Well, that was a yawner. The second T2 budget failed to live up to the scary hype, with relatively minor tax changes (see the summary below), but lots of debt and a big pink bow on the top – because we’re all feminists now.

And have you noticed how much time Justin has been spending with Ivanka lately? A joint venture announced in Washington for female entrepreneurs, then a rendevous on Broadway for a new play about Newfies. In fact, the budget we just received was more influenced by her dad, Donald Trump, than the little beavs sitting in Parliament.

There wasn’t a big hit on Canadian capital gains taxation because Justin and Bill have no idea if the Trump tax-slashing plan will happen. If it does, and Canada moves in the opposite direction, there could be trouble, with a river of corporate capital flowing south. Meanwhile there’s speculation in Ottawa (and Washington) that the economy could move south along with some financial markets as the American president loses prestige, influence and credibility less than three months into his tenure.

The FBI says it has an active investigation of the Trump election campaign’s ties to Russia, and that country’s influence on the outcome of the Presidential election. There is zero evidence to support Trump’s bombshell claim that Barack Obama wire-tapped the Trump Tower during the electoral process. That would make Obama a criminal. The Muslim travel ban has been eviscerated. And the feeling grows that not enough Republicans will support Trump on a key vote tomorrow to repeal and replace Obamacare. In fact the Donald has threatened anyone not voting his way with “losing you seat” in the next election. Bully tactics. Weird.

All of this is worrying investors. First, it was a mistake to try and tackle the complex issue of health care so early and so brashly. Second, the “America First” budget unveiled just days ago – gutting environmental, cultural and social spending to divert money into guns and a bejesus-tall Mexican wall – is dead upon arrival. Third, all of the above is causing serious doubts that the real stuff investors want – slashed corporate taxes, relaxed regulations and mega-spending on infrastructure – may be delayed, or not happen at all. So, no growth spurt, no profit romp, no inflation pop.

But already the markets and policy have moved. The Dow and the S&P bloated a full 10% since the November election. The dollar raced ahead, bond yields advanced and the Fed pushed ahead with an interest rate hike less than ten days ago, promising two or three more in 2017. Now doubts this agenda will actually take place – and Trump has shot himself in both feet – has created a risk-off moment. The Dow fell by 1% on Tuesday – the first time this has happened since October. The US dollar’s at a four-month low. Gold is on the rise, and so are bond prices, as investors look for safe places to hunker.

Stocks are expensive now – not hideously, but enough. The S&P is trading at 18 times forward earnings, compared to the long-term average of 15. That makes them about 20% higher than normal, and certainly opens the door for a correction should the Trumpster continues to lose altitude and political support.

So what does this mean for us?

Uncertainty. Buckets of it. This is why the second Trudeau budget was the non-event it turned out to be. While the Libs want to spend endless amounts of money and Hoover the wealthy to pay for it, the environment is just too fragile now for Canada to trundle down the path of socialism while the Americans are a nation divided, run by a rabid-right president who received a minority of votes and is beyond strange with a web of personal conflicts of interest.

For investors, it’s time to play safe. Stay with a balanced approach – because bonds, we well as preferreds and REITs will counterweight any give-back on stock markets. Stay diversified, since you definitely do not want too many eggs in the Trump basket. And remain globally-invested, with exposure to Europe, China and inevitably-emerging markets.

The American president is a flawed man. He may end up a flawed leader. This day you can be thankful for that. Trudeau blinked.

Here's what Bill just did (or didn't)

Bill Morneau lives in a $5 million house within walking distance of the big Loblaws in Toronto’s upscale south Leaside, and earns about $230,000 a year as the finance minister. So, he’s a 1%er. He also has a few other million in equity in the family pension business. So, he’s a .oo1%er. But right now he’s a politician in a time when the forces of populism are sweeping neo-liberals over the dam of public opinion. So he’d rather you forgot about his personal fortune.

His biggest challenge comes Wednesday afternoon with the second T2 federal budget, in which Bill will try to look like a gun-totin’ Deplorable, and tax the rich – at least those wealthy people silly enough to be doctors, entrepreneurs or others making their money in the sunshine. This is popular. Just read the comments on this strangely addictive but demure blog. It’s there. The sentiment that anyone making a big wage is ripping off the system, deserving to be taxed into the dust, is a moister meme. And never forget that Mr. Trudeau is our leader because hordes of young people voted for the first time – and voted for the sexy guy with tats, a hot wife and MaryJane as his muse.

Also popular with the kids. Debt. Its dark embrace is part of the Canadian fabric now – with personal borrowing at an unheard-of level, twentysomethings clamouring to get mortgaged and credit out of control. The T2 guys understand they no longer need to adhere to the campaign promise of a “modest” $10-billion annual deficit for a three year period. They can go full Monty, and the kids will still slobber over them.

Thus a big (but largely ignored) part of the budget tomorrow will be debt. The Libs will be spending not $10 billion more than they take in, but $30 billion (plus). It won’t last three years, either, but at least 10 and likely 15 (says the Parliamentary Budget Officer). The new debt to be added in four years will be historic. And this is happening during the lowest interest rates since ever. As rates rise, the pile gets raunchier.

This brings us to eating the rich. After B-day, Bill may be getting some passing strange glances from Leasiders as he loads up at the olive bar, there beside the greens section, just over from the Ace bakery display. As you’ve been forewarned here, the Libs may up the capital gains inclusion rate (beware if you own mutual funds or an investment condo), or water down the dividend tax credit (ugly), or lower the boom on small corps with retained earnings or Mom on the payroll (inevitable). All that is speculation. A debt bomb is fact.

Over eight years of rule, which included the greatest financial crisis in 80 years, the Harperites ran up $150 billion in new debt, much of it through the ‘Economic Action Program’ that built a bunch of stuff. The Cons also dropped the GST from 7% to 5%, lowered corporate income tax and brought in a mess of family tax credits. So far the T2 government is on track to add at least $100 billion in just four years, has carved about ten bucks a week out of the middle class bill, upped taxes on the wealthy, rolled back OAS pogey to age 65 (the cost is $12 billion a year) and started paying people a lot more to have children. Apples and oranges, Ying and yang. Mars and Venus.

Said Bill in Germany a day or two ago when asked about the budget: “We talk about middle class ad nauseam and I’m sure it drives journalists crazy. But seriously. We look at what’s gone on around the world, is there anybody who questions that we should be focused on how people feel? What are the outcomes if we don’t? So I think we’re going to stay on that message.”

The translation: yah, the deplorables are winning. They want government to be the solution, punish the elites and kick the can of responsibility way down the road. People are pissed. If we don’t give them what they want, we’re history.

This is the rub of politics. Do leaders lead, taking tough decisions then braving the consequences? Or follow, telling throngs what they wish to hear, then obsessing over ratings? Logic tells us a little country like Canada can’t add $30 billion a year to its national debt without the mother of all tax increases in later years. And yet Trudeau’s supporters seem not to care because, dammit, they want condos. And a guaranteed annual income. And (count on it) debt forgiveness once the cost of money rises.

This is why our guys in Ottawa have expanded the CPP, enhanced child payments, increased unemployment payments, and reversed Harper’s brutal OAS decision. It’s all about giving more to people, even when it means looting the future and Hoovering the successful. So, Canada and the US are on divergent paths, even though Trudeau and Trump serve the same master. The elector.

“The best argument against democracy is a five-minute conversation with the average voter,” Churchill said. Now it’s 140 characters. Or an Instagram. We’re screwed.