Print Transcript
[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing.
coming up on today's show, MoneyTalk's Anthony Okolie joins us. He's going to take us to the latest US jobs report. It was a scorcher. What does it mean? We are going to hear from TD Asset Management's James Hunter and his outlook for preferred shares. We will discuss what to keep in mind ahead is this month's RRSP contribution deadline from TD Wealth Nicole Ewing. It in today's WebBroker education segment, Bryan Rogers will show you how to find dividend information on the platform.
Before we get to all that, let's get you an update on the markets. We have gold and oil under pressure.
And we've got 88 points off the top of the TSX Composite Index.
21,030, we are down a little shy of half a percent.
We are seeing some money move toward Shopify.
That is preventing us from a deeper showing in the whole. Shopify, last time I checked, was down four or 5% yesterday.
Today's up about 7%. 109 bucks and $0.87 per share. Big rally in the tech name south of the border playing out on the side of the border.
With that stronger than expect the jobs report, we saw a jump in bond yields and a jump in the US a bucket, a pullback in the price of gold. Many minors today are feeling the same pressure to downside.
For our example, we got Barrett, 2055 per share, it is down 3 1/2%. South of the border, there was the strong jobs report and strong earnings out of some tech heavyweights after the closing bell yesterday.
Playing against each other and it seems that the excitement over strong earnings from the big tech names is winning out.
The S&P 500 almost a full percent of the upside, 43 points on the table.
Let's check in on the tech heavy NASDAQ.
221 points to the upside, almost one and 1/2%.
Quick check in on Meta Platforms, a very big intraday move from the parent company of Facebook.
A few things going on. We will dig in later on the show.
Among them, going to be paying a dividend for the first time. The stock is up more than 20%. And that's your market update.
Well, as we've all been interest rate watchers, we are keen waters of every piece of data coming out of the world's largest economy. Today it was a jobs report, much larger than expected.
MoneyTalk's Anthony Okolie joins us now to break it down.
>> It suggests that the higher rates that we have seen haven't really cool down hiring as much as previously thought.
Here's some details. US employers added seasonally adjusted 350000 jobs, that's nearly twice the 185,000 jobs that was estimated by most economists.
December was up 333,000 up from 250.
What might give the Fed some pause is monthly wage growth. It was at .2% for the month.
That's its fastest pace in nearly 2 years.
On a 12 month basis, wages were up 4 1/2% versus the 4.1% estimate while ours slipped lower. Breaking down the jobs by sector and services, we saw healthcare and education, professional and business services, retail trade, they saw the strongest gains. The goods producing side saw some solid gains in construction and manufacturing.
The key implication is that this latest jobs report underscores the strength of the US economy and downplaying expectations for a March rate cut which Fed chair Jerome Powell indicated at the meeting this week.
>> Now it seems in retrospect that he had good reason to say give the rate some time to do their work.
We need to make sure we are getting back to two. So you get a jobs report that is this strong.
Do we still have the Goldilocks scenario in place? It's good that the market, the economy is strong because inflation is coming down.
What are we thinking about a timeline for cuts?
>> I think the hope for a soft landing or no landing are still there given the strong jobs report, given the strong Q4 GDP numbers that we saw as well. I think what this does is it certainly perhaps rules out a March rate cut but TD Economics suggests that the Fed could still argue for a delay rate cut despite the ongoing job market strength because productivity in the US continued to firm in January and that has helped restrain inflationary pressures from higher wage growth. From that perspective, perhaps the cooling inflationary pressures in the next coming months could provide the Fed a bit more comfort that they are at least moving towards or sustainably moving toward side to present target.
>> A lot going on there. Thanks for breaking it down.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
Parent company of Facebook will be paying a dividend for the first time in its history.
The news comes as Meta reports a 25% jump in revenue amid a rebound in advertising sales.
Put it all together, the social media giant is also planning to buy back $50 billion worth of shares. That has the stock on the move today. 478 bucks and change for Meta platforms, a jump of more than 21%. Shares of Amazon also on the move higher today. Not quite that much but they are moving higher. The e-commerce behemoth is surpassing sales and profit estimates for its most recent quarter.
It's providing the street with a pretty solid forecast as well. The bottom line was boosted by Amazon's cost-cutting measures, including 27,000 job cuts since late 22. That stock up a pretty handsome 8% as well 172 bucks per share. Two big tech names after the close yesterday lifting the spirits of the overall market.
Let's talk about Imperial oil, it is boosting its dividend payout to investors by 20%. That height comes as profit fell more than 20% compared to the same period last year on lower commodity prices. It says it's upstream production increased year-over-year. Put it all together, $78.72 per share, you're up all mostly percent on the name.
A quick check in on the markets, starting here at home on Bay Street with the TSX Composite Index.
We have gold under pressure, that stronger-than-expected US job reports and bonds and the American dollar higher and sent gold lower. A lot of mining names under pressure.
Choppy trading. This week as well, a bit of a pullback in West Texas intermediate, we are down 90 points, a little shy of half a percent.
South of the border, those big tech earnings lifting the markets. We've got the S&P 500 now up 43 points, almost a full percent.
Well, of course, we have been digesting a lot of information this week, including, it seems like a long time ago, the Fed rate decision on Wednesday.
That's where chair Powell said at that rate cuts might not be coming as fast as people were expecting. Sam Chai, VP of active fixed income portfolio management at TD Asset Management joined us earlier to discuss.
>> The Fed has kept the interest rate on change, keeping a target range of 5.252 5.5%, which is generally conforming to market expectations.
More notably, the Fed has basically changed their forward guidance from having an explicit hiking bias to now having a neutral stance on future policy direction.
They have also added a language in a statement, which is that they do not see necessarily that they will be able to lower interest rates until they gain greater confidence that inflation comes sustainably towards their 2% target.
So I would say that overall, the policy statement generally is in line with market expectations. When you look at the broader US macro picture, in the most recent weeks, labor market has been solid.
Activity data has coming in more resilient than expected.
Inflation data, though, has coming in better than expected.
And when you look at core PCE measures, which is the Fed's favorite inflation measure, six month annualized core PCE is now below 2%. In other words, the Fed has already seen six months of good inflation data, but they just want to see more. So it's reasonable now to see that the Fed wanted to basically pare back their hiking bias to a neutral stance to lay the groundwork for potential rate cuts sometime in the future.
>> When I think about the market reaction, the equity side seemed to take it a lot tougher, that message, which he's been delivering all along, really. Let's see inflation get back to 2% and be on that path before we make any cuts. The equity markets sold off. The bond market sort of just held in. And even now, bonds seem to be on the rally. It's interesting to see that kind of dynamic. Did the equity market get a little bit of ahead of itself in thinking what the Fed is going to get up to?
>> So it's interesting you pointed out that discrepancy in the two markets. So I would say that for the rates market, we have seen that after the statement get released the US interest rates actually rose for a few beeps initially, because the market interpreted this language that they need greater confidence in order to cut to be slightly erring on the hawkish side. But going into the press conference, the message from Powell has been a bit more mixed. And so we have a pretty volatile intraday moves, like, on the rate side during the press conference.
But after the conference, US interest rate has seen a sustained rally until the end of the day. On net, we have seen roughly 10 beeps lower on US 10-year rates. So that has been a positive obviously, for the bonds. On the other hand, for the equity market, there might have been anticipation of a more imminent rate cut.
And with that not in the near term, that has on net led to roughly 1% of SPX index sell off from the beginning of the conference till the end of it.
>> Right. So interesting reaction there.
As we think about-- and we've had a little time in the markets calming down a little bit, they've had some time to take a breath, think about what Chair Powell actually said, what it could mean for the path forward-- what are we thinking now about rate cuts? Because at some point-- at one point, March seemed to be in play.
It doesn't seem to be the story now.
>> Yeah, so thankfully, Chair Powell had provided some guidance on that particular question. I would first say, though, that the Fed has taken an important step of basically turning their forward guidance from hiking bias to neutral, because again, that essentially laid the groundwork for a potential cut sometime down the road. So all future meetings are live. My base case would be that I expect a rate cut to materialize sometime in the second quarter this year.
Post-Powell's, you know, guidance on the March meeting cut likelihood. The market has priced a March cut to be roughly now around 30% chance. And personally, I think that's a fair assessment. And for this view of the first cut materialize in Q2, obviously, that would be conditional on us seeing more good inflation data over the coming months.
Obviously, there are risks to that to that view. On the one hand, we have seen pretty good core PCE data over the past months.
Maybe that progress stalls in the last mile of this journey. And if this inflation is slowing down, then we may see the Fed having to delay this rate cut sometime to the second half this year.
On the other hand, this inflation progress could accelerate. Or perhaps, labor market could deteriorate slightly faster than expected. If that's going to materialize, then the Fed will have to cut more aggressively and faster. And so there will be a lot of data dependency on that.
>> Let's take all of this, put it together to what it means for the fixed income investor in 2024.
How should we be thinking about that space?
>> Sure. So I would think about it in two components. Firstly, if we look at the shorter tenor of the interest rate curve, I would say that my personal view is quite aligned with when the market is going to deliver the first rate cut, which is sometime in Q2. But when you look at how many cuts the market has priced in for the Fed this year, that's just shy of six cuts.
Based on my personal macro view, I would think that that's slightly excessive.
Although, I would acknowledge that I think the risks to my macro view is slightly to the downside. For instance, when labor market reaches an inflection point, that unemployment rates start to rise, labor market could deteriorate much faster than expected, and unemployment rate rise more than expected, which is not uncommonly seen in prior cycles.
And so if that scenario is going to come to be realized, then the Fed will have to cut more aggressively and earlier. And the total number of cuts we have this year will be materially above the six cuts the market currently priced in.
>> And of course, the assumption from investors would be that would set off a rally in bonds, right? You start seeing this aggressive pull back in the Fed's funds rate, then we're going to see that bond rally we've been sort of keeping our eye on, waiting for.
>> For sure. And if we take our eye now to the longer tenor of the interest rate, if you look at the overnight index swap market, the actual average long-term rate currently priced in is roughly around 3.5%, which is materially higher than the long-term neutral rate that the Fed currently forecasts, which is 2.5%. So there seem to be some room for that average long-term rate currently priced in to come down.
And so that's going to contribute positively to longer-term US Treasury bonds.
Additionally, term premia currently on those bonds are also at relatively elevated level compared to where we have seen over the past years. So we also think that that is going to be a positive factor contributing to better expected returns of long-term treasury bonds.
>> That was Sam Chai, VP of active fixed income, portfolio management, at TD Asset Management.
Now, let's get our educational segment of the day.
Showing you earlier Meta is a mover in the markets today. That after announcing their first ever dividend.
If you are wondering it interested in finding information on other companies with dividends, WebBroker has tools which can help.
Joining is now with more, Bryan Rogers, senior client education instructor at TD Direct Investing. Always great to see you.
Talk to us about dividends and information on the platform.
>> That was very timely news we were talking about with Meta.
What I wanted to show, this is an old-school tool that's been around for quite a while on WebBroker. It's one of my favourites. It's had a lasting impression on me. I think a lot of other people will like this as well.
If you are looking for socks with dividends, your thinking, I want to add some more stocks that have a fairly high dividend yield and they have certain other criteria they might be looking for, there is a great way you can screen, you can use the stock screener within WebBroker and find those stocks and get a list you can save for later on.
You can alter it, add other criteria as you see fit.
I want to walk people through on how to set up a similar screen.
We are going to make it simple. It will be something you can find under the research tab.
It's going to be underresearched.
And then you're going to go to, in this case, the screener section right here.
That will pull up this page. You will see there are a number of preset screens available.
5G, AI, for example.
We are going to go right to the screening section right here.
We are going to actually click on the bulk edit.
This is probably the easiest way. There are other ways. There are preset screens already established. If I click on bulk edit, that gives me a few screens that are already available and if you criteria that are already set up, price-performance five day, price-performance 52, etc. I'm going to delete all these. I want to do a simple one.
I want to see some socks that have a certain dividend yield and a couple of other minimal criteria.
I just deleted the first three.
In terms of stock price, if you're looking for a range, you don't have to set this, but if you are looking for socks outside of the one dollar or really low value stocks, you may be looking at 25 to 50 or let's put $25-$100, and that's the price you may be looking for. Automatically it's telling you there are 5300 matches initially.
That's a little bit too many in there.
If we go in terms of common shares, there is 1498.
That's way too many. So you want to add on more criteria. Click on the bottom here.
Go to more criteria. I'm going to add dividend yield.
You can see it is added right here. I'm going to keep adding a few more.
Then we will adjust these as well.
I would like to see dividend growth rate because he wants to see these companies and you might prefer dividend companies that are continuing to increase their dividend.
And then I like to add, because I want to see stocks that are pretty strong and reputable, you think of blue-chip stocks in terms of market capitalization, so I'm going to click that on there as well.
I set a larger size company if I am looking for that.
So what I want to do is set the minimums.
Click on the button here. I go to 500.
I will put them in there for million, 500 million. I go 5%, so whatever you want is your criteria, I'm just setting some criteria around 5%.
You will notice there are 39 actual results. I looking at US and Canada. You can set it to Canada only if you like or the US. When I scroll down, you're getting your list of stocks and how they fit into the criteria.
Now you have a good list that's workable, about 39 stocks total that I look at that fit the dividend yield, market cap, etc., just as a simple skin so far.
>> All right, so we did some thoughtful work there to try to narrow down possibilities for research.
There's gotta be a way to save it. I wouldn't want to do that every single time.
>> Yeah. That's a great point.
Something I've done before on WebBroker.
We do a lot of work and then you either click back or you forget to save it. It's a really good idea to save this.
Let's go back quickly and we will show you how to save it because you can alter it later on to you. In terms of that initial work, if you don't want to lose that, you go to the very top and then click save.
When you click save, it's interesting to see. When I go to save, some people might not have noticed this before but when I put in the name, I'm going to call it 5% dividend, but you want to be specific, 500 million market cap. Once I type that end, you can type in an additional description as well. Something people might not realize is you can set this as a community screen.
I think it's a good idea to do that because now, if you want to search later on and search for similar screens, there is an area in screeners, we don't have time to look at it today, export when you get a chance, there are community screens on the first page and those are ones that other community users like us have made before or and have set as communities screens and shared. Once you go save screen, it is safe.
This doesn't jump out as easily, now that I'm showing you, you will know for next time. To find your saved screen, click right here on the star, like your favourites when you're thinking about your list on your browser and you can see that these are some other ones that I have say.
There's one I saved and that will, just like you saved it.
With your original settings there.
>> Great stuff as always. Thanks for that.
>> Thanks, Greg.
>> Bryan Rogers, Senior client education instructor at TD Direct Investing.
And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
Well, market conversations are often dominated by talk about stocks and bonds.
One area that doesn't get covered as much as an asset class that sits between the two: preferred shares. Earlier, I had the chance to discuss this part of the market with James Hunter, VP and portfolio manager with TD Asset Management.
>> Preferred shares are a type of security that are issued typically by banks and insurance companies, and they pay a dividend.
Like common shares, those dividends receive tax credits here in Canada. And both securities are publicly traded, as I mentioned.
But like a bond, they're a little higher in the capital structure. And in exchange for that, they don't participate in the growth of the company. So they have some features that are kind of like stocks and a few features that are kind of like bonds. They're a bit of a hybrid investment.
>> Okay, when we're talking about preferreds, who are we actually looking to in terms of who's issuing this kind of share?
>> Right. So if you look at the market in Canada, it's a $40 billion market. About 60% of that would be financial companies-- banks, insurers, some of the diversified financials.
The next 20% would be the pipeline companies. There's another 10% that are utilities, and the last 10% is a mix of other issuers.
So there's a reasonable balance in the market, but it is dominated by the banks and insurance companies. And one thing to know about preferred shares is that there's three types. So there's fixed rate resets. That's about 3/4 of the market.
And what it means is you get a fixed dividend for the first five years, and then it resets every five years thereafter. There are fixed rate perpetuals. That's where you get a fixed dividend indefinitely. And that's about 20% of the market.
And then the third type is floaters.
That's where the dividend floats up or down based on central bank interest rate policy. That's about 5% of the market.
>> So in a market like this and a market that we've been through in the past couple of years, when we break it down by three different types of preferred shares, where has the activity been in the market? Where has the interest been?
>> Well, in the last couple of years, I would say it's-- well, maybe to start with-- it's been a bit of a rough ride for preferred share investors. There have been a lot of ups and downs, and I think a lot of your viewers would probably be aware of that. And the thing that's really caught the market off guard has been just the volatility in interest rates.
If you think about pre-COVID, interest rates were around 3%. Then they were cut to 0% during the pandemic. We came all the way out of that up to about 5% here in Canada.
And that interest rate volatility has flown through into the preferred share market.
The interest in the last couple of years, the best performance has really been from floating rate preferred shares, because they benefit from higher interest rates.
But as I mentioned, that's sort of the smallest part of the market. And so the usual activity, you really see the most of that in the rate reset market. And that's had its ups and downs.
The last couple of months have been a bit better, though.
>> When you think about preferreds, and, perhaps, the audience might be learning about them for the first time, they might think, OK, why would I choose a preferred share over a bond? There are differences, but what sets them apart? Why do some investors make that choice and say, you know what?
Let's be in the preferred part of the market instead of the fixed income.
>> Right. So the main area that a preferred share can help your portfolio with is in terms of income. If you think about the income of a preferred share, right now, the yield is about 6%. It's quite a bit higher than most other parts of the market. And the key in Canada is that that's a tax advantaged income. You get the tax credit.
So depending on your marginal tax rate, that could be a 6% yield after tax. So that's one interesting feature of the preferred share market, which is probably a little bit better than cash, and certainly better than most bonds. The other thing to keep in mind right now is that preferred shares are trading about 20% below par, which means that if the market could continue to move back towards par value in Canada, that's $25 a share, there is also a capital gains opportunity.
Now, let's talk about the par value, because, obviously, some people when they take a look at pure fixed income, think the opportunity this year is not only central banks on hold, which they have been for several months, but central banks eventually cutting.
Is it the same kind of market conditions that would start to see preferred shares move back toward par?
>> It's not exactly the same, but I would say the theme or the rhythm of it is pretty similar. If you put up the chart that I brought along with me, we can look at the last 10 years of the preferred share market. And what I've done here is I've converted the index to a weighted average per share. And like I said, the par value of that is $25.
So you can see over the last several years, there have been a few drawdowns in the market. But the point that you'll see in the chart is that the long-term average is about $22 a share. And right now, we're meaningfully below that-- closer to $20 a share, which is that capital gains potential that I mentioned.
And to your question, Greg, I do think that preferred shares can move higher as interest rates come down. The key for the preferred share market, I think, will be interest rates coming down, but just not too much. If interest rates have to come down a lot, that probably means we're in a recession, which wouldn't really be great for the preferred share market. But if we get enough cuts that sort of indicate that the economy is going to muddle through a bit of a weak patch, I think that would be good for the market.
>> I wanted to ask you about some of the risks in this space in terms of investor thinking about preferred shares. You named one of them right there. A recession often hits many asset classes. Preferreds wouldn't be immune from that. Any other risks when people need to think about preferreds in their portfolio?
>> The two main ones that we would usually think about are credit risk and interest rate risk. So in terms of credit risk, you're talking about how secure the company's earnings and, therefore, how consistently can they pay the dividends.
Because, again, preferred shareholders don't participate in the growth of the company. But it's really important that they get that dividend income from the issuers.
So we always look at credit risk. And there is a good chunk of the market that is a lower level of investment grade. So that's one area that I think is of interest right now, because you can get some pretty good value in those parts of the market. The other thing is, of course, interest rate risk.
And if you think about rate resets, which, again, is 3/4 of the market, there's two things to look for there. It's, when will those rate resets reset? Which could be this year or it could be five years from now. And then the other thing to think about is how big is the spread on those securities.
Some of them will have a spread of 100 basis points. So if rates were to go down a lot, they don't have a lot of interest rate protection. But there are some securities with a 300 or 400 basis point spread. Those would be more resilient as interest rates come down. So those are the things we look at-- credit risk and interest rate risk being two of the keys.
>> Made me think, too, about the liquidity in the market. Is that a concern? Is it a very liquid market?
>> Well, it has gotten a little smaller in the last few years. There hasn't been a new issuance since 2022. And there were a number of redemptions a couple of years ago. We could get into some of the details if you want. But the bottom line is there were some redemptions that made the market smaller, but it stabilized, roughly, in the last 12 months.
That's a good thing, because liquidity is, at times, episodic. I guess what I would say is that there's still 200 preferred shares outstanding in Canada or more, and these are really high-quality issuers.
We're talking about the banks, the insurance companies, the pipeline companies in Canada, some of the utilities. So they're high quality, and there's still a couple hundred left. So I think it's still an investable opportunity.
>> That was James Hunter, VP and portfolio manager at TD Asset Management.
Now, for an update on the markets.
We are having a look at TD's Advanced Dashboard, a PlatForm designed for active traders available through TD Direct Investing. This is the heat map function, gives us a view of the market movers.
We will start with the TSX 60, and screened by Price and volume. It's been a choppy trading crude oil this week.
We are seeing a pullback in that space today.
We are also seeing gold under pressure on the back of that stronger-than-expected US jobs report, bond yields moved higher, gold move lower. 20 bucks per ounce right now about. This is how it's playing out in Toronto. Some downward pressure on big energy names including TRP and Enbridge.
Imperial oil is standing out. They are raising the dividend, seems to be attracting some money in that direction.
In the mining sector, you can see some more pain here. Barrick down almost 3%.
AEM is down a little bit more than 4%.
Where is the green on the screen?
You got tech stocks rallying south of the border although some earnings, and you've got Shopify rallying today, up almost 7%.
South of the border, a much stronger-than-expected US jobs report. It sent yields higher and the US dollar higher but in the equity side, we also had some earnings after the bells yesterday, including the parent company of Facebook, that would be met on the screen making a 22% jump in this session alone, not only a strong quarter and a strong forecast but also introducing a dividend for the first time.
Money moving in that direction. Amazon up more than 8%. A pretty good intraday move.
They pale in comparison to Meda but they came out with the earnings after the bell, also a strong showing.
You can find more information on TD Advanced Dashboard by visiting TD.com/advanceddashboard.
Let's talk personal-finance. The dead to contribute to your registered retirement savings plan for 2023 in that tax year is just around the corner. Nicole Ewing, Dir.
of tax and estate planning at TD Wealth joined us earlier discussed what to keep in mind ahead of the deadline.
>> At the end of February, February 29, we have the deadline for contributing money to our RRSP that can be used against income in 2023.
So even though we're contributing it now, we have that first couple of months of the year where we are able essentially to use our contributions against income from last year or this year. So it does provide us with some good flexibility.
Of course, we have to be within our contribution limit, making sure that we are not over-contributing but making sure that we also have looked at what the opportunities are more broadly for contributing to our RRSPs versus other registered plans and really making sure that we are really optimizing the opportunity. Because contributions to an RRSP, of course, can be claimed as a deduction against your income for the year and reduce tax significantly. It can grow in this tax-deferred environment, allowing you to have the growth over a number of years.
You will be taxed on this, though, when the funds come out. So this is where the math comes in looking at your own personal circumstances, when are you expecting to retire, what is your timeline, what is your age now, and what is your tax bracket? So If your tax bracket right now, if you are in one of those higher-earning brackets, but you're expecting that your retirement you will see you in a lower tax bracket, then an RRSP is a really beneficial tool.
If it's not the case, though, if we're perhaps in a lower tax bracket now, that doesn't mean that we wouldn't also want to maybe make those contributions if it allows us for that tax-free growth. So it's a little bit of math and a little bit of really weighing the opportunities and costs. But we don't have that same opportunity if we don't make those contributions by the deadline.
>> You're talking about a little bit of math there. When you talked about your contribution room and being careful of not exceeding that, there's a little bit of math there. I don't know the formula exactly. It's 18% of something, something, something. There's an easier way to get that number, right? Just to make sure you're within your boundaries.
>> You can check in with the CRA, and you can look on your account online to see what your contribution limits are. Now, I would caution, though, that these are not necessarily real time numbers that you're seeing. So we have seen situations where maybe people are over-contributing to their TFSA because they hadn't-- the numbers or the contributions that they had made in the current year weren't reflected on that tool.
So just make sure that you are aware of what that contribution limit is at the as at date because you may have made some additional contributions, and it can be a little bit surprising for people. So for example, if you have a contribution match, that's going to-- that's going to be counted against your contribution limit.
If you are in other sorts of pensions and contributing towards those, that will count against your contribution for your RRSPs as well.
So we can't think about it in a vacuum. We need to make sure that we're aware of which of our contributions to various types of plans will be caught under the umbrella of your RRSP contribution limit.
>> All right, so important things to keep in mind there. Sometimes this time of year, you hear people talking about a strategy to contribute to that RRSP before the deadline for the previous tax year.
And they talk about borrowing money to invest in an RRSP. Now what would be the condition? When would a situation like this make sense for someone?
>> Well-- and this is great. We are thinking about putting our money to work for us in the most tax efficient way. And so sometimes borrowing to invest is going to be a great strategy. What we want to be thinking about, though, is how quickly we are going to be able to repay that loan, what are the terms of the loan.
Sometimes we can see a short-term three-month time frame. Maybe we have a line of credit that we can borrow against.
But we have to ensure that we have a plan to pay those funds back so that we are not paying more in interest on a loan than we are earning in the account that's allowing us to grow tax free. So again, this comes down to the math. Will you have the opportunity to be able to repay that? Is your interest rate going to be one that is digestible and allow you to invest the money within your RRSP and outperform what the interest that you need to pay against that loan would be? And your age as well, so the compounding growth and the opportunity that the RRSP provides is really quite significant the longer those funds are in.
So being able to maximize your contributions and have that tax-deferred growth over a prolonged period of time can really be a significant benefit that does outweigh, perhaps, a short-term loan in order to allow you to put those funds in.
Generally speaking, a lot of people think about this when they are intending to be repaying that loan with the refund that they will be receiving as a result of using the contribution towards the deduction to reduce their income.
So they're going to get the refund and immediately pay back that loan. That's a great strategy. But we do have to keep in mind whether or not we can hold ourselves to that because ultimately, we could end up spending a little bit more on interest than we might realize if we just treat that loan as a longer-term strategy.
>> Need a little fiscal discipline to consider on that strategy. So once we get to the end of February, the deadline for contributing for the 2023 tax year is over, it'll probably be a mistake to sit back and say, well, I'm done now. I don't have to worry about anything else because then we enter tax season, don't we? What should we be thinking about this year?
>> Well, that's it, and it comes before we know it. And so there might be the temptation to file really early because we want to get that refund. Be aware, though, that we do-- if you file and do not report some of the income that you may have earned, maybe there's a slip that came out a little bit later, there are penalties.
Ask me how I know.
And if you don't do the-- if you do this repeated years, those penalties can be quite high. So now is a great time to be looking at your previous year's return, looking at the income sources that you received, the tax slips that you received, so that you have an understanding of really what to expect, and was this year any different?
We would also use this time to be gathering receipts, so for example, if you're able to use medical expenses, employment expenses. Maybe you've made some donations to charity. This is the time to be gathering all of that information so that you're in a position to know what your obligations are going to be.
Now, there has been some things that are different this year than last year. And so having these on the radar nice and early would be important, one of those being this underused housing tax that has created a lot of confusion for a number of people in that it applies in ways that were not necessarily anticipated. There was a deadline that has been extended and extended again.
So the 2022 year's obligation to report and file and pay the underused housing tax has been extended to April 30 of 2024, but that's only for the 2022 tax year. Whether or not you have a 2023 filing, you'll also want to be doing some looking into that to determine whether or not, for example, a joint account that you are joint names on a property, this might have created an a requirement for you to file.
We also have new T3 requirements for many trusts that previously didn't need to file. So if you have a trust that the calendar-- that the year end is on or after December 31, 2023, you will then also have a trust filing obligation. So now is really the time to be thinking about what new circumstances might I have found myself in this year, what research do I need to know about these new rules to know whether they apply to me, and to get your-- frankly, to get your tax advisors working with you now because come tax filing time, they are not going to have the bandwidth to be able to help you work through these more complex issues.
>> That was Nicole Ewing, Dir., tax and estate planning at TD Wealth.
Stay tuned. On Monday, we are going to have more on what the jobs numbers in the US could mean for markets. Chris Whelan, Senior Canada strategist and had a portfolio and ESG strategy at TD Securities will be our guest.
And a reminder that you can get a head start.
Just email MoneyTalkLive@TD.com.
That's all the time we have for the show today. On behalf of me and Anthony and everybody behind the scenes that brings you the show every day, thanks for watching. Have a good weekend. We will see you Monday.
[music]
coming up on today's show, MoneyTalk's Anthony Okolie joins us. He's going to take us to the latest US jobs report. It was a scorcher. What does it mean? We are going to hear from TD Asset Management's James Hunter and his outlook for preferred shares. We will discuss what to keep in mind ahead is this month's RRSP contribution deadline from TD Wealth Nicole Ewing. It in today's WebBroker education segment, Bryan Rogers will show you how to find dividend information on the platform.
Before we get to all that, let's get you an update on the markets. We have gold and oil under pressure.
And we've got 88 points off the top of the TSX Composite Index.
21,030, we are down a little shy of half a percent.
We are seeing some money move toward Shopify.
That is preventing us from a deeper showing in the whole. Shopify, last time I checked, was down four or 5% yesterday.
Today's up about 7%. 109 bucks and $0.87 per share. Big rally in the tech name south of the border playing out on the side of the border.
With that stronger than expect the jobs report, we saw a jump in bond yields and a jump in the US a bucket, a pullback in the price of gold. Many minors today are feeling the same pressure to downside.
For our example, we got Barrett, 2055 per share, it is down 3 1/2%. South of the border, there was the strong jobs report and strong earnings out of some tech heavyweights after the closing bell yesterday.
Playing against each other and it seems that the excitement over strong earnings from the big tech names is winning out.
The S&P 500 almost a full percent of the upside, 43 points on the table.
Let's check in on the tech heavy NASDAQ.
221 points to the upside, almost one and 1/2%.
Quick check in on Meta Platforms, a very big intraday move from the parent company of Facebook.
A few things going on. We will dig in later on the show.
Among them, going to be paying a dividend for the first time. The stock is up more than 20%. And that's your market update.
Well, as we've all been interest rate watchers, we are keen waters of every piece of data coming out of the world's largest economy. Today it was a jobs report, much larger than expected.
MoneyTalk's Anthony Okolie joins us now to break it down.
>> It suggests that the higher rates that we have seen haven't really cool down hiring as much as previously thought.
Here's some details. US employers added seasonally adjusted 350000 jobs, that's nearly twice the 185,000 jobs that was estimated by most economists.
December was up 333,000 up from 250.
What might give the Fed some pause is monthly wage growth. It was at .2% for the month.
That's its fastest pace in nearly 2 years.
On a 12 month basis, wages were up 4 1/2% versus the 4.1% estimate while ours slipped lower. Breaking down the jobs by sector and services, we saw healthcare and education, professional and business services, retail trade, they saw the strongest gains. The goods producing side saw some solid gains in construction and manufacturing.
The key implication is that this latest jobs report underscores the strength of the US economy and downplaying expectations for a March rate cut which Fed chair Jerome Powell indicated at the meeting this week.
>> Now it seems in retrospect that he had good reason to say give the rate some time to do their work.
We need to make sure we are getting back to two. So you get a jobs report that is this strong.
Do we still have the Goldilocks scenario in place? It's good that the market, the economy is strong because inflation is coming down.
What are we thinking about a timeline for cuts?
>> I think the hope for a soft landing or no landing are still there given the strong jobs report, given the strong Q4 GDP numbers that we saw as well. I think what this does is it certainly perhaps rules out a March rate cut but TD Economics suggests that the Fed could still argue for a delay rate cut despite the ongoing job market strength because productivity in the US continued to firm in January and that has helped restrain inflationary pressures from higher wage growth. From that perspective, perhaps the cooling inflationary pressures in the next coming months could provide the Fed a bit more comfort that they are at least moving towards or sustainably moving toward side to present target.
>> A lot going on there. Thanks for breaking it down.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
Parent company of Facebook will be paying a dividend for the first time in its history.
The news comes as Meta reports a 25% jump in revenue amid a rebound in advertising sales.
Put it all together, the social media giant is also planning to buy back $50 billion worth of shares. That has the stock on the move today. 478 bucks and change for Meta platforms, a jump of more than 21%. Shares of Amazon also on the move higher today. Not quite that much but they are moving higher. The e-commerce behemoth is surpassing sales and profit estimates for its most recent quarter.
It's providing the street with a pretty solid forecast as well. The bottom line was boosted by Amazon's cost-cutting measures, including 27,000 job cuts since late 22. That stock up a pretty handsome 8% as well 172 bucks per share. Two big tech names after the close yesterday lifting the spirits of the overall market.
Let's talk about Imperial oil, it is boosting its dividend payout to investors by 20%. That height comes as profit fell more than 20% compared to the same period last year on lower commodity prices. It says it's upstream production increased year-over-year. Put it all together, $78.72 per share, you're up all mostly percent on the name.
A quick check in on the markets, starting here at home on Bay Street with the TSX Composite Index.
We have gold under pressure, that stronger-than-expected US job reports and bonds and the American dollar higher and sent gold lower. A lot of mining names under pressure.
Choppy trading. This week as well, a bit of a pullback in West Texas intermediate, we are down 90 points, a little shy of half a percent.
South of the border, those big tech earnings lifting the markets. We've got the S&P 500 now up 43 points, almost a full percent.
Well, of course, we have been digesting a lot of information this week, including, it seems like a long time ago, the Fed rate decision on Wednesday.
That's where chair Powell said at that rate cuts might not be coming as fast as people were expecting. Sam Chai, VP of active fixed income portfolio management at TD Asset Management joined us earlier to discuss.
>> The Fed has kept the interest rate on change, keeping a target range of 5.252 5.5%, which is generally conforming to market expectations.
More notably, the Fed has basically changed their forward guidance from having an explicit hiking bias to now having a neutral stance on future policy direction.
They have also added a language in a statement, which is that they do not see necessarily that they will be able to lower interest rates until they gain greater confidence that inflation comes sustainably towards their 2% target.
So I would say that overall, the policy statement generally is in line with market expectations. When you look at the broader US macro picture, in the most recent weeks, labor market has been solid.
Activity data has coming in more resilient than expected.
Inflation data, though, has coming in better than expected.
And when you look at core PCE measures, which is the Fed's favorite inflation measure, six month annualized core PCE is now below 2%. In other words, the Fed has already seen six months of good inflation data, but they just want to see more. So it's reasonable now to see that the Fed wanted to basically pare back their hiking bias to a neutral stance to lay the groundwork for potential rate cuts sometime in the future.
>> When I think about the market reaction, the equity side seemed to take it a lot tougher, that message, which he's been delivering all along, really. Let's see inflation get back to 2% and be on that path before we make any cuts. The equity markets sold off. The bond market sort of just held in. And even now, bonds seem to be on the rally. It's interesting to see that kind of dynamic. Did the equity market get a little bit of ahead of itself in thinking what the Fed is going to get up to?
>> So it's interesting you pointed out that discrepancy in the two markets. So I would say that for the rates market, we have seen that after the statement get released the US interest rates actually rose for a few beeps initially, because the market interpreted this language that they need greater confidence in order to cut to be slightly erring on the hawkish side. But going into the press conference, the message from Powell has been a bit more mixed. And so we have a pretty volatile intraday moves, like, on the rate side during the press conference.
But after the conference, US interest rate has seen a sustained rally until the end of the day. On net, we have seen roughly 10 beeps lower on US 10-year rates. So that has been a positive obviously, for the bonds. On the other hand, for the equity market, there might have been anticipation of a more imminent rate cut.
And with that not in the near term, that has on net led to roughly 1% of SPX index sell off from the beginning of the conference till the end of it.
>> Right. So interesting reaction there.
As we think about-- and we've had a little time in the markets calming down a little bit, they've had some time to take a breath, think about what Chair Powell actually said, what it could mean for the path forward-- what are we thinking now about rate cuts? Because at some point-- at one point, March seemed to be in play.
It doesn't seem to be the story now.
>> Yeah, so thankfully, Chair Powell had provided some guidance on that particular question. I would first say, though, that the Fed has taken an important step of basically turning their forward guidance from hiking bias to neutral, because again, that essentially laid the groundwork for a potential cut sometime down the road. So all future meetings are live. My base case would be that I expect a rate cut to materialize sometime in the second quarter this year.
Post-Powell's, you know, guidance on the March meeting cut likelihood. The market has priced a March cut to be roughly now around 30% chance. And personally, I think that's a fair assessment. And for this view of the first cut materialize in Q2, obviously, that would be conditional on us seeing more good inflation data over the coming months.
Obviously, there are risks to that to that view. On the one hand, we have seen pretty good core PCE data over the past months.
Maybe that progress stalls in the last mile of this journey. And if this inflation is slowing down, then we may see the Fed having to delay this rate cut sometime to the second half this year.
On the other hand, this inflation progress could accelerate. Or perhaps, labor market could deteriorate slightly faster than expected. If that's going to materialize, then the Fed will have to cut more aggressively and faster. And so there will be a lot of data dependency on that.
>> Let's take all of this, put it together to what it means for the fixed income investor in 2024.
How should we be thinking about that space?
>> Sure. So I would think about it in two components. Firstly, if we look at the shorter tenor of the interest rate curve, I would say that my personal view is quite aligned with when the market is going to deliver the first rate cut, which is sometime in Q2. But when you look at how many cuts the market has priced in for the Fed this year, that's just shy of six cuts.
Based on my personal macro view, I would think that that's slightly excessive.
Although, I would acknowledge that I think the risks to my macro view is slightly to the downside. For instance, when labor market reaches an inflection point, that unemployment rates start to rise, labor market could deteriorate much faster than expected, and unemployment rate rise more than expected, which is not uncommonly seen in prior cycles.
And so if that scenario is going to come to be realized, then the Fed will have to cut more aggressively and earlier. And the total number of cuts we have this year will be materially above the six cuts the market currently priced in.
>> And of course, the assumption from investors would be that would set off a rally in bonds, right? You start seeing this aggressive pull back in the Fed's funds rate, then we're going to see that bond rally we've been sort of keeping our eye on, waiting for.
>> For sure. And if we take our eye now to the longer tenor of the interest rate, if you look at the overnight index swap market, the actual average long-term rate currently priced in is roughly around 3.5%, which is materially higher than the long-term neutral rate that the Fed currently forecasts, which is 2.5%. So there seem to be some room for that average long-term rate currently priced in to come down.
And so that's going to contribute positively to longer-term US Treasury bonds.
Additionally, term premia currently on those bonds are also at relatively elevated level compared to where we have seen over the past years. So we also think that that is going to be a positive factor contributing to better expected returns of long-term treasury bonds.
>> That was Sam Chai, VP of active fixed income, portfolio management, at TD Asset Management.
Now, let's get our educational segment of the day.
Showing you earlier Meta is a mover in the markets today. That after announcing their first ever dividend.
If you are wondering it interested in finding information on other companies with dividends, WebBroker has tools which can help.
Joining is now with more, Bryan Rogers, senior client education instructor at TD Direct Investing. Always great to see you.
Talk to us about dividends and information on the platform.
>> That was very timely news we were talking about with Meta.
What I wanted to show, this is an old-school tool that's been around for quite a while on WebBroker. It's one of my favourites. It's had a lasting impression on me. I think a lot of other people will like this as well.
If you are looking for socks with dividends, your thinking, I want to add some more stocks that have a fairly high dividend yield and they have certain other criteria they might be looking for, there is a great way you can screen, you can use the stock screener within WebBroker and find those stocks and get a list you can save for later on.
You can alter it, add other criteria as you see fit.
I want to walk people through on how to set up a similar screen.
We are going to make it simple. It will be something you can find under the research tab.
It's going to be underresearched.
And then you're going to go to, in this case, the screener section right here.
That will pull up this page. You will see there are a number of preset screens available.
5G, AI, for example.
We are going to go right to the screening section right here.
We are going to actually click on the bulk edit.
This is probably the easiest way. There are other ways. There are preset screens already established. If I click on bulk edit, that gives me a few screens that are already available and if you criteria that are already set up, price-performance five day, price-performance 52, etc. I'm going to delete all these. I want to do a simple one.
I want to see some socks that have a certain dividend yield and a couple of other minimal criteria.
I just deleted the first three.
In terms of stock price, if you're looking for a range, you don't have to set this, but if you are looking for socks outside of the one dollar or really low value stocks, you may be looking at 25 to 50 or let's put $25-$100, and that's the price you may be looking for. Automatically it's telling you there are 5300 matches initially.
That's a little bit too many in there.
If we go in terms of common shares, there is 1498.
That's way too many. So you want to add on more criteria. Click on the bottom here.
Go to more criteria. I'm going to add dividend yield.
You can see it is added right here. I'm going to keep adding a few more.
Then we will adjust these as well.
I would like to see dividend growth rate because he wants to see these companies and you might prefer dividend companies that are continuing to increase their dividend.
And then I like to add, because I want to see stocks that are pretty strong and reputable, you think of blue-chip stocks in terms of market capitalization, so I'm going to click that on there as well.
I set a larger size company if I am looking for that.
So what I want to do is set the minimums.
Click on the button here. I go to 500.
I will put them in there for million, 500 million. I go 5%, so whatever you want is your criteria, I'm just setting some criteria around 5%.
You will notice there are 39 actual results. I looking at US and Canada. You can set it to Canada only if you like or the US. When I scroll down, you're getting your list of stocks and how they fit into the criteria.
Now you have a good list that's workable, about 39 stocks total that I look at that fit the dividend yield, market cap, etc., just as a simple skin so far.
>> All right, so we did some thoughtful work there to try to narrow down possibilities for research.
There's gotta be a way to save it. I wouldn't want to do that every single time.
>> Yeah. That's a great point.
Something I've done before on WebBroker.
We do a lot of work and then you either click back or you forget to save it. It's a really good idea to save this.
Let's go back quickly and we will show you how to save it because you can alter it later on to you. In terms of that initial work, if you don't want to lose that, you go to the very top and then click save.
When you click save, it's interesting to see. When I go to save, some people might not have noticed this before but when I put in the name, I'm going to call it 5% dividend, but you want to be specific, 500 million market cap. Once I type that end, you can type in an additional description as well. Something people might not realize is you can set this as a community screen.
I think it's a good idea to do that because now, if you want to search later on and search for similar screens, there is an area in screeners, we don't have time to look at it today, export when you get a chance, there are community screens on the first page and those are ones that other community users like us have made before or and have set as communities screens and shared. Once you go save screen, it is safe.
This doesn't jump out as easily, now that I'm showing you, you will know for next time. To find your saved screen, click right here on the star, like your favourites when you're thinking about your list on your browser and you can see that these are some other ones that I have say.
There's one I saved and that will, just like you saved it.
With your original settings there.
>> Great stuff as always. Thanks for that.
>> Thanks, Greg.
>> Bryan Rogers, Senior client education instructor at TD Direct Investing.
And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
Well, market conversations are often dominated by talk about stocks and bonds.
One area that doesn't get covered as much as an asset class that sits between the two: preferred shares. Earlier, I had the chance to discuss this part of the market with James Hunter, VP and portfolio manager with TD Asset Management.
>> Preferred shares are a type of security that are issued typically by banks and insurance companies, and they pay a dividend.
Like common shares, those dividends receive tax credits here in Canada. And both securities are publicly traded, as I mentioned.
But like a bond, they're a little higher in the capital structure. And in exchange for that, they don't participate in the growth of the company. So they have some features that are kind of like stocks and a few features that are kind of like bonds. They're a bit of a hybrid investment.
>> Okay, when we're talking about preferreds, who are we actually looking to in terms of who's issuing this kind of share?
>> Right. So if you look at the market in Canada, it's a $40 billion market. About 60% of that would be financial companies-- banks, insurers, some of the diversified financials.
The next 20% would be the pipeline companies. There's another 10% that are utilities, and the last 10% is a mix of other issuers.
So there's a reasonable balance in the market, but it is dominated by the banks and insurance companies. And one thing to know about preferred shares is that there's three types. So there's fixed rate resets. That's about 3/4 of the market.
And what it means is you get a fixed dividend for the first five years, and then it resets every five years thereafter. There are fixed rate perpetuals. That's where you get a fixed dividend indefinitely. And that's about 20% of the market.
And then the third type is floaters.
That's where the dividend floats up or down based on central bank interest rate policy. That's about 5% of the market.
>> So in a market like this and a market that we've been through in the past couple of years, when we break it down by three different types of preferred shares, where has the activity been in the market? Where has the interest been?
>> Well, in the last couple of years, I would say it's-- well, maybe to start with-- it's been a bit of a rough ride for preferred share investors. There have been a lot of ups and downs, and I think a lot of your viewers would probably be aware of that. And the thing that's really caught the market off guard has been just the volatility in interest rates.
If you think about pre-COVID, interest rates were around 3%. Then they were cut to 0% during the pandemic. We came all the way out of that up to about 5% here in Canada.
And that interest rate volatility has flown through into the preferred share market.
The interest in the last couple of years, the best performance has really been from floating rate preferred shares, because they benefit from higher interest rates.
But as I mentioned, that's sort of the smallest part of the market. And so the usual activity, you really see the most of that in the rate reset market. And that's had its ups and downs.
The last couple of months have been a bit better, though.
>> When you think about preferreds, and, perhaps, the audience might be learning about them for the first time, they might think, OK, why would I choose a preferred share over a bond? There are differences, but what sets them apart? Why do some investors make that choice and say, you know what?
Let's be in the preferred part of the market instead of the fixed income.
>> Right. So the main area that a preferred share can help your portfolio with is in terms of income. If you think about the income of a preferred share, right now, the yield is about 6%. It's quite a bit higher than most other parts of the market. And the key in Canada is that that's a tax advantaged income. You get the tax credit.
So depending on your marginal tax rate, that could be a 6% yield after tax. So that's one interesting feature of the preferred share market, which is probably a little bit better than cash, and certainly better than most bonds. The other thing to keep in mind right now is that preferred shares are trading about 20% below par, which means that if the market could continue to move back towards par value in Canada, that's $25 a share, there is also a capital gains opportunity.
Now, let's talk about the par value, because, obviously, some people when they take a look at pure fixed income, think the opportunity this year is not only central banks on hold, which they have been for several months, but central banks eventually cutting.
Is it the same kind of market conditions that would start to see preferred shares move back toward par?
>> It's not exactly the same, but I would say the theme or the rhythm of it is pretty similar. If you put up the chart that I brought along with me, we can look at the last 10 years of the preferred share market. And what I've done here is I've converted the index to a weighted average per share. And like I said, the par value of that is $25.
So you can see over the last several years, there have been a few drawdowns in the market. But the point that you'll see in the chart is that the long-term average is about $22 a share. And right now, we're meaningfully below that-- closer to $20 a share, which is that capital gains potential that I mentioned.
And to your question, Greg, I do think that preferred shares can move higher as interest rates come down. The key for the preferred share market, I think, will be interest rates coming down, but just not too much. If interest rates have to come down a lot, that probably means we're in a recession, which wouldn't really be great for the preferred share market. But if we get enough cuts that sort of indicate that the economy is going to muddle through a bit of a weak patch, I think that would be good for the market.
>> I wanted to ask you about some of the risks in this space in terms of investor thinking about preferred shares. You named one of them right there. A recession often hits many asset classes. Preferreds wouldn't be immune from that. Any other risks when people need to think about preferreds in their portfolio?
>> The two main ones that we would usually think about are credit risk and interest rate risk. So in terms of credit risk, you're talking about how secure the company's earnings and, therefore, how consistently can they pay the dividends.
Because, again, preferred shareholders don't participate in the growth of the company. But it's really important that they get that dividend income from the issuers.
So we always look at credit risk. And there is a good chunk of the market that is a lower level of investment grade. So that's one area that I think is of interest right now, because you can get some pretty good value in those parts of the market. The other thing is, of course, interest rate risk.
And if you think about rate resets, which, again, is 3/4 of the market, there's two things to look for there. It's, when will those rate resets reset? Which could be this year or it could be five years from now. And then the other thing to think about is how big is the spread on those securities.
Some of them will have a spread of 100 basis points. So if rates were to go down a lot, they don't have a lot of interest rate protection. But there are some securities with a 300 or 400 basis point spread. Those would be more resilient as interest rates come down. So those are the things we look at-- credit risk and interest rate risk being two of the keys.
>> Made me think, too, about the liquidity in the market. Is that a concern? Is it a very liquid market?
>> Well, it has gotten a little smaller in the last few years. There hasn't been a new issuance since 2022. And there were a number of redemptions a couple of years ago. We could get into some of the details if you want. But the bottom line is there were some redemptions that made the market smaller, but it stabilized, roughly, in the last 12 months.
That's a good thing, because liquidity is, at times, episodic. I guess what I would say is that there's still 200 preferred shares outstanding in Canada or more, and these are really high-quality issuers.
We're talking about the banks, the insurance companies, the pipeline companies in Canada, some of the utilities. So they're high quality, and there's still a couple hundred left. So I think it's still an investable opportunity.
>> That was James Hunter, VP and portfolio manager at TD Asset Management.
Now, for an update on the markets.
We are having a look at TD's Advanced Dashboard, a PlatForm designed for active traders available through TD Direct Investing. This is the heat map function, gives us a view of the market movers.
We will start with the TSX 60, and screened by Price and volume. It's been a choppy trading crude oil this week.
We are seeing a pullback in that space today.
We are also seeing gold under pressure on the back of that stronger-than-expected US jobs report, bond yields moved higher, gold move lower. 20 bucks per ounce right now about. This is how it's playing out in Toronto. Some downward pressure on big energy names including TRP and Enbridge.
Imperial oil is standing out. They are raising the dividend, seems to be attracting some money in that direction.
In the mining sector, you can see some more pain here. Barrick down almost 3%.
AEM is down a little bit more than 4%.
Where is the green on the screen?
You got tech stocks rallying south of the border although some earnings, and you've got Shopify rallying today, up almost 7%.
South of the border, a much stronger-than-expected US jobs report. It sent yields higher and the US dollar higher but in the equity side, we also had some earnings after the bells yesterday, including the parent company of Facebook, that would be met on the screen making a 22% jump in this session alone, not only a strong quarter and a strong forecast but also introducing a dividend for the first time.
Money moving in that direction. Amazon up more than 8%. A pretty good intraday move.
They pale in comparison to Meda but they came out with the earnings after the bell, also a strong showing.
You can find more information on TD Advanced Dashboard by visiting TD.com/advanceddashboard.
Let's talk personal-finance. The dead to contribute to your registered retirement savings plan for 2023 in that tax year is just around the corner. Nicole Ewing, Dir.
of tax and estate planning at TD Wealth joined us earlier discussed what to keep in mind ahead of the deadline.
>> At the end of February, February 29, we have the deadline for contributing money to our RRSP that can be used against income in 2023.
So even though we're contributing it now, we have that first couple of months of the year where we are able essentially to use our contributions against income from last year or this year. So it does provide us with some good flexibility.
Of course, we have to be within our contribution limit, making sure that we are not over-contributing but making sure that we also have looked at what the opportunities are more broadly for contributing to our RRSPs versus other registered plans and really making sure that we are really optimizing the opportunity. Because contributions to an RRSP, of course, can be claimed as a deduction against your income for the year and reduce tax significantly. It can grow in this tax-deferred environment, allowing you to have the growth over a number of years.
You will be taxed on this, though, when the funds come out. So this is where the math comes in looking at your own personal circumstances, when are you expecting to retire, what is your timeline, what is your age now, and what is your tax bracket? So If your tax bracket right now, if you are in one of those higher-earning brackets, but you're expecting that your retirement you will see you in a lower tax bracket, then an RRSP is a really beneficial tool.
If it's not the case, though, if we're perhaps in a lower tax bracket now, that doesn't mean that we wouldn't also want to maybe make those contributions if it allows us for that tax-free growth. So it's a little bit of math and a little bit of really weighing the opportunities and costs. But we don't have that same opportunity if we don't make those contributions by the deadline.
>> You're talking about a little bit of math there. When you talked about your contribution room and being careful of not exceeding that, there's a little bit of math there. I don't know the formula exactly. It's 18% of something, something, something. There's an easier way to get that number, right? Just to make sure you're within your boundaries.
>> You can check in with the CRA, and you can look on your account online to see what your contribution limits are. Now, I would caution, though, that these are not necessarily real time numbers that you're seeing. So we have seen situations where maybe people are over-contributing to their TFSA because they hadn't-- the numbers or the contributions that they had made in the current year weren't reflected on that tool.
So just make sure that you are aware of what that contribution limit is at the as at date because you may have made some additional contributions, and it can be a little bit surprising for people. So for example, if you have a contribution match, that's going to-- that's going to be counted against your contribution limit.
If you are in other sorts of pensions and contributing towards those, that will count against your contribution for your RRSPs as well.
So we can't think about it in a vacuum. We need to make sure that we're aware of which of our contributions to various types of plans will be caught under the umbrella of your RRSP contribution limit.
>> All right, so important things to keep in mind there. Sometimes this time of year, you hear people talking about a strategy to contribute to that RRSP before the deadline for the previous tax year.
And they talk about borrowing money to invest in an RRSP. Now what would be the condition? When would a situation like this make sense for someone?
>> Well-- and this is great. We are thinking about putting our money to work for us in the most tax efficient way. And so sometimes borrowing to invest is going to be a great strategy. What we want to be thinking about, though, is how quickly we are going to be able to repay that loan, what are the terms of the loan.
Sometimes we can see a short-term three-month time frame. Maybe we have a line of credit that we can borrow against.
But we have to ensure that we have a plan to pay those funds back so that we are not paying more in interest on a loan than we are earning in the account that's allowing us to grow tax free. So again, this comes down to the math. Will you have the opportunity to be able to repay that? Is your interest rate going to be one that is digestible and allow you to invest the money within your RRSP and outperform what the interest that you need to pay against that loan would be? And your age as well, so the compounding growth and the opportunity that the RRSP provides is really quite significant the longer those funds are in.
So being able to maximize your contributions and have that tax-deferred growth over a prolonged period of time can really be a significant benefit that does outweigh, perhaps, a short-term loan in order to allow you to put those funds in.
Generally speaking, a lot of people think about this when they are intending to be repaying that loan with the refund that they will be receiving as a result of using the contribution towards the deduction to reduce their income.
So they're going to get the refund and immediately pay back that loan. That's a great strategy. But we do have to keep in mind whether or not we can hold ourselves to that because ultimately, we could end up spending a little bit more on interest than we might realize if we just treat that loan as a longer-term strategy.
>> Need a little fiscal discipline to consider on that strategy. So once we get to the end of February, the deadline for contributing for the 2023 tax year is over, it'll probably be a mistake to sit back and say, well, I'm done now. I don't have to worry about anything else because then we enter tax season, don't we? What should we be thinking about this year?
>> Well, that's it, and it comes before we know it. And so there might be the temptation to file really early because we want to get that refund. Be aware, though, that we do-- if you file and do not report some of the income that you may have earned, maybe there's a slip that came out a little bit later, there are penalties.
Ask me how I know.
And if you don't do the-- if you do this repeated years, those penalties can be quite high. So now is a great time to be looking at your previous year's return, looking at the income sources that you received, the tax slips that you received, so that you have an understanding of really what to expect, and was this year any different?
We would also use this time to be gathering receipts, so for example, if you're able to use medical expenses, employment expenses. Maybe you've made some donations to charity. This is the time to be gathering all of that information so that you're in a position to know what your obligations are going to be.
Now, there has been some things that are different this year than last year. And so having these on the radar nice and early would be important, one of those being this underused housing tax that has created a lot of confusion for a number of people in that it applies in ways that were not necessarily anticipated. There was a deadline that has been extended and extended again.
So the 2022 year's obligation to report and file and pay the underused housing tax has been extended to April 30 of 2024, but that's only for the 2022 tax year. Whether or not you have a 2023 filing, you'll also want to be doing some looking into that to determine whether or not, for example, a joint account that you are joint names on a property, this might have created an a requirement for you to file.
We also have new T3 requirements for many trusts that previously didn't need to file. So if you have a trust that the calendar-- that the year end is on or after December 31, 2023, you will then also have a trust filing obligation. So now is really the time to be thinking about what new circumstances might I have found myself in this year, what research do I need to know about these new rules to know whether they apply to me, and to get your-- frankly, to get your tax advisors working with you now because come tax filing time, they are not going to have the bandwidth to be able to help you work through these more complex issues.
>> That was Nicole Ewing, Dir., tax and estate planning at TD Wealth.
Stay tuned. On Monday, we are going to have more on what the jobs numbers in the US could mean for markets. Chris Whelan, Senior Canada strategist and had a portfolio and ESG strategy at TD Securities will be our guest.
And a reminder that you can get a head start.
Just email MoneyTalkLive@TD.com.
That's all the time we have for the show today. On behalf of me and Anthony and everybody behind the scenes that brings you the show every day, thanks for watching. Have a good weekend. We will see you Monday.
[music]