After living through a year of confrontational statements from President Trump, I can understand why investors have tuned out from the daily Washington beat. It paid well to consider it all a distraction in 2017. That is no longer the case.
Following last year’s positive upswing in GDP growth and the associated windfall to government finances in Canada, many of the nation’s provincial governments have come face to face with some moderation in the economic outlook, and have launched into a phase of late-cycle fiscal stimulus.
Amid a backdrop of controversial tweets out of the White House, geopolitical risks and trade war angst, market volatility is surging and the potential outflow from emerging markets (EM) has heightened. In Signature’s view, both these factors – which pose the biggest risks for EM investors – are being driven by tighter global financial conditions.
On May 29, 2018, the Government of Canada announced that it is prepared to purchase a variety of assets (most notably the Trans Mountain Pipeline System, including its planned expansion) for $4.5 billion from Kinder Morgan Canada (KML), which is 70%-owned by Texas-based Kinder Morgan Inc. (KMI). Certain mutual funds managed by Signature Global Asset Management (“Signature”) are shareholders of KML and KMI, and Signature has followed this saga extremely closely. This note represents big-picture thinking only, with the details being too numerous to mention here.