Is Canada Building a Stronger Bull Market?

Editors’ note: MarketMinder is nonpartisan, favoring no party nor any politician. We assess political developments solely for their potential economic or market effects.

Canada’s government is pursuing a deregulatory push aimed at increasing its economy’s global competitiveness. Sounds good—pro-market! From an investment perspective, however, unlocking gridlock may not be so great. Here is why.

Like many developed markets, Canada faces regulatory hurdles when building infrastructure—the bigger the project, the more red tape. For example, while a growing population may necessitate a new wastewater treatment facility, you can’t simply site one willy-nilly. It usually takes years of research, planning and local buy-in for all the permitting requirements. Not-in-my-backyard attitudes often reign among residents. If the project spans multiple, overlapping regional or federal jurisdictions—say, where discharge into international waters is concerned—it may take longer still. All that just to break ground.

With US tariffs making cross-border commerce tougher, Canada seeks new markets. But most infrastructure—like oil pipelines and factory locations—is set up to facilitate trade with America. So development is arguably needed. The government, therefore, wants to fast-track permitting and associated studies. Hence, Canadian Prime Minister Mark Carney is backing the Building Canada Strong Act, which would ensure infrastructure projects’ “federal reviews and decisions are completed within one year.”^[i] Suddenly, it appears, groundbreaking in the Great White North could be around the corner.

How could this help Canada economically—and politically? Carney has already pre-approved a second oil pipeline from Alberta to British Columbia, allowing it to sell more energy to Asia, once completed. This is an extension of Carney’s push to make Canada a global energy export “safe hand.” Aiding permitting reform to further speed this agenda, the new legislation would also limit workers’ strikes, prioritize transportation construction, cut paperwork and facilitate private investment. Not coincidentally, faster pipeline construction may help mute support for a formal independence vote in Alberta’s October 19 referendum, too.

For markets, none of this is surprising. Given Carney’s background^[ii]—and campaign platform—he is just following through on promises. He is also striking while his political capital is high. Carney, elected after American tariffs (and US President Donald Trump’s “51st state” rhetoric) stirred ire in Canada, sports a thumping mandate—north of 60% approval ratings. His original minority Liberal government flipped to a majority in April, after several defections and special elections. The iron is hot.

This raises markets’ political risks somewhat, though. For one, even if the ostensibly pro-business Building Canada Strong Act passes, sweeping legislation creates winners and losers, causing loss aversion. Behavioral research long ago proved losers suffer more than twice winners’ equivalent joy. Which is why markets prefer gridlock. The status quo may not be ideal, but at least everyone knows where they stand—and can plan accordingly.

The bill’s opponents highlight a second political risk. The likeliest losers are Canada’s environmental advocates and Indigenous groups, as they get less review time and say over approval. They are also key constituent groups within the Liberal Party. So despite its House of Commons majority—and many thinking the Act is a done deal—passage isn’t guaranteed. With expectations high, failure could bring disappointment. Intraparty opposition could easily water it down, too.

Relatedly, a big bill and investments that might spring from it take time. Beyond the legislative back-and-forth, will all the political (and, potentially, financial) capital pay off if the infrastructure projects complete post-Trump in 2029? Who knows.

As always, we counsel weighing reality against expectations. Popular pro-business notions can raise expectations, but they also prime discontent—and lag. Either they fall short of reality, passage stirs big loss aversion or both. Now, politics is only one market driver. But seemingly rapid regulatory shifts and sentiment towards them are worth monitoring.