happening—and there is rather a lot of uncertainty.^[i] Outside the major and heavy coverage of things like tariffs and DOGE, which have undoubtedly added to that uncertainty, there are other events ongoing in politics—spurring a few questions of their own. Canada has a new prime minister, but with an election looming, how long will he be around? What is next for Portugal after yesterday’s government collapse? And will the US add a government shutdown to the mix Friday night? While uncertainty over these factors is elevated now, markets will gradually gain clarity on all fronts, likely helping stocks move past this rough patch.

Mark Carney Ticks Another Box on His BINGO Card

Bank of Canada Governor. Bank of England Governor. And soon, pending some formalities, Prime Minister of Canada. Yes, Mark Carney is getting ever closer to a high-profile job BINGO after winning the Liberal Party’s leadership contest and taking over for the deposed Justin Trudeau. While polls showed a tight race between him and former Deputy Prime Minister Chrystia Freeland, in the end it wasn’t close: Carney took over 85% of the narrow, party-member vote (only about 156,000 people actually voted in this race). He is now going about the business of picking a cabinet, talking tough about tariffs, promising Canada will never be America’s 51^st state and deciding whether to call a snap election.^[ii] It is quite the full dance card.

And it means investors have the answer to one of the two big political uncertainties hanging over Canadian stocks this year: We now know Carney will succeed Trudeau. But we don’t know how long he will be in the big chair, as a general election is due by October. The opposition Conservative Party and their leader, Pierre Poilievre, had a wide polling advantage in recent months, but it narrowed as Carney’s star rose and Canadians rallied against tariffs and the strange distraction that is “annexation” chatter.^[iii] Carney also has the rather tricky distinction of being a prime minister whom the people haven’t elected—he is a technocrat without a seat in Parliament. And here, again, even his “landslide” victory that catapulted him into office came on the back of only 129,000 votes. In 2021’s election, 17 million Canadians voted out of more than 27 million eligible.^[iv] Will he seek to capitalize on the polls and call a contest now, in hopes of winning a mandate? Will his recent support translate on a much, much bigger stage? Or will he wait a bit, in hopes scoring some tariff or economic wins bolsters his position further?

None of this is a market function, so it is impossible to know. And regardless of when the election is, we know early polls are of little use. Even with the Conservatives’ 10-ish point lead over the Liberal Party, we can’t presume Carney will be seeking his next big post by autumn.^[v] But we will gradually get clarity. And more importantly, Canadian stocks will get clarity on the next government’s makeup and the likely policies it will pursue, helping businesses plan. That encourages risk-taking and should be a modest tailwind as this year unfolds.

Portugal Gets a Snap Election. Again.

This week, Portugal marked one year since March 2024’s snap election, called after former Prime Minister António Costa’s ouster over corruption allegations. And Parliament celebrated by … ousting Prime Minister Luís Montenegro over corruption allegations. His center-right minority government lost a confidence vote Tuesday, teeing up the country’s third election in three years.

It is also a snap election that none of the major players seem to want. The opposition Socialist Party leads slightly in polls, but voters are about as enthused with the traditional center-left and center-right in Portugal as they are throughout the rest of Europe. That should be an opportunity for the right-leaning populist Chega party, but they are dealing with some criminal allegations of their own, including charges that one of their members of parliament stole luggage at Lisbon’s airport. Needless to say, voters don’t appear to be cherishing the opportunity to go to the polls once again, and most assume whatever government emerges will be about as gridlocked as its predecessors.

Theoretically, this should be good for Portuguese stocks. The country has relatively fast-growing GDP, and reforms made during the eurozone crises improved its competitiveness greatly. Gridlock means governments haven’t been able to undo those reforms. They have made a couple tweaks at the margins, but mostly they just pass budgets and squabble, letting businesses get on with things with reasonable confidence the rules won’t change. Yet Portuguese stocks are in a bear market and haven’t participated in Europe’s big 2025 rally.

In our view, the real lesson here is about how markets work—namely, what drives returns in countries, like Portugal, with very narrow markets. The MSCI Portugal spans all of three sectors: Energy, Consumer Staples and Utilities. The latter is about 50% of market capitalization, and it—like many other European Utilities—has struggled alongside higher interest rates and cost pressures. Energy firms have struggled globally amid weak oil prices, which pressure earnings. When a country has a narrow market with such high stock concentrations, the macroeconomic and overall political environment tend to matter less to returns than company-specific issues. So Portugal doesn’t disprove our general view that gridlock is good for stocks. It is just a narrow market, and one so small it exerts basically no influence over broader European markets.

To Shutdown or Not to Shutdown

That seems to be the question dogging Congress this week as both parties wrestle with whether a government shutdown supports or contradicts their political interests. We could wade into the politics of it, but we don’t think it matters from a market standpoint—grandstanding and hot air, those great bipartisan traditions, aren’t market drivers.

We have seen a lot of headlines saying that if the government does shut down, it will be somehow different and worse than prior shutdowns—the implication being that while no shutdown in history has caused a bear market or recession, this one would break the mold, mostly because of DOGE. We are monitoring these arguments and have some thoughts, but addressing it in depth is premature, because Congress has a long history of taking shutdown brinksmanship to the wire, then striking a deal at the last minute. Or a few hours after the last minute, letting the government “shut down” during the weekend, when it wouldn’t have been open anyway, then reaching a deal before Monday morning.

If Congress defies this history and we do get a shutdown, then it will be worth spending the time to parse the claims in detail and determine how big the gap is between sentiment and reality. But in the meantime, bear in mind that markets are actually behaving pretty normally. Shutdown chatter is part of the rising uncertainty stocks have dealt with during this correction. Uncertainty often stokes volatility. But the uncertainty usually fades quickly: Either we get a deal, and life goes on, or we get a shutdown, and people subconsciously see life going on even if headlines harp on it. Furloughed workers eventually get backpay. The shutdown is only one source of uncertainty, alongside tariffs and broader fiscal policy, and it is impossible to know when the tide will turn. Corrections begin and end without warning—so it goes when emotion is the swing factor for markets. But shutdown or no, the backdrop looks like a classic wall of worry for stocks to climb.

Aaaaaaaand update! Just before we went to press, news hit that Senate Democrats decided to take the threat of a shutdown off the table. Huzzah! Though we wish they would have tipped us off a couple of hours ago, before we wrote this. And we are still leaving it here just in case, because politics is still politics and you never know.