NDP Popularity Surge Worries Investors

Whenever a federal election takes place, the nation’s economic situation is generally at the top of the priority list for voters. With Stephen Harper’s Conservatives successfully securing a majority government in yesterday’s election, it appears clear that Canada is thankful for the ways in which his leadership helped the country rebound from the recession.

Perhaps, many economists and citizens alike predicted this outcome. One thing that caught many off guard, however, was the incredible surge in popularity of Jack Layton’s New Democratic Party. The NDP now stands as the Conservatives’ official opposition winning 102 seats in the House of Commons. This marks an amazing 66 seat jump from their previous position.

Last week, QMI Agency released a report indicating that economists were not quite ready for what is now being dubbed the “Orange Wave”. The NDP’s newfound popularity is sure to create an impact on the stock and currency markets, according to the article. Layton has plans to challenge Harper on a number of economic issues.

As QMI reveals, “Layton has threatened to revoke Prime Minister Stephen Harper’s corporate tax cuts, returning the rate to 19.5%, and to impose a cap-and-trade system on the country’s energy companies, similar to one in place in Europe, to combat emissions.” Of course, Layton is not Prime Minister, but his increased number of seats in the House of Commons is sure to add strength to his voice.

A week ago, it was predicted that NDP could possibly close in on 100 seats. The election results show that they overshot that mark becoming even more successful than expected. This isn’t good news for everyone, however. Ka Yan Ng of Reuters reported this past weekend that NDP’s growth in popularity may make many investors nervous.

In an interview with Reuters, Layton insisted he would “play nice” with investors. Erasing the deficit within four years was one of Layton’s campaign promises although many worry about how such a promise can be kept. A concern for increased taxes was on the minds of voters who chose against an NDP-led government.

According to Michael Sprung – the president of Sprung & Co Investment Counsel – an “NDP-led minority…would be a negative for the market. It would be one more thing to worry about and a little bit more domestic in orientation. People would worry about higher taxes and how that might affect the recovery that we’re in.”