Forget the election—it’s back to fundamentals.

While the U.S election and its aftermath have dominated news headlines, companies have continued to roll out their Q3 earnings reports, providing insight into the current state of the economy. Overall, corporate earnings continue to be good. There haven’t been many negative surprises or, as importantly, downgrades in companies’ outlook. This is significant because it gives markets the justification to potentially move higher based on the continuation of strong corporate profits, the prospect of lower interest rates, and perhaps even some stimulus in the form of tax cuts. Looking more closely at the Technology and Communication sectors, results have also generally been good. Both Shopify and Spotify reported earnings beats which were rewarded by investors with big surges in stock price. This tells us that despite sky-high expectations, there’s still room for markets to be surprised on the upside. The fact that these aren’t Magnificent 7 (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) names is also a good sign, as market concentration has been among investors’ top concerns for some time.

Gold and cryptocurrency have been on a tear recently, while oil has suffered a few setbacks. What can investors expect from these markets going forward? Of the three, we’re seeing the most bullish sentiment for crypto in the short term, which ties into the recent U.S. election: crypto firms spent an enormous amount of money to elect pro-crypto candidates, like in the Senate race that ousted Sherrod Brown, and as a result, markets believe that crypto regulations will continue to be very favourable. The price of Bitcoin crossing $90,000 further highlights this momentum. For gold, it’s been a different story since the election. Before the vote, investors had flocked to the precious metal as a hedge against election-related uncertainty. But the election is now behind us, and gold has pulled back from its highs as a result. That said, we don’t believe it’s the right time to get out of gold. There is still uncertainty around tariffs, volatility, and geopolitical risk, and this could ramp up after Donald Trump’s inauguration in January. For now, we prefer to continue to hold gold as a hedge. On the energy front, markets appear uncertain on which way it will go post-election. For us, it comes down to supply and demand: Trump is likely to be more pro-fossil fuel than his predecessor, but he’s also committed to adding more energy to the marketplace, which means that supply could outstrip demand and drive prices lower. We continue to believe that $70-$80 per barrel is a fair price given current dynamics, and while occasional spikes could happen if geopolitical tensions increase, they are likely to be short-lived. If we do see a major influx of oil coming into energy markets, that could cause prices to stay under $70 for longer—unless the Organization of Petroleum Exporting Countries (OPEC) intervenes by decreasing supply.

What it comes to the state of the consumer, it’s a tale of two countries. In the United States, consumers still look good—delinquencies had increased earlier in the year, but now they appear to have plateaued, which is what we’d anticipated. We aren’t seeing job losses popping up, which would be a warning sign, though the number of jobs available is coming off. Sentiment appears to be positive post-election, and with tax cuts on the horizon, it’s likely that spending will continue to drive the U.S. economy. The Canadian consumer is in a different situation. As more housing renewals come up, it’s likely that many people will be forced to downsize due to higher mortgage rates. Rate cuts from the Bank of Canada may help somewhat, but in our view, they’re unlikely to bring a massive cohort of new buyers into the market (though we likely will see some short-term pop in prices). That puts Canadian consumers in a tough spot, as they’re constrained by high debt levels that are unlikely to be offset by an increase in net worth from rising housing prices. The U.S. is Canada’s biggest trading partner, so the Canadian economy could receive a bit of a boost if American economic strength continues into next year. But in general, we expect Canadian consumers to be more constrained in their spending than their American counterparts.

For a detailed breakdown of our portfolio positioning, check out the latest BMO GAM House View Report, titled “Trump bump”: Why markets have rose-coloured glasses on, for now.

For more analysis of the economic implications of the U.S. election, see the new commentary by Fred Demers, Chief Investment Strategist, BMO GAM, and Yung-Yu Man, CIO, BMO Wealth Management, U.S., titled Trump 2.0.