The Fog in Vienna and Ottawa

Editors’ Note: MarketMinder prefers no politician nor any party. We assess developments for their economic and market effects only.

A rather busy, uncertain stretch for international politics keeps trucking along, with new developments in Canada and Austria hitting headlines Monday. In our view, neither of these—nor Germany’s snap election, France’s upcoming budget battle, Belgium’s marathon government formation process, Korea’s impeachment adventures, or, or or—has some inherently good or bad outcome for markets. None are particularly make or break. But how they affect sentiment will be key as 2025 gets going in earnest.

Justin Trudeau Bows Out

Perhaps the biggest lesson from Canada’s news is that uncertainty often fades slowly. Ever since Prime Minister Justin Trudeau’s Liberal Party lost the support of the New Democratic Party following its intervention in labor disputes, investors have been wrestling with the prospect of a government collapse and snap election. The speculation fire got more fuel when (now former) Deputy Prime Minister and Finance Minister Chrystia Freeland resigned, citing disagreements with Trudeau over fiscal policy and how to handle US President-Elect Donald Trump’s tariff threats. This was kind of a big deal, given she was one of his original top cabinet appointees in 2015. It isn’t quite a Lennon/McCartney split (or Waters/Gilmour, if you prefer), but not far off. Next to no one expected Trudeau to last until the next general election’s October 2025 due date, but there was an utter lack of clarity.

Now we are starting to get it … kind of. Trudeau resigned Monday, citing deep intraparty opposition, and prorogued Parliament until March 24 while his party holds a leadership contest. So now we know Trudeau isn’t hanging around. But we don’t know who will replace him. Polls point to Freeland and the former head of both the Bank of England and Canada, Mark Carney, but it isn’t clear that either would want to take what looks like a poisoned chalice given the Liberals are polling some 20 percentage points behind the Conservatives.

Then there is the question of whether this new leader calls an immediate snap election, perhaps hoping to capitalize on a honeymoon boost, or if he or she runs out the clock. Will Canada vote in the spring? Summer? Autumn? And will Conservative Party leader Pierre Poilievre’s polling stay hot once he has to move from scoring easy points in opposition to the harder work of campaigning?

It won’t shock us if these questions weigh on sentiment for some time. Falling uncertainty is generally a tailwind, yes, but we don’t know when that tailwind will start blowing. So in the meantime, how do investors react? Do they get on with it? Does wait-and-see become dominant? Or do expectations outright fall?

Stocks move most on the gap between sentiment and reality. For now, it is too soon to assign strong probabilities to the potential outcomes in Canada. But it also seems too soon to make a clear determination of sentiment. So watch, wait and see how the mood evolves. That might not be the most satisfying counsel you will receive today, but sometimes the best move is to watch and wait.

Austria’s Coalition Talks Restart

While the ongoing uncertainty in France and Germany gets most attention, Austria has also been getting in on the, um, fun. Last September’s general election returned a hung Parliament, which is neither shocking or unique. The rise of smaller parties has been pancaking eurozone parliaments into fragmented beasts for the better part of a decade. But the winner raised some eyebrows: The Freedom Party (FP), widely called “far right,” topped the rolls with nearly 29% of the vote, its first national victory.

This spurred a lot of fearful rhetoric, given ex-Nazis founded the FP in the 1950s. But it largely died down when President Alexander Van der Bellen handed the mandate to form a government to incumbent Chancellor Karl Nehammer of the center-right Austrian People’s Party (APP), which came a close second. The APP swiftly entered coalition talks with the center-left Social Democrats (SDP) and a new centrist party, Neos.

As often happens when parties with divergent ideologies try to form a government, talks went nowhere fast. Neos finally pulled out last week, saying progress over the budget had backslid. Mathematically, the APP and SPD could have plowed forward without them, but the SPD pulled out, too, as the bickering over who was to blame for the splintering proved insurmountable. Nehammer then resigned, and Van der Bellen handed the mandate to FP leader Herbert Kickl.

His task is to try to form a right-leaning government with the APP, which has already pledged not to work with him. That could change, and they could find enough common ground on economic policy and other matters to overcome their foreign policy differences. Otherwise, Austria would be headed for a second election, which may not prove any more conclusive.

So here, too, questions abound and sentiment is in flux. If the FP and APP are able to form a government, will investors cheer the clarity and find something to like in economic policy? Or will sociological fears outweigh this, keeping sentiment lower—and perhaps building a bigger gap between reality and expectations? And how would investors react to a fresh election and the prospect of several more months of coalition talks afterward?

In 2007, Fisher Investments founder and Executive Chairman Ken Fisher published a book called The Only Three Questions That Count. We are big fans of the original and the 2012 reissue, which is all about how to get ahead by knowing things others don’t. Not insider information, which is illegal! But by seeing things differently, interpreting things differently, seeing things others miss, that sort of thing.

With Austria and Canada—and pretty much the entire international political scene—there is just too much fog for anyone to make a clear, probabilities-based determination. And you know what, that is ok! You don’t always have to know everything or have a strong opinion. Sometimes the wisest move is also the humblest, confessing that there are too many clouds, too many moving parts. Not to do something for the sake of doing something, but to watch and wait until such a time as you can develop a logical, well-founded, unique insight.

So we are watching and waiting to see how sentiment evolves as these moving parts slowly slide into place. Stay tuned, stay calm and keep your long-term goals front of mind—in our view, the best antidote to near-term uncertainty.