Alexandra Gorewicz

[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing. Every day, I'll be joined by guests from across TD, many of whom you'll only see here. We're going to take you through what's moving the markets and answer your questions about investing. Coming up on today show, we'll discuss what's next for the Fed after yesterday's pause on rates with TD Asset Management's Alex Gorewicz. MoneyTalk's Anthony Okolie will have a look at a new report on the state of household finances. And in today's WebBroker education segment, Caitlin Cormier is going to take us through what you can find in the Analyst Centre on the platform. So here's how you can get in touch with us. Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker. Before we get our guest today, let's get you an update on the markets. We are seeing the price of crude oil study and we have some green on the screen for the TSX Composite Index, though it might be very modest. Indeed it is. You're up about five points right now, or just three text to the upside. some interesting moves in First Quantum about an hour ago. Some unconfirmed reports out there that perhaps First Quantum and Baruch were speaking with each other but they've broken off these talks. You saw a big jump in the price of First Quantum shares. Right now you're up about 11 1/2% at 34 1/2 bucks. Let's check in on Barrick's shares and see how they are faring in the wake of this news. At 2176, they are down modestly, a little shy of 3%. South of the border, investors continue to digest what they heard from the US Federal Reserve yesterday. You got the pause, the skip, whatever you want to call it, they did not do anything to raise but there was indication that there might be more to go. The market seems to be taking it in stride, up 35 points for the S&P 500, a little shy of a full percent. Tech stocks have been very sensitive to interest rate policy. Let's check on how the NASDAQ is doing, hundred and four points or three quarters of a percent to the upside. Advanced Micro Devices giving back about 2.7%. There were some modest gains in recent days. AMD it came out in recent days saying they were going to have their own GPU chip by the end of the year, perhaps trying to challenge Nvidia a bit in that space, all that artificial intelligence excitement. There is a bit of a bid into it earlier in the week and a bit of a giveback today. Hundred and 23 bucks and $0.89 per share. And that's your market update. The US Federal Reserve held its key interest rate steady after 10 consecutive hikes, but some market watchers are calling it a hawkish scape with the Fed signalling there could be more hikes ahead. Joining us now to talk about how the sets of the bond market for the second half of the year is Alex Gorewicz, portfolio manager for active fixed income at TD Asset Management. Always great to have you on the show. >> Thanks. Good to be here. >>we know that the Fed, although they did not take any action yesterday, they did give us an indication that there might be further to go. how do we read that? > This is the first time I will give Powell credit for all the experience he has in terms of being able to communicate and otherwise a bit of a head scratcher decision as far as investors and market pundits go. He was able to communicate the rationale in a pretty concise and convicted manner. But it doesn't change the fact that the data has been calming and strong enough that the Fed, which communicated that it will probably deliver another two rate hikes before the end of the year, could have done it yesterday and they chose not to. >> It's one of those things where it's like, all right, we are going on a road trip. We have to cover a lot of ground, so let's go. there was a bit of confusion. I think he was sort of giving them a bit of time. They've done a lot in the short period of time so let's see what the effects are. What do we have, five, six weeks until the next meeting? Good things turn in the data that would cause them to rethink their steps? >> Look, anything is possible. If we look at jobless claims in the last couple of weeks, we have seen not just higher than expected claims but we are seeing now a friend where the trend of the last several weeks is clearly in an upward trend. How that continues or how that evolves from here on out and certainly before the next meeting might give the Fed indication of whether the job market is starting to exhibit better balance. And I think that, more than anything else, is ultimately the key for the Fed in determining whether they are going to deliver more rate hikes and I don't think it's lost on any of us that that seemed to come up time and again from Powell in his answers to questions about what they are looking forward to determine whether to hike rates further. >> Of course, one point here Powell to get that question about one are you going to start cutting? There's been a bit of a push and pull between what the banks and the markets have been telling us during this rate hiking cycle. Last time you were on, we were talking about the potential for cuts in the summer or the fall just based on market pricing. that has disappeared. Jerome Powell is pretty adamant. He talked in terms of years. He said this is a place we need to get to in a fight we need to sustain for years. A pretty strong signal to the market. We take that at face value? A year is a long time. >> Well, yeah, but I find out a little misleading. One thing I would've liked to see reporters ask or challenge him about is why. . . >> Means you're not gonna get there without cuts. >> Back to me is probably the most important question to ask because that difference, 100 basis points of rate cuts or even some rate cuts has consistently been communicated by the Fed between 23 and 24, even as far back as the end of last year's dot plot. but the most recent update continues to show that rate cut, despite the fact that they think, well, at some point this year, we still have more rate hikes to deliver. And then if you think about the magnitude, let's say 100 basis points is the difference between the two median dots and that is supposed to be to the end of 2024, well, they are not going to deliver 100 basis points all in one meeting, let's say, in December of next year. So that will very likely start in a more gradual fashion as far as the Fed is concerned, probably within the next 12 months. So here you see why it is a head scratcher for investors who say, over the next couple of months, you still have to deliver to more rate hikes, but then over the next 12 months, you start cutting? And if the Fed, and Powell did acknowledge that they don't really have a lot of visibility out beyond a couple of months. Which I understand, I appreciate how uncertain the environment is. But if that is the case, why are you already communicating rate cuts for next year? >> What does it mean for fixed income? Maybe in the second half of this year, startlingly so, if you look at the calendar, we are almost halfway through this year. >> Correct. What does it mean? It means that despite the volatility that we have seen in interest rates this year, and we have done a number of roundtrips where to start the year, interest rates came down 60 to 70 basis points, then they came back up through February and then they came back down in March and then back up again, we have literally done roundtrips in a matter of weeks of 60 to 70 basis points. That's not insignificant in a very short period of time. And I think that could persist but what that also tells you is that what you are really doing is you are clipping your coupon. You are getting income. And although interest rates right now are higher than where they were at the start of the year because of all of these roundtrips, the total returns on bonds are still positive which, again, is a sign that income is helping to offset some of these negative price impacts. >> At the heart of all this is inflation. There was a time when it was going to be transitory. It wasn't transitory, the central banks got aggressive. We are here today in the situation. Are you seeing signs that they are winning this battle? Headline seems pretty decisive. I watched the headline graph and it goes hi appear and low here but underneath that there seems to be concern. >> Powell broke it down into effectively three categories. He talked about inflation that came from the good sector and there he said there's been a lot of moderation and let's sayglobal supply chains and all kinds of supply related pressures that are helping to bring those prices down relatively quickly. And we are seeing that as well. Then he talked about housing. Housing is probably the one sector or component that responds most clearly to monetary policy tightening easing. However, the lags are substantial. It can take anywhere from a year to 18 monthsto actually start seeing the effects of tightening. And we have seen some correction in the US housing market and perhaps you will see more as the Fed continues to deliver rate hikes, albeit at a slower pace, but they know that it's having an impact. Their monetary policy tightening is having an impact on that sector and they expect housing to continue to moderate. Then he mentioned services, and on services, X housing, on services, he did talk about how that was the most labour sensitivesegment, effectively, the inflation basket. And what he really did was to tie the fact that at this point, to bring inflation down, you need to start seeing cracks in the labour market. And he didn't talk about cracks, obviously, but he did say there needs to be better balance or you need to see a moderation in wage growth and what that really means is they are looking for an uptick in unemployment. And if you look at the projections that they put out alongside the decision, their updated projections, they've actually decreased the rise in unemployment rate that they are expecting for this year. Previously, they were expecting the unemployment rate to rise to about 4 1/2% at the end of the year. Now, it's only about 4.1%. So in many ways, although they are communicating that they have to raise rates further, they actually think it's going to be an even softer landing than they thought before. >> A lot of intrigue. Always great to get Alex's thought on the entry. We know you have questions for Alex Gorewicz. We are going to get to them in just a moment's time. Of course, you can get in touch with us at any time. Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker. 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. The Canadian Real Estate Association says home sales actually turning positive on an annual basis and me. that as the first year-over-year increase in almost 2 years. While at home price index, no we are talking prices instead of sales, climbed modestly compared to a month earlier, it was still down almost 9% compared to May 2022. With the uptick in sales activity last month came before the Bank of Canada surprised markets last week with a 25 basis point interest rate hike. We have another sign now that the airline industry continues to recover from the pandemic. Delta Air Lines reinstating its quarterly dividend. It suspended that payout at the start of the COVID 19 pandemic. Delta is also forecasting strong demand for the summer travel season, which it expects to boost the profit line. US airlines were barred from paying dividends during the pandemic after taking billions in government aid, but that prohibition expired last fall. Delta Air Lines is up about half a percent. The head of artificial intelligence at Meta Platforms says apps such as ChatGPT are not as smart as humans. During a panel discussion at a technology conference, the Meta executive said generative AI isn't very intelligent because those large language models are coached solely on language and they lack an understanding of the real world. This is the reason I got interested in the story. He added that AI is currently not even as smart as a dog. Which I find reassuring because my dog stares at me all the time begging for food. Who needs that from their ChatGPT? A quick check in on the markets. We'll start your own Bay Street with the TSX Composite Index. We've got oil prices to the upside, a bit of stability and energy space. We are green but not by much, 14 points upside we will call it, about. 07 points. S&P 500 in positive territory, up almost a full percent. We are back with Alex Gorewicz, taking your questions about fixed income. Plenty coming in, so let's get to it. We just talked about the Bank of Canada, their surprise last week. The viewer wants to know, what's next? >> As in are there more rate hikes to come? That's probably that's the one. Especially if they have floating-rate loans. >> I get what people are asking why that's relevant but to your point about the recent pickup and housing, but I would caution that tends to be more in the large metropolitan sectors, not necessarily consistent across the country, but I think that was a primary driver for the Bank of Canada to come off of pause. It is clear for them that the housing channel is an important call a transmission mechanism for monetary policy. I think too many people took the Bank of Canada's pause to mean time to pile back into the housing market, and that's not what the Bank of Canada wants. But anecdotally, I do here, having spoken to a lot of advisors and planners across the country, that their customers are starting to draw more and more on their investments and on their savings to put money towards mortgages and mortgage payments. And we know from… Warning in the last 24 hours to large Canadian banks that mortgage amortization periods have extended and that is posing risk to Canadian households, that they are going to be indented for longer, unless the bankstry to reign some of that in. So that's my way of saying that the Bank of Canada I think is trying to send a signal. It doesn't necessarily mean that a lot more rate hikes are to come, although bond investors are anticipating that the Bank of Canada might deliver another rate hike before the year is out. But still, within the next 6 to 12 months, investors are expecting rate cuts from the Bank of Canada because there is an acknowledgement that the policy rate is too high at the current level, and going higher still would just put more pressure on Canadian households, Canadian consumption and therefore the Canadian economy. >> With the Bank of Canada trying to push back against the housing market, is that, I don't want to call it a fight or a battle but is that a contest it can win? There are so many other factors, right? A robust immigration, shortage of supply and all the Bank of Canada has is, well, we are going to make the mortgage a little more expensive. >> Again, the housing channel is extremely important. They can raise rates but they can't go into your line of credit and say they are changing the rate that you are paying on this outstanding debt. They rely on the fact that people feel like money costs more and therefore they start slowing down their consumption in other parts of their day-to-day lives. So if housing starts to slow down or the cost of money starts putting pressure on consumption, people feel less wealthy, they consume less and the economy starts to slow down which is ultimately what the Bank of Canada is trying to do in order to cool inflation. >> This next question is interesting. The currency one, considering we got a surprise hike from the BOC last week at a pause or skip from the Fed, what does it mean for the loonie? Where do you see it heading? >> A lot of mixed signals and what I mean by that is obviously initially with the Bank of Canada's surprise rate hike, the Canadian dollar did appreciate relative to the US dollar, relative to other developed market currencies. However, yesterday's Fed decision although was a pause skip hop, call it whatever you want, whatever it was, the Fed's decision was accompanying by more rate hikes to come, and the Bank of Canada hasn't necessarily communicated those, which now has kind ofcounteracted some of that Canadian dollar appreciation versus the US dollar, so I think there's just a lot of uncertainty at this time when it comes to monetary policy differences between the two countries which ultimately has a large impact on your currency. So all that to say that the currency could remain surprisingly range bound for the next couple of months until we have better clarity about what the direction for both the Fed and the BOC will be. >> That's next question. Someone wants to know, we have been touching on this as part of other conversations, how long until we see the Fed and the BOC cutting rates? >> So if you asked the bond market and bond investors, although they are no longer expecting let's say a full rate, from either central bank by the end of this year, the bond market continues to move in that direction. A little bit of a rate cut is priced by December for both the BOC and the Fed. But for sure, a full rate hike is priced in by the first quarter of next year. And it goes back to our opening conversation about the Fed is already communicating rate cuts to the end of next year which probably means they start at some point in the next6 to 12 months, poor operably more likely 12 months, let's say next summer, but nevertheless, investors usually get ahead of that and they are pricing that rate cut to come in sooner. Now, what is the likelihood of that happening? That all hinges on labour and that's true for both Canada as well as the Fed. If we look at Canada's jobs numbers, the BOC may have hiked on Wednesday… >> Interesting timing, right? Two days later we get the jobs report and we lost jobs. > Correct. Even the jobs report the month prior in Canada, we actually saw job losses for full-time positions, although there were more than enough gains in part-time positions. Nevertheless, we are starting to see cracks in the Canadian labour picture and to the extent that those cracks build up further, I think it's safe to say that the BOC could pivot before the Fed but again, the housing picture is extremely important for Bank of Canada. they don't want to stoke more speculation or unnecessary over leverage in the space because of anticipation in the turn in the policy rate. So all this to say that labour will ultimately drive the decision for both central banks in terms of when they start cutting, but I think it's fair to say it will be at some point in 2024. >> As always at home, make sure you do your own research before making any investment decisions. we are going to get back to your questions for Alex Gorewicz from TD Asset Management in just a moment's time. We are talking fixed income. a reminder that you get in touch with us at any time. Just email moneytalklive@td. com. Now let's get to the educational segment of the day. if you're interested in finding out what analysts are saying that certain stocks, WebBroker has tools which can help. Joining us now ignores Caitlin Cormier, client education instructor with TD direct investing. Take us through we can find in the Analyst Centre. >> The Analyst Centre is a really neat place with an WebBroker where we can look and see what the majority of analysts are saying about an individual's security but we can kind of dive a little deeper so let's go ahead and see what I mean by that. So what we are going to do is we are going to click on research towards the top left-hand side of the screen. Under markets, we will go all the way down to Analyst Centre. this is the main homepage for the analysts, where we kind of keep all the market informationthat analysts have coming in. So the first page become on is the most recent page. So these are the most recent ratings that were given by analysts. We can see the analyst's name and ranking over here. These are all as of today's date. Quite a bit of information coming up for today. What I want to look at is under trending stocks and we actually have an option to see best rated, worst rated and most rated. This is kind of interesting. This is giving us some companies that are actually covered the most by analysts. We have the most number of analysts actually going in and doing their research and making a recommendation as to whether they think this is a buy, a hold or a cell. So this could be an interesting place to come in and get some different names to take more of a look at. So what I'm going to do today is I'm going to choose the top rated, the top covered, I should say, security here, so it has the most number of ratings. I'm going to go ahead and click on the stock symbol for that particular security. We can get into the main research page but we are going to do today is we are going to click on analysts again. But instead of doing analysts analysis on the entire market, this is specific to this individual security. We can see that there is a price projection of $239.10 for the security which is 14.18% to the upside. They are projecting an increase in the value of the stock and it's based on 33 analysts offering a 12 month projection. All of these projections were made within the last three months and it gives us the high, the average and the low over that projection. Of course, on the far left-hand side, we can see what has happened over the last year versus what the production is for the next 12 months. There's quite a bit of information here. It's giving is basically what we can expect as far as the price goes. Plus a conglomerate of the ratings for that individual security. >> So for whatever reason, someone takes a look at this and an analyst catches their eye, they want to find out more about them or the companies they provide ratings on. How would they dig deeper on that name? >> Yeah, absolutely. On this page that we are on already, if we scroll down a little bit further, we can see all of these analysts that have made those recommendations. As for the above information, we can see these are the actual individuals who have made the recommendations. You get a little bit of information about them. If I were to go in and let's just say we choose this individual here, I click on their name and I actually click to see their win loss rating, so how successful they have been in the past as far as the ratings go, and I also click to view portfolios. This is going to take me to an individual profile for this analyst. I see the other companies, as you mentioned, but that's particular analyst follows. These are recent ratings they have made. I see their average return. This particular analyst has is ranked towards the top. Not too bad. We can see his number of ratings as well as how he is feeling all those different securities. So kind of interesting. And then as you mentioned, we can actually follow them just by clicking the follow button. And then you might notice towards the top on the far left-hand side, there's a little thing that says followed analysts. This is where I come to see any analysts that I follow and checking on them. I got a few different analysts here and I come here to see how they are doing, this is under the whole market analyst Centre and I click on any one of them and just go back to their profile and see how successful they have been in any recent ratings they have done. >> Great stuff as always. Thanks that. >> Thanks so much. >> Caitlin Cormier, client education instructor with 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. All right, we have lots of questions coming in for Alex Gorewicz, talking fixed income. Let's start getting through them. What are your thoughts on the high-yield bond market? Do you see any opportunities there? >> Opportunities always exist because there are a number of companies that have seen ratings upgrades, the number of companies that we expect in the coming years to actually become investment grade, so opportunities exist all in yields in this space are attractive. A 9% yields. However, we caution that a good amount of that yields actually comes from what we call the risk-free rate or the government bond, at least about half of it. And if that's the case, and depending on each individual's financial objectives, but if you assume that some mid-single-digit type of return target that tends to be quite consistent across investors, you could get that without taking the kind of risk that we are actually seeing in the pipeline building over the next 1 to 2 years. And why do I say that? Because, and I'm sure you've heard myself and my colleagues on the fixed income team talk about this repeatedly, high-yield companies were very good to manage their cost of debt by locking in rates. Second half of 2020 and all through 2021 at rock-bottom levels. And they don't have an incentive to come to market. So without that supply of new debt coming online, there hasn't been real price discovery to see where that extra compensation above and beyond the risk-free rate needs to settle down, and it's very possible that within the next 1 to 2 years, as more and more of these companies need to refinance their debt, it's entirely possible that we are going to see a lot more price discovery that would translate into potentially higher risk premiums demanded by the investor base. From our perspective, we are certainly of that belief. We do think that the economy will continue to trend lower over the next 12 to 24 months, and we want to ensure that we are being compensated for that risk and we just don't see that on an aggregate level. Again, there are select opportunities, but in aggregate, I think high-yield has more risk than reward potential over the next 1 to 2 years. >> Definitely a space for the sharp pencils and research at home. Let's get another question. Very popular, everyone wants to know about this. What impact do you think the flood of US government bonds supply will have on the fixed income market after the recent suspension of the debt limit? They have to refill the coffers, right? >> Yes, they do. This is where it actually is, it pays to have a former Fed chair as the secretary, Treasury Secretary. Yellen has talked about the fact that they have done consultations with the large banks, large investors, and there is an understanding of how to issue debt here in a way that is not going to put undue pressure on the market. Howell was even asked about this yesterday in the press conference and he did talk about the fact that he expects a combination of cullet offsets. As the TGA account is replenished, he expects some will come from the reverse repo facility which is let's say representative of excess liquidity in the system and some of it will come from reserves, and to the extent that it is more of a balanced mix, it shouldn't put undue pressure on the cost of funding or on funding markets, which are the key to companies and banks being able to maintain daily operations. Long story short, I trust that there will be a measured approach in terms of how that process unfold, but everybody will be monitoring it closely. >> Okay, question here. When you see wage growth cooling substantially in the United States? Is that a this year story or a next year story? >> We have already seen wage growth moderate to a degree. one thing I would caution is that if the unemployment rate rises in a material way, and it could be this year or next year, whenever, but if it begins to increase, you tend to actually see an increase in wage pressures and the reason is actually because the vast majority of people that tend to get laid off come from lower income segments. So if more of the middle or higher income segments are represented in the population and employment population or working group, that tend to have an impact of pushing up wages. You saw the look on my face. >> Yeah. I think the point is that the way the math works out may confuse some people. But it just how the math works out. that depends on where it is coming from. To date, we have the job losses that we have seen in the United States have come fromhigher income sectors, the tech industry, to some extent from the banking industry, and we are seeing more and more sectors join that trend. And so for now, you are seeing a cooling and wage pressures but if more and more people get laid off, particularly from service sectors and lower income segments, you might actually see an uptick in the wage growth. >> Fascinating dynamics. Look at another question here. Is it a good time to buy bonds? You're on the platform, we can't get buy or sell advice,but we can talk about the case for bonds. >> We talked about this in the opening segment. But I will spell it out. There are two components to return for bonds. There is the end, or basically the coupon, the cash flows that you're getting, that as interest rates rise, you are continually reinvesting those coupons or cash flows at higher and higher interest rates, so that is a positive source of return. And then there is the price component. As interest rates rise, your bond price does go down. Now coming into this year, we were looking at yields that, on just government bonds, that were call it 4+ percent, and those yields, although they have bounced around, as I mentioned previously, they have done some very wild swings and roundtrips multiple times already are today, yield right now have shaken out a bit higher than what they were at the start of the year, which means the price return is negative. But that income that you've been getting, because yields were already high coming into this year, has more than offset the negative price return. So absent a really material increase in interest rates from here on out to the end of the year, you could end up in a position where you eke out something like 4% returns for bonds that just by the fact that you've been clipping those coupons and bond prices have gone sideways. The real question, though, to assess the opportunity for bonds today is to say, what is my expectation, let's say, 1 to 2 years now, for interest rates? And as we have talked about and the opening segment and throughout, one will central banks cut rate? If you believe it's next year, this is a good opportunity to get that price return as well is that income return. So you could be looking at decent returns if you believe that interest rates and central banks will be bringing down interest rates in 2024. >> We will get back to your questions for Alex Gorewicz on fixed income in just a moment time. As always, at home, make sure you do your own research before making any investment decisions. and a reminder that you need in touch with us at any time. Do you have a question about investing or what's driving the markets? Our guests are eager to hear what's on your mind, so send us your questions. There are two ways you can get in touch with us. You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send. We'll see if one of our guests can get you the answer right here at MoneyTalk Live. Household debt Worth rose in the first quarter of this year, but we have rising interest rates and servicing costs still posing a challenge to many Canadians. Anthony Okolie has been digging into the latest numbers and a TD Economics outlook for household finances. What are you seeing? >> Canadian household wealth climbed higher for the second quarter in a row. It rose by nearly 520 billion, that's u nearly 3 1/2% in the first quarter of this year. Household net worth was bolstered by really equity markets as well as real estate markets, despite the fact that we saw continued financial market volatility as well as higher interest rates. The value of real estate rebounded at 2.7% after three consecutive quarters of decline, according to Statistics Canada. That was supported by low hold inventory levels. Meanwhile, financial assets for Canadians rose 3%, rising for the third consecutive month. Credit market borrowing continue to decelerate for household. Edged up .1% but that marks the slowest pace of quarterly household borrowingin nearly 20 years. Now, despite the slowing debt growth, household credit market debt to disposable income actually rose to nearly 185% in the first quarter, higher than what we saw back in the fourth quarter, as this chart shows. In other words, there was a dollar and $0.85 in credit market debt for every dollar of household disposable income. Now, rising interest rates and higher debt servicing costs for Canadian households, not surprisingly, stats Canada reported that mortgage interest payments were nearly 7% higher in this first quarter of this year, that compares to the first quarter of 2022, as a result of the ongoing interest rate hikes that we have seen. When we take a look at household savings rates in the next chart, the savings rate continued to trend lower. That was due to a couple of factors. One of the main factors was there were less government transfers to households and that weighed on overall disposable income. The drop in household disposable income at the Canadians had less income versus rising credit market debt. And finally, when we break down total household credit market debt, the slower growth was actually driven by deceleration in household mortgage borrowing activity despite an uptick in the housing market. Remember, mortgage debt accounts for three quarters of total outstanding debt. The declines and he locks and other personal loans help to partially offset the growth of credit card debt, which rose about 3% in the first quarter. >> The BOC got off the sidelines and hikes. The Fed paused but said they will probably hike more. You see rates rise and remain high for longer, what does that due to household net worth? >> Household debt is expected to rise rapidly throughout the year and peak in the second half of 2024 as interest rates rise and are expected to rise and remain elevated for longer. This will create additional headwinds for Canadian householdswith high sensitivity it to interest rates. that could result in high delinquency rates in the future. As Alex alluded to, the BOC will need to maintain a close watch onPostal credit performance as higher interest rates will continue to weigh on Canadian households this year. >> Interesting stuff. Thanks. At my pleasure. >> MoneyTalk's Anthony Okolie. Now for an update on the markets. We are having a look at TD's advanced dashboard. This is a platform designed for active traders available through TD Direct Investing. Taking a look at the heat map function here, nature presentation of what's happening. We are screening to the TSX 60, we are looking at price and volume. Dominating the screen would be the taker FM, that is First Quantum minerals. You can see it's up a little shy of 10% right now. There was actually news that broke about an hour before we came on. Unconfirmed reports that First Quantum has recently rebuffed an informal takeover push from Barrick Gold. Interesting. It's an unconfirmed report. It deftly moved First Quantum higher. I watched that in real time as the story broke. You can see Barrick there off to the corner down by about 2%. On the screen you can see some on screen on the screen for the energy names. We have West Texas intermediate American crude on a very bumpy ride in recent days but to the upside today. Then up in the far corner you can see that Shopify is getting back some of its recent gains, although it's been an up-and-down sort of journey for that stock most recently. You can find more information on TD Advanced Dashboard by visiting TD.com/advanced dashboard. We are back with Alex Gorewicz from TD Asset Management, lots of questions coming in. The clock is not in our favour. We will try to get through them. Hi, this is difficult to know, but by September or October, where do you see the Canadian short-term bonds, one to five years, be? Higher or lower than today's stage and how about 1 to 5 year fixed mortgages? >> You're basically asking, are our central banks raising rates for the? Short-term interest rates, and I will say short-term meaning anything five years and under, like the viewers asking, are highly correlated with what central banks are doing. So right now, it's clear that the skew is towards higher interest rates in the near term and so there is the potential for interest rates to rise. The all in yield to move higher for even corporate bonds. However, it kind of goes back to this notion of thinking through what it means from an opportunity perspective. And if you believe that central banks need to raise rates and other hundred basis points for 200 basis points, it doesn't seem like that's what they are indicating. The Fed is saying 50, the Bank of Canada is not committing to anything further, but there is a risk. So if you believe that is going to be another hundred or 200 basis points, maybe there will be a better opportunity in a few months from nowto get into those of bonds. If it's only marginally higher, you'll have some price loss, but the income onshore bonds, because of how low the durations are, more than compensates for some marginal loss on the price of those bonds from here on out. So it would be really difficult to generate negative total returns for those short bonds without meaningful increases in central bank policy rates. >> We are going to squeeze one more in. This will be a good final thought. The viewer says they find it difficult when the central banks need bad news in the form of higher employment to reach good news in the form of lower interest rates are lower inflation. It seems more of a statement than a question. Yet the central bank saying, we are going to inflict pain on you. This is real pain felt by real people. >> Yeah. Again, if you look at the updated economic projections from the Fed, it looks like it's an even softer landing than what they had projected back in March, and then they did increase meaningfully their GDP forecast for this year without really changing very much those projections for this year in the hereafter. So why do I mention that? Because it goes back to what Powell said about visibility. Clearly, the data right now is holding up. There forecast, as things currently stand, is still strong, but they don't actually have very much visibility beyond the next couple of months and while that might seem strange for all of us to comprehend, I'm going to use a history example for those who don't review history, are doomed to repeat it. The question on everybody's mind earlier this year when the BOC one pause, surely this means that the next move, whenever it happens, will be a cut. And actually, there is history of the BOC staying on pause for a long time. It's just it was followed by a very ill-timed hike. What do I mean by that? May 2006. BOC raises rates to 4 1/4%. After having delivered many rate hikes prior to that. And stays on pause for 14 months, until July 2007, when it chose to raise rates to 4 1/2% because all the economic data that they had seen, especially in the first half of 2007, was higher than their projections. So that compelled them to raise rates. In hindsight, all of us who know what happened thereafter, it was probably, it could be deemed a policy mistake. In fact, if you think about it, by September 2007, the US was officially in a recession. By September 2007, we didn't realize the magnitude of the recession to follow. But the reason why that's relevant is because if you think about it, from July to September, the BOC didn't have visibility that the US was about to enter into a recession. And drag everybody else along for a very wild ride for couple of years. So that goes to show that at this time, the central banks are like the rest of us; they are responding to economic data. I prefer to talk about that before, that we are now at a point in the cycle were central banks have raised rates so much that investors are paying less attention to that and they are paying more attention to the economic data. But the reality is, so are the central banks. They have just as much visibility as the rest of us mere mortalsand the reality is that they are going to go one meeting at a time until, unfortunately, something breaks. And for what it's worth, I appreciate the fact that they are forecasting soft landings, but let's face it: Europe is already in a recession. We had headlines out overnight that New Zealand is now in a recession. There are a number of economies that are already moving in that stagnated if not contracting economic positions. >> Always a great conversation and a pleasure to have you. I learned a lot in the audience when blood as well. Thanks. > Thanks, Greg. >> At home, always do your own research before you make investment decisions. Our thanks Alex Gorewicz, portfolio manager for active fixed income with TD Asset Management. Alex, you are our guest on our one year anniversary show. What is it, June 15? I should know. June 15 last year is when we launched MoneyTalk Live. So yeah, we've had the one year. We've had 283 shows in that time. We received close to 800 of your questions. This is really the lifeblood of the show. You the viewers sending in your questions for our guests, so we can have these discussions. We want to thank TD Direct Investing for giving the show a home on the platform. Of course, the client education team for all of their great segments. And of course we would be able to have these conversations if not for all our partners at TD Wealth, TD Asset Management, TD Securities and TD Economics sending their guests over for me to talk to. We will be back tomorrow with an update on the markets and house for best interviews of the week. On Monday, Haining Zha, portfolio manager from TD Asset Management will be our guest. We are going to talk about China's economy. It's a very interesting time for China's economy. Plenty to discuss. A reminder that you get a head start with your questions. Just email moneytalklive@td.com. That's all the time we have for the show today. Thanks for watching today and for the past year and we will see you tomorrow. [music]