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[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing. It's a new program broadcast daily on WebBroker. I'll be joined by guests from across TD, many of whom you'll only see here. We will take you through what's moving the market and answer your questions about investing. Coming up on today's show, Alex Gorewicz from TD Asset Management is going to join us and discuss what we are seeing in terms of the Fed's latest moves and what might lie ahead for us from the world's most powerful central bank as investors. And in today's WebBroker education segment, we are going to take a look at different types of fixed income investments and how you can find them on WebBroker. So here's how you can get in touch with us. Just email moneytalklive@td.com or you can tell her that viewer response box right under the video player here on my broker. Before we get our guest of the day, let's get you an update on the market action. It's been a bit of a choppy trade on Wall Street and Bay Street. We seem to account our way back into positive territory, last I checked. Let's check out the TSX Composite Index here at home and see where we are at. Nice triple digit gain at the moment at 19,409, up almost a full percent. We have been in negative territory earlier in the session so it's been a bit choppy. Let's check out Bausch Health. This is an interesting one. 50% pullback in one session. The catalyst here is that Bausch brought an unfavourable court ruling in their battle over there irritable bowel syndrome drug. The ruling not going in their favour, and this is the market reaction at this hour. Basically being chopped in half in one session. I want to check in on Shopify because this has been an interesting month. The stock pulled back sharply on news earlier this week that they were cutting their workforce. The CEO said he misjudged the staying power of the e-commerce boom, sort of sticking around after the pandemic listed. So Shopify, you can throw it back up on the screen. One and 1/2% up today, so sort of settling in. Yesterday they had their earnings, it was a surprise to the downside and it's become a more stable trade today in Shopify. South of the border, let's check out the S&P 500, the broader read of the American market. They're trying to get a feel for what they heard from the Fed yesterday. The equity markets rallied off the word from Jerome Powell, the 75 basis point hike today. It was a bit indecisive at the open but now we have a gain of 31 points, so three quarters of a percent to the upside. Let's check out the tech names, they rallied yesterday. They are up about 1/4 of a percent right now, a bit calmer. Pfizer, one a check in on the reaction to their latest earnings, they are at 5147 per share. That's your market update. Investors are still digesting the feds moves, trying to determine whether Jerome Powell is going to ease up on the pace of rate hikes as we head into the fall. So what's the bond market telling us and what are realistic expectations going forward? Alex Gorewicz is portfolio manager for… Great to have you on the program. I still feel like the world is trying to figure out exactly what we heard yesterday. We all heard it and we heard the words but I mean this idea that the Fed could be getting near the end of this aggressive rate hike cycle, is that realistic? >> Powell did focus a lot on the non-inflation data through the Q&A, and I think that's where the market started running, that it's maybe a little bit more balanced, some interpreted it as dovish. The ultimate conclusion is it may be that the Fed won't raise rates as far as they are communicating. From the flipside, he did reinforce a number of times that the best blueprint they haveof where monetary policy will go to the end of this year and then even to the start of next year,was already set outin their June meeting where they give us their updated economic projections including dot plots. He said, we are still sticking to that, we think that's appropriate. And since that economic projection update, inflation, if anything, has surprised to the upside, although growth has come and weaker. Again, this emphasis on growth, the market seems a bit more dovish, but he is saying that their mandate is still inflation and that's problematic. 75 basis point rate hike for September is on the table. going to just over 3% on the policy rate, the order of 3 1/2% by the end of this year is what they effectively showed back in June. that is still on the table, and thenhiking even further into 2023. >> Jerome Powell is asked routinely, are you trying to engineer recession?of course they say, we don't want to end up there but we can't rule it out. And then today, you get GDP. I'm not can make you quibble about whether we use the word recession because of this factor or that factor, but the fact is, for the first half of this year, the economy has not been growing in the US, inflation is comfortably high. where does this leave us? >> Between a rock and a hard place. Probably the best way of characterizing it, and the best way of looking at it is when looking at the GDP through Q1, Q2 and heading into Q3, each one has a different source of weakness. In Q1, it was an external source and that's why everybody said let's not make a big deal about this because the domestic economy is still strong. This time around, if you delve into the details, it's was an inventory drag. Companies built up their inventories a lot in the second half of last year and the first quarter of this year,so that has no actually been a drag but there was some weakness in residential investment as well which is, again, a domestic factor. Maybe at the marginsthings are not just external-led in terms of weaker economic growth, and then another thing that we've noticed is that if you look at personal consumption, although still positive and contributing positively to GDP, every single quarter over the last three quarters, it's steadily gone down. Could it be flat in Q3? Or could even be negative? That would be a real surprise. To the extent that every additional quarter showing that GDP weakness is coming from domestic factors, that makes it harder for the Fed to say, well, we could debate the technicalities of what a recession is. However, when the inflation side, to address that part of your question, still very high. There are signs that it is rolling over, particularly when we look at core inflation. We know the Fed has to take into account the headlines, things like energy and food prices are incorporated in inflation numbers that they have to try to bring down. But the problem with high inflation at the moment as far as the Fed is concerned is that the labour market is too tight, and this Powell said repeatedly yesterday, he would like to see some softeningof the labour market, which they think would put less pressure on the price side of the equation. >> So given the what we heard from the Fed yesterday, Jerome Powell, given what we are seeing out of the American economy, what is the bond market telling us about the direction that we are moving in? >> So I kind of alluded to how investors took the… >> They hear what you want here? But the bond market, they are supposed to be smarter than that, right? >> Technically, the yield curve has inverted, but not every single point when the yield curve has inverted. The Fed's favourite recession predictor is still slightly positive but if we look at the entirety of the yield curve, more than 50% of the yield curve is inverted and has been for some time. To the bond market has been saying, not to a pat ourselves on the back and say we are very smart, we've been saying for a long time that this is going to happen. But when we think aboutthe fact that stocks rallied yesterday, implied volatility in the fixed income, several others all fell, those arepositive developments, spreads tightened, positive development. Most investors are saying, well, the reaction is on balance constructive because the Fed won't over tighten and won't be necessarily the cause of that recession. And in fact, it could also be interpreted that a lot of investors are saying, well, maybe the pivot from the Fed will come a lot sooner than what they are suggesting at the moment and that's what happens when you say, we are not giving forward guidance anymore. Now we are going to be truly data dependent, we are going to make decisions meeting by meeting. So then investors will take the data and run with it and right now, investors on average are saying that growth is more of a factor, so interest rates fell, credit spreads tightened, risks rallied in general yesterday. Was interesting and that not a lot of people talk about is that inflation breaks even. Basically, the markets inflation expectations view actually went higher. So it could be that some niche investors are saying, well, hang on, even if inflation is showing signs of being rolled over, where is it rolling over to, is it rolling over fast enough and what does that mean for the Fed if we get into a recession but inflation is still far away from their target? What kind of easing could they possibly provide, and if they ease, is that a mistake and should inflation expectations move higher? >> A tricky path ahead but a great start to the program. We will get back to your questions about fixed income for Alex Gorewicz at any time. A reminder that you get in touch with us at any time. Email moneytalklive@td.com or fellow the viewer response box under the video player on my broker. Right now, I want to give you an update on the top stories in the business world in a look at how the markets are trading. It's the first quarterly decline in sales for Facebook parent company medical forms. The social media giant is feeling the pressure of softer demand for digital advertising,missing revenue estimates in its latest quarter. Meta's forecast for this quarter is also falling short of the streets expectations. CEO Mark Zuckerberg is attempting to refocus the company on the Meta verse, making it the people want to immerse themselves in a virtual reality environment. Back here in the real world, soaring inflation and fears of recession have companies pulling back on ad spending, and that's being felt across the social media landscape. Strong demands for SUVs and crossover vehicles powered forward to any earnings beat in the latest quarter. The Detroit-based automaker is also standing by profit outlook for the year, expecting demand for its higher-margin vehicles to remain strong. That said, Ford is warning of inflationary pressures, saying it's commodity costs are on the rise. While the CEO did suggest you look at cost reductions, he declined to comment on the recent media report supported planning as many as 8000 job cuts. The company is also raising his courtly dividend by $0.15 per share. Canadian energies are being rewarded with another special dividend, this time it's Tourmaline Oil returning cash to shareholders amid a surge in free cash flow. The natural gas and oil company is also indicating more special dividends are to come this year. Germline said a special dividend of two dollars a share will be paid out next month to shareholders of record on August 5. Soaring energy prices have Canadian oil and gas company's awash in cash, and Crescent Point energy is among other energy names that have announced special dividends for shareholders. Let's take a look at how the markets are trading. Starting with the TSX Composite Index, right now, triple digit gain of 160 points for the TSX Composite Index, up almost a full percent, and S&P 500, let's check in there. Investors are in a bit of a buying mood but are more cautious after the back of the news of yesterday, of 24 points, little more than half a percent. We are back now with Alex Gorewicz from TD Asset Management. We are taking your questions on asset management. Here's a question. Companies are warning that the currency impact of a higher US dollar. You expect that to continue? >> There's a popular saying that don't fight the Fed, but if you don't know what the Fed is doing or going to do or if the Fed is telling you, we are going to be data dependents, we don't have a clear picture of the best way forward, don't fight the market. And what the market is saying, if the broad interpretation from yesterday's Fed meetingwas that growth is more important to track here and peak inflation is behind us, then you would expect that the pit happens sooner rather than later, and again, this is just going with the market, and in that case, the US dollarstrength is probably behind us, at least until we are all worried about inflation again. But for now, with the growth fears front and centre, it might not be a positive US dollar. As I think about that real-time reaction yesterday afternoon, we saw the US dollar pull back pretty dramatically. I was just one afternoon of action but it shows you how in tune with the currency traders are with what the Fed may or may not do. He made a great point there. If we are sort of on our own try to figure it was going to happen next, we are on our own try to figure this stuff out as well. >> Yeah, absolutely. And I would say that another clear sign that the focus is very strongly when growth is looking at the Japanese yen. That is up across the board, across all currencies and that's alsousually or at least, has been, I should say, this year highly correlated with what interest rates are doing and what the interest rates having fallen now, the Japanese yen is very much appreciatedacross all of its peers. >> Interesting stuff. Another question off the platform. What's your view on inflation linked bonds or other forms of inflation protection for portfolios? that's interesting in times like these. >> Probably first and foremost, it's important to realizethat inflation linked bonds, will focus on the US for Canada to, they are highly correlated with commodities. So if you look at what's happened in the last several weeks with commodities having rolled over, I mean, not in a convincing way, I would argue, and especially not convincingly for energy commodities, which is what inflation linked bonds particularly pay attention to, but having rolled over. . . the problem going forward which I talked about with the Fed being caught between a rock and a hard place,if they try to sound a little bit more balanced or dovish, does that actually put additional pressure on inflation expectations? If possible, although in the near term, there's been a correction in the space, going forward, it might actually provide some good hedging opportunities for the possibility that the Fed pivots too soon and inflation expectations rise again. I would say from a fundamental perspective, you touched on a going forward, forward amongst other large US automakers are going to be facing labour negotiations in 2023. Unions are very much going to push for higher wages given the inflation that we've experienced this year, over the past year, and given the fact that wage growth has not kept pace with inflation but on a real basis, we are falling behind. >> If we are going to talk about inflation on the forward pass, it would mean that as much as the Fed might be trying, and our central bank as well, to crush a little bit of the demand out there, because demand is running very hot in a supply constrained environment, but if they do get those wages, they can't tamp down. >> I mean, this is where… They say they don't want to engineer a recession but that they also say that the path to a soft landing, that is that they slow that excess demand but don't hurt the normal demand, the demand that keeps demand and supply in balance, they say that that path is narrowing. In some ways, their comments are contradictory and the likelihood will be that we need to see a recession with unemployment rising in a nontrivial way. > Maybe workers lose some of their power? >> Exactly. >> We entered this year with workers having the upper hand. And that seemed to float partially in the past little while. >> That's right. That's why on the one hand they say they don't want to create a recession, on the other, they say labour markets are very tight and some softening there would be good. But you can never get some softening. You will get softening, you just can't control the amount. >> We started with a question about inflation linked bonds and I want to go back to face a bit in terms of what do investors need to be aware of if they are started to think about making these kind of investments? >> Particularly when it comes to Canada, that market is a little bit more technically driven and what I mean is it's a little bit more niche. You don't have the same type of broad global investor base and so the demand supply of those types of bonds will ultimately drive their performance. Even if inflation let's say goes higher and you expect them to perform, they might not necessarily perform the way you would expect. There's a lot more liquidity, there's a lot more market depth in the US for inflation linked bonds, and I would say that that's a better proxy, not to mention the fact that when you think about US and Canada, economically we are so… You know, linked to or our economies are so closely tied together that you don't expect material divergence. It's not as though we would expect Canada's inflation rate to skyrocket but the US rollover. They will likely move in tandem. >> Interesting stuff. As always, make sure at home you do your own research before making any investment decisions. We are going to get back your questions for Alex Gorewicz from TD fixed asset management in a moment time. A reminder, you can get in touch with us anytime. Just email moneytalklive@td. com. Now let's get to today's educational segment. We are talking fixed income today so if you are interested in investing in that space, WebBroker has tools that can help you research your option. Joining us now with more is Nugwa Haruna, Senior client education instructor with TD Direct Investing. Nugwa, such a pleasure to see. Let's talk about the options we have here for investors on the plat form. >> It's always a pleasure being here, great. Yeah, so when investors are thinking about investing in the fixed income space, there is things like investment funds available. When you are in WebBroker, there are things like mutual funds and exchange traded funds, and the idea behind investors using investment funds allows investors to diversify, so little money can no longer weigh in terms of providing some kind of diversification within the investor's portfolio. It could also help investors who are maybe not too comfortable in terms of researching different kinds of fixed income products, if you're not too sure, as well as investors who don't have enough time on their hands. I will mention that when it comes to fixed income funds, there is actually a wide range of fixed income funds. So for instance, investors may have access to fixed income funds such as money market funds, they may have access to high yield funds, they may also have access to things like the inflation protected bonds that you and Alex were just speaking about. Now I also do want to mention some key differences between exchange traded funds and mutual funds, which are the different kinds of funds investors can find in WebBroker. So for instance, mutual funds themselves are priced once a day, so investors to consider using this need to be aware, there tends to be a minimum holding. When you're holding mutual funds, but the reason investors may potentially explore using mutual funds could be because investors can purchase fractional shares so investors can set up some kind of automated purchaseor use a systematic investing plan so it's almost a set and forget way of investing. On the other hand, with a strange traded funds, investors can purchase this on an exchange. It means that it could be subject to commissions when you are buying and selling, but the flex ability there for investors means there is no minimum holding period, so investors could potentially get it when the price is lower and then sell these funds when the price is slightly higher, but one similarity across the board for investment funds is that there tends to be a management expense ratio, so a management fee, because they tend to be professionally managed funds. >> Great overview there. Now let's take the WebBroker platform for a spin. How can an investor find fixed income ETFs or mutual funds on the block from? >> We will separate into WebBroker and look at this. So once into WebBroker,the investor can click on research. Under investments, we will focus on the ETFs page and that's because this is very identical to the mutual funds page. So once here is an investor, if I'm looking for a specific category, in this instance, let's stick with Canadian bond funds. I'm going to click on Canadian bonds and I'm actually able to scroll down and I can see the top and bottom performing categories. I know that we got a question from a viewer about having access to floating rates funds within WebBroker, and so this is where they can actually explore the 10 different funds that are available. For investors that want to see the rest of the categories available, we are actually going to click on the tablets as categories. In this instance, we are going to focus on exchange traded funds that trade on the US exchange, and we are going to click on taxable bonds. Now once here, investors can go through the different subcategories of fixed income products, but we want to go one step further by filtering for performance in the last number of years and something that was actually discussed by yourself and Alex, based on a question we got was inflation protected bond funds. So an investor can actually explore the 23 of these funds by clicking on here, getting a better idea of what exactly funds that call themselves inflation protected, what exactly they mean by looking at the definition right over on the right side. Investors can also filter these 23 funds on the left-hand side by performance, or they can filter by the management expense ratio or the distribution yield that each of these funds provide to investors. So once again, providing investors with a wide variety of different funds and the ability to research on WebBroker to make better investing decisions. > Great stuff as always. Thanks. >> Thank you. >> Nugwa Haruna, Senior client education instructor at TD Direct Investing. Make should check out the learning centre on WebBroker for free educational videos, interactive master classes and upcoming webinars. Before we get back to your questions on fixed income for Alex Gorewicz, a reminder of how you get in touch with us. You have a question about investing or withdrawing the markets? Our guests are eager to hear with on your mindSo send us your questions. There are two ways you can get in touch with us. You can send us an email anytime@moneytalklive@td. com or you can use the question box right below the screen here on WebBroker. Just writing your question and hit send. We will see if one of our guest can get you the answer right here at MoneyTalk Live. We are back now with Alex Gorewicz from TD asset management. We are taking your questions on fixed income. This one coming off the platform. What do you see happening with corporate debt over the next year? >> So this one's a little bit trickier in the sense that from a fundamental perspective, when we look at ratios, free cash flows, when you look at a number of different financial metrics that give us a sense of what kind of position corporate's are in, it looks like they are in a pretty healthy position, probably even more so than they were heading into the pandemic and the recession that the pandemic induced. And that means that the widening that we've seen that year to date in terms of corporate spreads, which means the underperformance they've had relative to government bonds, in some ways was due to the rise in volatility, the pivot from the central bank such regard, but going forward, continued underperformance, or continued widening and corporate bonds will largely be determined based on, to put it this way, the severity of the recession that the head of us. And that's not me passing judgement on when that recession will happen, just knowing that at some point it will happen, the question is how severe will it be. Often times when we think about some of the variables that forecast a recession or help us see it coming or being upon us, we think of things like unemployment, we think of things like PMI's, leading indicators and some even use corporate bond spreads as a predictor. And it's not that of all these dimensions that unemployment tends to be the last shoe to drop but actually what we have noticed by looking back at every recession over the last five decades is that corporate spreads tended to be the last shoe to drop, and part of that could be that if it's not a credit driven event, that is it some kind of economic slowdown or perhaps some kind of external shock that generates a slowdown, if companies are in good positions, they can ride out a lot of that economic slowdown and a lot of that recession, but then the question is, how deep is that recession? How long does it last? And then, can companies ride it out long enough? And then inflation pressures and price pressures in our economy don't abate fast enough, those positive free cash flows that we see today could turn negative very quickly. >> Of course, on the equity side, screening for people looking at dividends, obviously can be a little too excited, perhaps even blinded by a big fat dividend yield. on the corporate side, obviously there companies with a higher grade, but then you're not getting as much of a return. Are they the same kind of caveats when you are searching through the corporate bond yield, if there is a high bond yield, investigate as to why it is so high? >> Yeah, absolutely. And that also speaks to the type of leverage. Often times, that credit rating or that quality that you are referring to is very closely related to the amount of leverage that a company has on their balance sheet and the higher the leverage, the harder it is for them to extend an economic slowdown, particularly along one. I'm not saying that's what is ahead of us,but that is something you need to consider in terms of the pros and cons. But to talk about the all in yield, if we are heading into an environment where investors care more about the slowdown, interest rates and yields on government bonds will continue to fall. they have in the last couple of weeks, they will continue in that direction as long as inflation is actually showing signs of rolling over. But if those credit spreads widened because companies now are deemed to be sort of the next to take the hit, the overall yield might not actually change, which means that your total performance of the asset, of that corporate bond, won't be as bad as you would expect if interest rates were steady and just corporate spreads are widening. So long story short, the income that you get, the yield that you get from corporate bonds today actually does look quite attractive, but there are risks of underperforming, let's an equivalent maturity government bond. >> We are getting a master class on fixed income here. I like it when I learn stuff on the show too. Everyone has to learn stuff. Let's get to another question off the platforms. >> Canada said that they think it's appropriate to either get to the top of their neutral range which is 3% or even slightly above that to go into what they call restrictive territory which means they raise their policy rate above what they see as neutral. And I think general consensus, and we would tend to agree with this, is that we will likely have 75 basis point rate hike. Inflation will likely not turn enough to give them comfort to say let's take a pause here. They will likely hike. Will it be another hundred basis points? I think the bar is really high for that, especially since commodity prices have rolled over in recent weeks, which will take some pressure off of headline inflation as energy, which has driven a lot of that headline inflation growth, is moderating a little bit. So the bar for 100, I think, is very high in September. They will likely do 75 basis points and then beyond that, they will probably drop forward guidance the way other central banks have done and tell us it's going to be a meeting by meeting. [video buffering] [video repeating] We think that the Fed has more room to run. >> Is that because of the situation we are in here with household debt and the housing market? >> You clearly talk to enough people to know that housing is going to be a limiting factor when it comes to this tightening cycle for Bank of Canada. I mean, they have identified it as a sore spot in our economy and their financial stability report. We have seen CMH to come out and say, you know, if the Bank of Canada hikes interest rates by the end of this year to 3 1/4, 3 1/2%, we will likely have a recession in the first half of 2023, and we will likely see housing prices correct further, and we also know that Canadians, they pay attention to their house price, even if they don't have a mortgage, they pay attention to that as a sign for how wealthy they feel and if they feel that their wealth is being eroded, the chances of them spending is probably going to decrease. The likelihood of them saving will increase. So you know, I think probably the most likely scenario is Bank of Canada hikes again in September, like I mentioned, 75 basis points and then they wait a little bit to see what inflation does and how the economy is taking it. >> This next question is a nice follow on to this discussion we just had. What a recession, if there was to be one, hit Canada harder than it would hit the United States? >> I'm, I think the answer here is yes, but, I mean, I put the cabbie at with how quickly does inflation moderate? If it turns out, and it's very likely, I think this is probably more my base case scenario than it isn't, it's very easy to get from 8 1/2% inflation to 4 1/2%, but then it's much harder and it takes much longer to get from 4 1/2 to 2%, and 2% is Bank of Canada's inflation target. That scenario means that as the growth slowdown… Able to cut interest rates, or if they do, it'll only be marginal to get back in neutral territory, which they define between two and 3%, they won't necessarily cut below that neutral level, not as long as they claim that inflation is their mandate. So it's a very difficult position, and it all really depends on timing, but if households don't get that relief, again, just a psychology of, you know, household, making people feel wealthy, will probably lead to either a prolonged correction or a deeper slowdown in Canada relative to the US where households, you know, took their medicine after the financial crisis, after the great recession of 2008, 2009, where it was the housing led recession, and 18 leverage. There household debt has come down from the levels that we saw just over a decade ago, where is in Canada, it continued to climb. > I feel like you might be in a situation where the Bank of Canada will have to say, we know you are in pain, but sorry, this is the medicine. It's time for us to take our medicine. >> That's right. And I think as time passes and inflation is not falling fast enough, that likelihood increases. >> Interesting stuff indeed. We are going to get back to questions for Alex Gorewicz on fixed income in a moment. Do your own research before making investment decisions. Our mining get in touch with us anytime. Give a question about investing or what's driving the market? Our guests are eager to hear what's on your mind. Send us your questions. There are two ways to get in touch with us. Send us an email anytime at Moneytalklive@td.com. Or you can use the viewer response box here in my broker. Type it in and hit send. We will see if one of our guest can get your answer. As the US Federal Reserve continues to height rates in order to try to slay inflation, TD Securities has a report. Joining us now is Anthony Okolie. >> TD Securities is now looking at at the US and the year at 7% and six… Q4 over Q4 basis. Just to give that some context, the most current reading for June US CPI came in at 9.1% year-over-year. That's the highest that it has been in for decades. Now we should also point out that the core number which excludes food and energy is still very high at 5.9% year-over-year in June. Altogether, TD Securities expects both headline and core inflation to peak on a year-over-year basis during the current quarter. And consumer prices continue to gain speed in the second quarter, driven by energy and shelter prices, but TDSI expects these two driving forces to diverge in the months ahead. Particularly because they don't expect energy's strength to be sick stained, and more important, TD Securities expects consumer price growth in the US to continue to ease into 2023 with most of that easing happening in the second quarter and third quarter of next year. And in 2023, TDSI's forecasting headline and core inflation to end at 2.5% and 2.6% year-over-year on a Q4 over Q4 basis. Greg? >> Obviously will you talk about inflation, we feel across the board, but it really stings in the roof over your head and the food that people will put in their bellies. What the report sang about that? >> Alex alluded to it earlier. We've seen broad weakness in commodity prices including wheat, corn, fertilizer. So TD Securities see his food inflation gradually easing through the end of the forecast horizon. Now they don't expect housing inflation to ease in the near term. However, they do expect that the slowdown in the US housing market will impact shelter costs through the back end of 2023. >> Great stuff as always, Anthony. thanks for that. We will check back on the markets, Bay Street and Wall Street. I haven't had a chance to check in. We will start with the TSX Composite Index right here at home. Indeed, with 172 points to the upside, making some modest gains as we grind through the session, getting closer to that 1% gain Mark at the moment. Athabasca Oil, their latest earnings out, consumers aren't too impressed by what they are seeing, $2.29 per share, a pullback of a little more than 5%. Some of the gold name seem to be getting some good sales. We will check in on B2Gold, $4.47 a share, it is up 3.8%. South of the border, the S&P 500 right now is up a little more than half a percent, sort of holding onto its gains in that range. I believe we are going to hear from Janet Yellin later this afternoon possibly talking about some of these economic numbers we have seen, see what name the Biden administration wants to put on to say whether inflation is happening or not. We will see if Janet Yellin has only does it is happening. We will check at the NASDAQ, see how the tech sector is faring right now. The NASDAQ right now is up a little less than half a percent. Meta Platforms, earlier in the session it was under pressure and it continues down, down a little bit more than 5%, hundred and $60 per share. The first quarterly sales decline for the parent company of Facebook and, of course, big bets on the future of all of us wanting to live inside the med Avers. It'll take a while before we figure that out probably. We are back now with Alex Gorewicz from TD Asset Management. We are talking fixed income and taking your questions on the platform. Here's one we got in recent moments. What's going to happen to the euro this year? >> Well, for European policymakers, I wish I had a med Avers… I want them to say everything's good, it sunshine and rainbows, and unfortunately it's anything but. So the euro is actually going to be a really difficult oneto call. Yes and no. It's come down a lot. It's depreciated a lot against all peers and it makes sense why. Their policy rate has been on hold until just a week or so ago. It was at -50 basis points or minus half a percent. And this against very, very persistent inflation and the levels that are really not appropriate for that policy stance. So for example, average inflation in Europe right now is like maybe in the 8%, but in some countries like Spain, they are running over 10% year-over-year inflation. So eye-popping numbers, which means that even at 0% policy rate which is where they are at now after hiking 50 basis points last week, it still seems so out of touch with what inflation is doing. And part of that justification was, well, inflation is not domestically lead. It's because of external shocks, so global supply chain pressures and then obviously the Russian invasion of Ukraine and the route that it had in commodity markets and pushing commodity prices higher in Europe on par being a net energy importer, it's put a lot of price pressures, etc. , so things that are beyond the ECB's control. But as we know, the dynamics of seeing price pressures and the things that we need to spend our money on, food to fill our bellies or energy to fill up our cars and run our factories, all of that stuff will ultimately force people to start demanding higher wages and we are starting to see that materialize in Europe. The problem is that when you let your inflation rate get higher and higher relative to other currency, your purchasing power parity is falling. So that's largely explained Europe's or the euro's performance so far this year. Now looking forward, if we think the Fed pivots first, if we think other central banks and started raising rates before the ECB did will pave it and not have a more balanced approach to monetary policy, one could make the argument that the euro should appreciate from here. However, and this is a really big one and it's hard to model because there isn't a nice, normal distribution or risk function that you could create for this, the outcome for the euro could actually be very bimodal. Either Russia increases its gas supply through the north stream, one pipeline back to 100% capacity or so thing higher than 50%, or it doesn't. It doesn't even need to turn it off completely. If he keeps it at 3020%, operating at 20% capacity as it is now,that would spell not just a very harsh winter for the likes of Germany, which is very dependent on Russian gas or even Italy, but it spells trouble for the industrial base in Europe because you need to start rationing, you need to start cutting back production, maybe lay some people off, but it doesn't mean your price pressures go away. And then beyond that, this is where it gets even harder to determine what the euro will do relative to all other currencies, it will mean renewed pressure in global supply chains that are beginning to show signs of easing. So when we look at what's happening in China, were starting to say, well, global supply chain pressures are coming off the boil. Things are getting better. But Europe is systemically… As an aggregate, is systemically important as a global manufacturer and what happens there and prospects of industrial production getting cut will impact us here at home as well. So that's where the dynamics become less a European problem in more a global problem again in which case where does that leave monetary policy? We go back to the mercy of, as I mentioned, the Fed or the Bank of Canada having to hike even more. And so the dynamics in the euro are a little bit balanced in terms of the risks. On the one hand, the euro should probably appreciate and prefer over say the US dollar or the Canadian dollar just because of how much it's underperformed year-to-date and because the Bank of Canada and the Fed are closer to the end of the hiking cycle. But on the flipside, there too many risks right now,geopolitical and economic risks in Europe that makes stagflation a real, real possibility there. And eventually, that could spill over to us. That makes it really difficult to say which way is going to go from here. >> Always a great discussion, Alice. I appreciate you joining us. Look forward to the next time. >> Thanks. > Our thanks to Alex Gorewicz from TD Asset Management. Stay tuned. After the long weekend, Haining Zha will be our guests, taking questions about the Chinese economy and the market. A reminder, you can get a head start on getting those questions to us. Email moneytalklive@td.com. [video buffering] [music]
