The bilateral agreement reached with Mexico last month calmed fears that the US was engaging in a “war on trade” as it showed a willingness to compromise to preserve NAFTA. (see details in our Trade wars page).
Reaching agreement with Canada before the end of September is necessary for the US to sign a bill by November 30, and a deal to be struck this week. However, a failure to reach agreement raises NoFTA risks once again. Unfortunately, there is a growing bearishness inside Washington that no deal with Canada will be reached and a Mexico-only text will be transmitted to Congress. This would be bad for the following US stocks which have the highest sales % coming from Canada:
ADS, TAP CB MS (which is part of our US SC list) CTAS (part of our low vol high EPS selection list), NCLH ,COST, NUE, DRI , PWR , DVN , TJX , DLTR , WELL, HAS
These stocks (and this list is underweight tech) has more or less performed (purple line) like the S&P500 (red line). In the case of no Canada deal, it could offer good ideas of shorts. our grades are bearish for TAP, HAS or DVN.