Last night’s just-before-deadline announcement that Canada and U.S. had reached a deal was met with a sigh of relief in many capitals but especially Ottawa. Reaching a deal on the two linked bilateral deals was definitely better than the alternative of no deal and related uncertainty for investors and certainty of a tough congressional approval process for a bilateral U.S. Mexico deal. It reduces the risk of a negative market outcome for one of the more integrated blocks, a fact that was largely priced in, but it is hard to see the deal as more than defensive.

In short, it seems to be a deal narrower in scope, one that was defensive (holding back on U.S. protectionism rather than creating space for new areas of growth), raising the question about the deployment of political capital on a relatively narrow set of policy changes. Next up – legislative approval in the three countries (tricky in all, mostly in the U.S.) and dealing with the bigger issue/challenge – China. The outcomes for both congressional passage and a deal with China may both be harder than markets expect.

Like many people I’ve spent a lot of time over the last week  at “2018” Outlook events, reading and writing outlooks. At the risk of adding to the deluge, its worth a few reflections about the status of consensus and where triggers might diverge.
Almost everyone I've spoken to over the last few months  is upbeat and sees a continuation of the “synchronized global expansion,"* benign liquidity conditions and pricey valuations getting even more pricey after gains. Some countries and sectors look less resilient, but the general view is quiet positive. 

Some are a little worried about 2019 or H2 2018 or Q4 2018 when the effects of balance sheet adjustment might begin to be more priced and when questions escalated on what might be the new drivers of growth. In this context, regulatory uncertainty especially around trade and investment policy might reinforce recent investment trends, as some corporations and households hold off on spending.