A convergence of political shifts and economic data will test global markets this week, with significant implications for North American trade and fiscal policy. Investors are bracing for the impact of US midterm elections and a major Canadian federal budget, alongside critical employment reports in both nations.

What is driving the Canadian economic agenda?

In Canada, Finance Minister François-Philippe Champagne is set to deliver the federal budget on Thursday. This marks the second budget under Prime Minister Mark Carney, who is prioritizing infrastructure to counter geopolitical shifts and US tariffs.

Read also U.S. midterm shift and Canadian budget signal economic changes

Key elements expected in the budget include:

  • A $36-billion "Productivity Mega Deduction" over five years to allow businesses to write off capital asset investments immediately.
  • Focused tax breaks aimed at small businesses and entrepreneurs.
  • Continued spending on infrastructure to bolster the national economy.

However, Parliamentary Budget Officer Annette Ryan has noted that government borrowing is rising quickly, and interest costs are expected to increase significantly over the next four years.

How will US politics affect the markets?

The US midterm elections on Tuesday could reshape the regulatory landscape. While Republicans have controlled both chambers of Congress during the first two years of President Donald Trump's term, Democrats are expected to win the House of Representatives. A Democratic victory could lead to increased scrutiny of Wall Street and tougher regulations on artificial intelligence and data center expansion.

Monitoring labor and trade trends

Employment and trade data will provide a clearer picture of economic health. In Canada, Statistics Canada will release September trade figures on Wednesday and October labour force results on Friday. This follows a difficult September where the economy lost 68,000 jobs and the unemployment rate rose to 6.5 per cent.

In the United States, Friday's non-farm payrolls report is a major focus. Analysts are looking for signs of continued resilience in the labour market following a period of lower-than-expected job growth in September.

FAQ

Why are AI investments being watched closely?

Investors are concerned about the massive capital being spent on chips and data centers, questioning if the long-term returns will justify the high costs.

What impact could the US elections have on tech companies?

If Democrats gain control of the House, they may push for stricter oversight regarding AI technology and the physical expansion of data centers.