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[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's show, we discuss what today is hotter than expected US inflation report means for rates and fixed income with TD Asset Management Alex Gorewicz.
MoneyTalk's Anthony Okolie is going to have a look at investor sentiment with the results of the latest TD Direct Investing Index.
And in today's WebBroker education segment, Bryan Rogers will shows how you can use conditional orders 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 to all that and our guest of the day, let's get you an update on the markets.
It's not a great picture. We will start here at home on Bay Street with the TSX Composite Index. We are at a 381 point deficit, almost 2% down.
Among some of the most actively traded names in Toronto right now, including Cenovus Energy, a lot of energy names under pressure today. At $21.99, instead about 1.3%.
Pullback in the price of gold, Kinross Gold is down about 3.7%.
South of the border, as investors take the inflation print and try to figure what it means longer-term, these are markets I'd been making you all-time highs in recent sessions, the S&P 500 is pulling back more than a full percent or 50 points.
The tech heavy NASDAQ is off the lows of the session but still under pressure, down 186.41.17 percent as well. I want to check in on some of the Wall Street heavyweights, Bank of America is down 2.25%. And that is your market update.
We have more signs that inflation in the US has not been tamed with the latest read on consumer prices coming in hotter than inspected. What does this mean for interest rates in the bond market? Joining us viscous is Alex Gorewicz, VP and Dir.
for active fixed income portfolio management at TD Asset Management.
The expectation was that we would be below three, it didn't happen. Why?
>> There is no one answer.
The stickiness is quite broad-based which is a problem for the Fed.
I think if we look at the headline numbers, we had some expected let's say drags from goods or energy, although be at less than what was anticipated and maybe that contributed a bit to the meats.
But really it was core services, even excluding shelter, which is continuing to moderate but it's really core services X shelter that's just proving to be quite sticky. Some components actually edged higher. Not good.
>> I was going to say, we didn't expect it would be a straight line all the way down from the eight or nine where we were way back when down to the 2% target, that there would be chop along the way, but is this more than just drop?
Are we going to get to two in the time we think that we are going to get there?
>> I think… It's hard to say at this time.
The reason I say this is it was anticipated by let's call them inflation experts, people who are putting their money where their mouth is and trading inflation like products, it was expected that this month and the next couple of months, February, March, are expected to remain sticky and that they are not necessarily suggesting inflation across the board is starting to trend higher, but they are sort of stalling the disinflation progress.
This, to some extent, was not unanticipated. It was maybe a little bit firmer than that, but nothing at the moment suggests that the Fed was want to pave it. It does reinforce, however, that the euphoria coming into this year with five or six rate cuts to be delivered by the end of the year, there was just too much euphoria and that had to give back.
>> Let's talk about that euphoria. We did see Jerome Powell push back against this.
He said, listen, we are not in a rush to cut rates.
There's been a dance. We've been talking about the stance between what the Fed in our central banks have to say and what the market wants to believe. Are we pulling expectations back in line again, saying, maybe he is serious and has reason to wait?
>> Yes, and this definitely reinforce that, but we didn't need the CPI number to basically validate Powell's stance or we will say the collective Fed stance that March is too soon because jobs numbers beat, GDP data, both realize for Q4 of last year as well as advanced data for Q1 of this year, they are all tracking a lot better-than-expected which, you know, tells you that the Fed can at least be patient.
This just reinforces that. Again, it doesn't necessarily throw off track disinflation progress, it just dulls it.
We will see next month and the month after that if we have a genuine pop higher or if what we have seen today in terms of the broadening of that stickiness in core services, if that persists over the next couple of months.
But in any case, I think the bond market's reaction, which is, okay, we are not pricing and six, now we are pricing and only forward to the end of the year in terms of rate cuts from the Fed. I think that's a lot more appropriate.
>> What does it take for the Fed or really for the economic data, I think in terms of interesting ideas but recently about the idea that if you can have interest rates at this level, which we consider to be restrictive, more restrictive than they need to be, they are not neutral, but the economy keeps performing, the labour market keeps up, inflation is stuck there above three, the Fed not only doesn't have to be in a rush, do we have an idea where rates need to be to bring the economy into balance?
>> That's an excellent question and I think if we judge based on the reaction that we have seen in interest rates, let's say year to date as this full suite of data, not just the latest CPI data but the full suite of economic data has been coming in better-than-expected, I think interest rates have responded accordingly, which is they've edged higher. Today, we have had actually a pretty significant reaction to this CPI print, as one would expect.
Ten-year interest rates are a little higher by almost 10 basis points, two-year and five-year are up even more than that.
The reaction was expected but interest rates year to date have been reacting by moving higher to all this positive data.
Where I have more concern for the broader market, both a broader bond market as well as Capital Market is that risk assets, whether you look at corporate bonds, that's effectively where we say looking at credit spreads or whether you are looking at equities, I think they really ran away with this notion that we will get five or six rate cuts and they probably have more adjustment to do after this CPI print.
When I think about where rates are, I would say they are pretty fairly priced for only three, maybe four rate cuts that we will get this year.
>> What does that mean for fixed income this year? It's still early, we are only in February. We had expectations and six, seven weeks in, we are starting to question them.
>> Looking back at every rate cut cycle since the 60s or 70s, we went back a long time, and one thing that we found was that interest rates don't really fall until we are about let's say a calendar quarter, three months, away from that first rate cut. What was clear, and this is why I keep mentioning the broad suite of economic data, what was clear from as early as the first week of January is that data was suggesting that the economy is doing better than expected, better than the Fed's forecasting, better than economists are forecasting, and what that meant was that March was too soon. We have been talking about that for many months now, and that June was more likely. So if history repeats itself like it has in prior rate cutting cycles, that means you will have interest rates come down and therefore fixed income as an asset class will generate positive returns but you need to be within striking distance of that first rate cut.
I think at this point it is too far away.
As long as the data is not suggesting inflation is re-accelerating and as long as the data cooperates, I think that's where you start to see those positive gains in the asset class.
>> With what we know today and the caveat that it could change according to the data that comes out in coming weeks and months, is June still reasonable, a reasonable expectation that perhaps we see that first rate cut in June?
>> Yes, I think so. Interestingly, the bond markets reaction to today's CPI print was to effectively price out any expectation of rate cuts in March. But the May meeting still has 40 to 45% probability… >> Is it still live?
>> It is still a live meeting. With the data coming in as it is, and it's not just the hard data points that I mentioned, even looking at survey-based indicators, they are suggesting a bit of a cyclical upturn. To the extent that that translates into economic activity, we think May is still too soon and maybe the Fed can give itself more option alley and start in June.
>> Always great insights with Alex Gorewicz and a great start to the program.
We will get your questions about fixed income for Alex and just moments time. And a reminder that you 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.
Shares of Shopify are in the spotlight today. Let's check in on the e-commerce services company. They handed in a solid quarterly report but on the screen you are looking at a stock that pull back 11%.
What's going on? Investors are concerned about the forecast. In a note to clients, TD Cowen says an increase in operating expenses will likely weigh on operating margin going forward. That seems to be a concern that has rolled into the price action today. Stronger-than-expected sales at Tim Hortons that help power and earning speed for parent company Restaurant Brands International. Same-store sales, which is a key metric for the industry, were up 5.8% across all of its banners, including Burger King, Popeyes and Tims. That said, we are looking at a stock that is down 3%.
Restaurant Brands did sound some cautious notes on the weakening consumer and their input costs.
Also want to check in on shares of SS are mining.
They are one of the most actively traded on the TSX composition today. The company has suspended operations at its Copler gold mine in Turkey. The miners is a large slip occurred on a leach pad were or is pleased, forcing the suspension of activity. There is the suggestion that some workers are missing as well. The stock is down more than 55%. Let's check in on the markets, starting with Bay Street and the TSX Composite Index. It is a risk off session. Seeing a sizable pullback.
400 points deficit right now, almost 2%.
See if the selling pressure is intensifying south of the border. Pretty much where we started the program. We are down 60 points on the S&P 500, which broke over 5000 for the first time last week and closed above it, but higher-than-expected inflation print has it below 5000 today.
We are back with Alex Gorewicz, taking your questions about fixed income.
Some perspective outside our two countries. Does your guest see any opportunities outside of Canada and the United States?
>> Yes, actually. I assume the question is being asked within the fixed income market space. So maybe two things to think about.
One is more may be near-term and the other is a little bit more medium to long term.
To the extent that today CPI number did not throw the Fed off course and the pivot is still very much intact which, for what it's worth, at the moment, I still believe that to be the case and I still think June will be the first rate cut, to the extent that we get that pivot and those rate cuts follow, it will likely put some downward pressure medium-term on the US dollar vis-à-vis the others which means emerging markets actually are very attractive as an area for higher yields effectively, for carry.
But near-term, today's reaction, for example, to CPI, was that the dollar was up across the board.
EM markets, it doesn't matter what asset classes you are talking about, generally don't do well in that environment. That's more of a medium-term consideration once that easing cycle gets underway.
Near-term, there's been a lot of I would say sort of coincidence in terms of how developed market central banks have progressed in their tightening cycle and now how they are all seeming to pivot to we are going to be on pause, we are not hiking anymore, and eventually we will cut rates. There is a lot of coincidence there.
But there are small variations depending on where each market is vis-à-vis its disinflation cycle. There are 2 Markets outside of North America that we think are presenting quite favourable opportunities just because investors in those markets have been priced in rate cuts as aggressively for 24 as they have in North America.
Those two markets are UK and Australia.
The fact that today's negative reaction we will call it in US bonds because of that hotter than expected inflation has pushed out some rate cuts in the US, you basically have more of a compression between yields in UK and Australia vis-à-vis the US and even to some extent Canada. That is more of a near-term opportunity.
And I think over the next couple of months, you could see further interest rate convergence between the two markets with the UK and Australia outperforming North America.
But eventually, once those rate cuts come through, particularly for the Bank of Canada and the US, it should be relatively indifferent between developed markets.
>> I have another audience question.
This one is a bit of an idea. Let's run this idea passing.
In an article in the Globe and Mail. It Tim Shufelt reference to a research paper from Benjamin Felix at PWL Capital.
Apparently he ran the data through a million simulations of an ideal portfolio and concluded that "Bonds add virtually no value." I would appreciate your guest's thoughts on this. Bonds add virtually no value?
>> Thanks, Greg.
I have to think through my answer here.
There is some existential crisis now for my entire asset class. It all hinges on my answer.
Mea culpa, I don't know this research paper that the viewer is referring to.
But there are two parts of my brain that are going right now.
The first one is the practitioner side of me that says history has shown that asset classes had evolved, have, first, emerged and then evolved out of needs, and that's true for bonds, for stocks, for private assets of all kinds, furniture capital, infrastructure, etc., even more recently, crypto. But what we have to respect is that, and I don't know what timeframe we are talking about with this research paper, if we think it through even the last 50 years, there have been times where bonds have outperform stocks and vice versa and then they've both done well and times when they both not done well, 2022 for example.
So every asset class, and I just use stocks and bonds, but the reality is every single one of those different asset classes that I've mentioned has had their time in the sun and the time in the doldrums.
That's the practitioner side of me. And timing matters because again, not knowing the methodology and timeframe of this research paper one the simulations were run, where they'd done backward looking, on an ex-ante basis forward-looking, I'm not sure, the point is, depending as an investor on your time horizon, he may have found that some asset classes work better for your portfolio and helping you generate returns and compound those returns and other asset classes. And most of the time, I don't know an investor for example who started saving and then 50 years later did not once touch their portfolio. Your life events will ultimately dictate how and when you draw on your investment portfolio and on your savings.
So that's the practitioner side of me. The academic side of me thinks back to grad school and it's fascinating.
In undergrad, you spend all this time learning content. In grad school, you spend a lot more time thinking through research papers and you start looking at pure reviews, what criticisms you peers have of the methodology, have the data sources, of the approach, etc.
So I guess the one thing I would say is not having seen that, perhaps this viewer that asked the question should have a look at what the pure reviews say about this paper and its findings. And if there are no pure reviews or if the limitations of the assumptions used in the paper are not highlighted, the my question is, what is this person trying to sell you? So just be mindful in terms of how you consume conclusions from people's research work.
>> An interesting discussion on that one.
We are going to get to a much more straightforward question for Alex.
>> Thank you.
>> Are the Bank of Canada and the Fed on a divergent path when it comes to interest rates?
>> Are they on divergent paths? No, but I think both of them will very likely start cutting interest rates later this year. I would say let's say said June and maybe Bank of Canada could be July or maybe even June, we will see.
I would say what has changed in terms of my expectations is if you had asked me a few months ago when it was very clear that Canada's economic dynamics were stagnating, potentially even on the verge of contracting, I would have expected that Bank of Canada would begin to cut interest rates much sooner. And if we just look at the economic growth picture, for sure, Bank of Canada has more reasons to cut them the Fed. The flipside is more recent data, the way that I mentioned earlier and showed that it's been strong for the US, it's actually been meeting expectations in Canada as well.
And why that's relevant is that given our well telegraphed housing supply challenges, the one thing that Bank of Canada is very worried about is beginning to cut interest rates and seeing the housing bubble expand even more.
>> That's like last year at this time.
They are on pause, the housing market took off in the spring and then they shorted back up again with more hikes.
>> That housing impact, we will call it the housing transmission channel of monetary policy is actually quite strong in Canada.
Most people are really consumed by how much is their house worth and how does that contribute to their overall feeling of wealth. The fear from the Bank of Canada is if they start cutting interest rates and the housing effect takes on new life that you could actually see inflation reemerge very quickly. Not to mention the fact that although we had hotter than expected inflation in the US, in Canada, it's also been meeting expectations but most importantly it's been beating the Bank of Canada's forecasted expectations.
So now my expectation is Bank of Canada cuts in line with the Fed or even a little bit after them.
>> Interesting stuff.
As always, make sure you do your own research before making any investment decisions.
we are going to get back to questions for Alex Gorewicz on fixed income in just a moment's time.
You can get in touch with us at any time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now let's get our educational segment of the day.
In yesterday's show, we did take a look at using trailing stops on the platform.
Today's education segment, we are having a look at another type of order, a conditional order. Bryan Rogers, Senior client education instructor with TD Direct Investing joins us now with more.
Great to see you. Let's talk about why you might want to use a conditional order.
>> Thanks, Greg.
He mentioned trailing stops that we talked about yesterday. I wanted to build on that because I think a lot of self-directed investors have heard of these conditional, sometimes you hear them called contingent orders and they are just that, they are conditional or contingent on certain factors.
You may not necessarily need it but I do want to make you aware of it. There's a really good one that's very simple to use and I think once you see how it works, it's something you can easily implement into your daily trading activity if you're more of an active trader or even long-term as well to be able to do multiple actions.
If we jump into WebBroker, I want to show a quick example in a small chart that we have here. I have Suncor Energy up, I just pulled up a random stock. What I wanted to show in the chart was if it's trading at $43 today, it's about between 40 and 45, if you bought it recently around that price and you notice that oftentimes it has some resistance appeared 47 1/2, so maybe you want to sell it at 48 or 49 or 50.
If you are to enter a limit order, it's only gonna let you enter one order at a time.
Whether you enter a sell order, maybe a limit order of $50 or something like that, but you might want to protect yourself on the downside at the same time. In the past, you had to choose, I'm going to put in a stop order here it may be $40 because it came down to 40 recently said to protect myself I'm going to enter a stop order, but then I have to sit and watch and wait until it climbs up to enter my other sell order.
So these conditional orders give you the ability to enter both because the one I'm talking about today is called one cancels the other. If the stock went up to whatever you set, it will sell your stock and cancel your stop order.
This is now giving you the ability to enter both orders at the same time and you're getting the best of both worlds, you can put in an order to sell higher and in order to protect myself lower like a stop order.
>> We got the rationale here and understand why you would want to use an order like this. How do you enter one on WebBroker?
>> That's the tricky part. We go into WebBroker, it's fairly simple once you know how to do it but you need to have someone show you in the strategy section in WebBroker but once you've done it once it's easy to do. There are multiple variations as well.
We will show you where you can find those in WebBroker.
I'm going to click on the sell button.
That's when to pull up the order to get that most of us are used to. If I put in the sell order for 100 shares, once I do that if I do it market or limit, I can enter any other orders on that particular stock. If I go over here to strategies, maybe you stumble on this before didn't know what it is, there are four different types of conditional orders. These ones are more related to options on the far right hand side to this technically three different ones that you have. We have one triggers another, you can read through and it will tell you a little about what these are about.
Say you own the stock already and you click on this one cancels other.
We will put in the same symbol.
And then I can click on sell and put in my number of shares and I'm gonna do the first part of my order.
Like if I put in $50, for example. I put that in and that's my high side. That's where we will hopefully sell above the market. And then below the market if I want to protect myself, I can use a plane stop order, notice the other orders here at the top, I can click sell, you have to put the symbol again, you can use this with different symbols as well if you want to be creative, but this is a simpler version. So I put in 100 shares here, and now stop limit or trailing stop order stock market. If I wanted to trigger a market order when it drops down to maybe $40, if I want to protect myself on the downside, once these are all set up and I go confirm and send and preview the order is I will have an order that's above the market and one that's below the market and when one goes through, the other one is automatically cancelled so I don't have to worry about that getting filled. That's about it on just one of the conditional orders. You can explore those other ones there but I think that's probably the most common one, using the bracket order, being able to sell higher and lower and now you know how to use one of the conditional orders.
>> Thanks for that.
>> Thanks, Greg.
>> Bryan Rogers, Senior client education investor 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.
Alright, we are back with Alex Gorewicz, taking your questions on fixed income.
This one just coming in in the past couple of moments. An intriguing thought.
Our interest rate cuts this year unrealistic?
>> I think that's an excellent question and I think more people need to be asking that question.
So I will say, I will start off by saying yes, they are realistic, even if you don't believe inflation get sustainably back to 2% and I will talk about some of the reasons why, but first I will say I mentioned earlier for rate cuts are priced to the end of this year from the Fed. Now, we look at that number is the probability way to the outcome of every single market participants expectations. It doesn't mean everybody out there thinks it's good to be for. But how do you come up with for?
Well, you probably have a whole cohort of people, let's call it 60%, and then we will say about 30% who think it will be six, I'm making up these numbers, and then 10% to think there won't be any.
The 10% who think there won't be any, it's actually a little bit less than 10% but based off some of the more recent numbers I've seen, it's less than 10%.
I think that number should be more than 10%. And I actually felt that way even after the December meeting when the Fed said, okay, we are now ready to start thinking about when to cut rates, how long we will be on pause and then went to cut rates.
And then, based on what we saw today, inflation is not sustainably on a path in a credible way that we can all agree that is going back to 2%, but a couple of things are very clear. You remember how I mentioned earlier that disinflation has not been off track, it's maybe just stalled for now and maybe will stall for the next couple of months.
Even if that's the case, if things move effectively sideways and you get stuck around 3% inflation, with the Fed at 5 1/2%, what it means is more time passes, the more you actually contract, if you will, credit conditions and financial conditions in the economy. So the Fed can stand still but still have a tightening effect on the economy and that will be especially true if after the stall in disinflation we go back to inflation coming back down, which I think happens around April or May.
If that's true, then you are tightening standard actually gets even tighter. So the Fed, just to stand still in its monetary policy stance, actually has to start cutting rates and that's effectively why, whether you believe in disinflation or not, the Fed has told you that they are going to cut rates. My mantra is don't fight the Fed. They are going to cut rates.
But I do think in terms of how the market is pricing, especially when we came into the start of this year, six rate cuts to the end of the year, I thought that was egregious. For is more reasonable. Three, which is what the Fed has been telling us in there.plot, that they will cut three times this year, I think if we got to that in the market, I think that's probably appropriate.
>> Rate breakdown of the big issues there.
Let's take another audience question. This one about the United States.
Are we worried about treasury issue? Is that an issue?
>> So thereto, there is a sort of short-term and medium to long-term considerations. Short-term, the answer is no.
When we look at the refunding announcement a few weeks ago, there were no surprises there.
If anything, mildly better than expected.
In other words, less issuance, although still really big numbers. Who are we kidding? Anything more than a trillion, it's still bad.
And in addition to that, the Treasury made sure that how it's funding that deficit it is not in a way that increases for example the supply of longer bonds which investors are a little bit more cautious about. And what we can actually see over the last week, we have had a series of treasury auctions. Three year, 10 year, 30 year, across the curve, we are better-than-expected. So yields actually came down, bond yields came down after those options which is a good sign that investors are willing to take down these big deficits. That short term. Short-term, not an issue. And if anything, treasury supply is in good demand. Medium to long term, and we will have a better sense after the US election at the end of this year, but neither party as it stands right now is really looking to do anything to address the longer-term debt challenge.
Although the Fed is intent on beginning to lower interest rates later this year, it's very clear to everybody, we are not going back to 0% policy rates.
So we will get some rate cuts and if the economy starts to weaken even more, maybe we will get a few more rate cuts.
But if in aggregate between now and over the next couple of years, interest rates come down let's call it 250 basis points, call it 300 basis points, you're still almost 300 basis points higher than you were when we read zero.
That's important because it means to finance this big debt pile that neither party wants to do anything about, the party in DC, he gets more costly and time.
So I think medium to long term, US government debt is a problem, but near term, it's under control.
>> Very interesting stuff. We'll get back to your questions for Alex Gorewicz on fixed income in just a moment's time. As always, make sure you do your own research before making any investment decisions.
and a reminder that you can get 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.
TD Direct Investing Index for the month of January has been released and MoneyTalk's Anthony Okolie has been going over the numbers and has more in this report.
>> The TD Direct Investing Index for the month of January has been released and the main story was that self-directed investors stayed at modestly bullish one month into 2024.
Here are the details. First, let's start with the overall TD Direct Investing Index which measures sentiment in a range from -100 for very bearish to +104 very bullish. They landed at +9, a slight three point drop month over month. Investor sentiment clung to the bullish camp in January, often seen as a barometer for the market. In other words, the market ended January on a high note which is considered a positive sign for the remainder of the year and vice versa.
While the overall DII score declined modestly in January, sentiment remained bullish for the third month in a row and was three points higher versus January one year ago. When we look at the components that make up the DII, one proxy that helps us better understand why sentiment slipped in January, chasing trends which measures how many investors bought stocks on a rising or falling market tumbled 11 points month over month to +5, indicating fewer investors bought a share prices rose. A few key points that stood out.
First, similar to last month, technology was a big winner in January was sentiment rising five points month over month to +18. Secondly, active traders, those with 30 or more trades over the past three months, or more optimistic than long-term investors, those with 29 trades or less over the last three months. Developments in artificial intelligence and optimism over the technology's ability to generate big profits well into the future have been a tailwind for the IT sector. The most heavily bought stocks tech stocks last month included tech giant Nvidia following a monumental rise in 2023.
Other heavily bought stocks included AMD, Shopify and Microsoft which eclipsed Apple to become the world's largest company by market capitalization.
When we look at trading activity based on investor type, active traders were the most positive was sentiment at +20 after edging down five points month over month.
Tech stocks proved to be popular in January for active traders, led by Tesla, Nvidia and Shopify.
And that is you are TD Direct Investing Index highlights for January 2024.
>> That was MoneyTalk's Anthony Okolie.
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, he gives us a view of the market movers on the TSX 60 by Price and volume.
You're not seeing a lot of green on that screen whatsoever. Shopify standing out, obviously a big pullback. The quarter was pretty decent. It's all about the outlook these days.
Rising costs and squeezing margins have investors concerned.
South of the border, hotter than expected inflation, we talked about the S&P 500 in recent days breaking about 5000 for the first time setting record highs and today a bit of a pullback. Still noticing some modest screen on the screen and little pockets but pretty much broadly across the board, we are seeing selling pressure off the back of that report.
You can find more information on TD Advanced Dashboard by visiting TD.com/advanceddashboard.
All right, we are back with Alex Gorewicz from TD Asset Management, talking fixed income. We briefly mention the fact about political parties in the states with debt issuance. What about the US election itself, what reaction could be seen in the bond market?
I'm thinking about the lead up to the election and after.
>> I think to summarize what you just said, there will be more interest rate volatility. Maybe not higher than we are today but one thing that's very clear is that even sense we will call it the Fed to bid at the December meeting, interest rate volatility that's priced in by the market has come down marginally but is still sort of stubbornly high versus many years ago.
It tends to be a more US phenomenon. More troubling than that, it tends to imply higher sovereign risk than normal for the US specifically.
Again, we are not same as for other developed markets even though we've all been on this wild ride in capital markets for the last couple of years. And in the US in particular, it started to diverge versus other developed markets around the beginning of last year. If you think back to January 2023, we had the speaker of the house elections which was a very messy process. It took many, many rounds of voting to get McCarthy elected.
Then we had the bank crisis in March, April. Policymakers all had to come together to come up with a quick Band-Aid solution. Then, we had governments shut down concerns, then treasury issuance concerns that a few months after that and then McCarthy was ousted in the fall and then they elected a new speaker. Round after round, what it did is when we look at sovereign risk, we are actually looking at something called credit default swaps which most people think trade on corporations but they also trade for sovereigns.
The US is the risk-free benchmark of the world, it is the input to every other market the output into every other asset classes output, you would really expect any kind of sovereign risk. Who really thinks the US is not going to pay back its debt? The fact that the CDS gap has continued to widen from each of these events I've mentioned, you can see it almost to the day or week or month that all these pops higher have not been able to come and settle back down even after the Fed pivoted. I was really hoping that part of that manifestation of higher sovereign risk was in part because of how quickly the Fed was tightening interest rates although I had my doubts because every other central bank including the Bank of Canada was also raising their interest rates very quickly and they didn't see that kind of increase in sovereign risk. So to me, it really boils down to cohesion in politics.
If there is a lot of dysfunction in DC, I don't think that investors, broadly speaking, have confidence that the US exceptionalism will persist. So to me, it means higher interest rate volatility in the US, which translates into higher volatility or capital markets everywhere, regardless of who wins the election.
>> Always fascinating insights and a pleasure to have you on the show.
>> Thanks.
>> Alex Gorewicz, VP and Dir. of active fixed income Portfolio management at TD Asset Management.
As always, make sure you do your own research before making any investment decisions.
stay tuned for tomorrow show. Vince Valentini, managing director for equity research at TD Cowen will be our guest, he must take your questions about telecom and media stocks.
You can get a head start on those questions.
Just email MoneyTalkLive@TD.com.
That's all the time have the show today.
Thanks for watching.
We will see you tomorrow.
[music]
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's show, we discuss what today is hotter than expected US inflation report means for rates and fixed income with TD Asset Management Alex Gorewicz.
MoneyTalk's Anthony Okolie is going to have a look at investor sentiment with the results of the latest TD Direct Investing Index.
And in today's WebBroker education segment, Bryan Rogers will shows how you can use conditional orders 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 to all that and our guest of the day, let's get you an update on the markets.
It's not a great picture. We will start here at home on Bay Street with the TSX Composite Index. We are at a 381 point deficit, almost 2% down.
Among some of the most actively traded names in Toronto right now, including Cenovus Energy, a lot of energy names under pressure today. At $21.99, instead about 1.3%.
Pullback in the price of gold, Kinross Gold is down about 3.7%.
South of the border, as investors take the inflation print and try to figure what it means longer-term, these are markets I'd been making you all-time highs in recent sessions, the S&P 500 is pulling back more than a full percent or 50 points.
The tech heavy NASDAQ is off the lows of the session but still under pressure, down 186.41.17 percent as well. I want to check in on some of the Wall Street heavyweights, Bank of America is down 2.25%. And that is your market update.
We have more signs that inflation in the US has not been tamed with the latest read on consumer prices coming in hotter than inspected. What does this mean for interest rates in the bond market? Joining us viscous is Alex Gorewicz, VP and Dir.
for active fixed income portfolio management at TD Asset Management.
The expectation was that we would be below three, it didn't happen. Why?
>> There is no one answer.
The stickiness is quite broad-based which is a problem for the Fed.
I think if we look at the headline numbers, we had some expected let's say drags from goods or energy, although be at less than what was anticipated and maybe that contributed a bit to the meats.
But really it was core services, even excluding shelter, which is continuing to moderate but it's really core services X shelter that's just proving to be quite sticky. Some components actually edged higher. Not good.
>> I was going to say, we didn't expect it would be a straight line all the way down from the eight or nine where we were way back when down to the 2% target, that there would be chop along the way, but is this more than just drop?
Are we going to get to two in the time we think that we are going to get there?
>> I think… It's hard to say at this time.
The reason I say this is it was anticipated by let's call them inflation experts, people who are putting their money where their mouth is and trading inflation like products, it was expected that this month and the next couple of months, February, March, are expected to remain sticky and that they are not necessarily suggesting inflation across the board is starting to trend higher, but they are sort of stalling the disinflation progress.
This, to some extent, was not unanticipated. It was maybe a little bit firmer than that, but nothing at the moment suggests that the Fed was want to pave it. It does reinforce, however, that the euphoria coming into this year with five or six rate cuts to be delivered by the end of the year, there was just too much euphoria and that had to give back.
>> Let's talk about that euphoria. We did see Jerome Powell push back against this.
He said, listen, we are not in a rush to cut rates.
There's been a dance. We've been talking about the stance between what the Fed in our central banks have to say and what the market wants to believe. Are we pulling expectations back in line again, saying, maybe he is serious and has reason to wait?
>> Yes, and this definitely reinforce that, but we didn't need the CPI number to basically validate Powell's stance or we will say the collective Fed stance that March is too soon because jobs numbers beat, GDP data, both realize for Q4 of last year as well as advanced data for Q1 of this year, they are all tracking a lot better-than-expected which, you know, tells you that the Fed can at least be patient.
This just reinforces that. Again, it doesn't necessarily throw off track disinflation progress, it just dulls it.
We will see next month and the month after that if we have a genuine pop higher or if what we have seen today in terms of the broadening of that stickiness in core services, if that persists over the next couple of months.
But in any case, I think the bond market's reaction, which is, okay, we are not pricing and six, now we are pricing and only forward to the end of the year in terms of rate cuts from the Fed. I think that's a lot more appropriate.
>> What does it take for the Fed or really for the economic data, I think in terms of interesting ideas but recently about the idea that if you can have interest rates at this level, which we consider to be restrictive, more restrictive than they need to be, they are not neutral, but the economy keeps performing, the labour market keeps up, inflation is stuck there above three, the Fed not only doesn't have to be in a rush, do we have an idea where rates need to be to bring the economy into balance?
>> That's an excellent question and I think if we judge based on the reaction that we have seen in interest rates, let's say year to date as this full suite of data, not just the latest CPI data but the full suite of economic data has been coming in better-than-expected, I think interest rates have responded accordingly, which is they've edged higher. Today, we have had actually a pretty significant reaction to this CPI print, as one would expect.
Ten-year interest rates are a little higher by almost 10 basis points, two-year and five-year are up even more than that.
The reaction was expected but interest rates year to date have been reacting by moving higher to all this positive data.
Where I have more concern for the broader market, both a broader bond market as well as Capital Market is that risk assets, whether you look at corporate bonds, that's effectively where we say looking at credit spreads or whether you are looking at equities, I think they really ran away with this notion that we will get five or six rate cuts and they probably have more adjustment to do after this CPI print.
When I think about where rates are, I would say they are pretty fairly priced for only three, maybe four rate cuts that we will get this year.
>> What does that mean for fixed income this year? It's still early, we are only in February. We had expectations and six, seven weeks in, we are starting to question them.
>> Looking back at every rate cut cycle since the 60s or 70s, we went back a long time, and one thing that we found was that interest rates don't really fall until we are about let's say a calendar quarter, three months, away from that first rate cut. What was clear, and this is why I keep mentioning the broad suite of economic data, what was clear from as early as the first week of January is that data was suggesting that the economy is doing better than expected, better than the Fed's forecasting, better than economists are forecasting, and what that meant was that March was too soon. We have been talking about that for many months now, and that June was more likely. So if history repeats itself like it has in prior rate cutting cycles, that means you will have interest rates come down and therefore fixed income as an asset class will generate positive returns but you need to be within striking distance of that first rate cut.
I think at this point it is too far away.
As long as the data is not suggesting inflation is re-accelerating and as long as the data cooperates, I think that's where you start to see those positive gains in the asset class.
>> With what we know today and the caveat that it could change according to the data that comes out in coming weeks and months, is June still reasonable, a reasonable expectation that perhaps we see that first rate cut in June?
>> Yes, I think so. Interestingly, the bond markets reaction to today's CPI print was to effectively price out any expectation of rate cuts in March. But the May meeting still has 40 to 45% probability… >> Is it still live?
>> It is still a live meeting. With the data coming in as it is, and it's not just the hard data points that I mentioned, even looking at survey-based indicators, they are suggesting a bit of a cyclical upturn. To the extent that that translates into economic activity, we think May is still too soon and maybe the Fed can give itself more option alley and start in June.
>> Always great insights with Alex Gorewicz and a great start to the program.
We will get your questions about fixed income for Alex and just moments time. And a reminder that you 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.
Shares of Shopify are in the spotlight today. Let's check in on the e-commerce services company. They handed in a solid quarterly report but on the screen you are looking at a stock that pull back 11%.
What's going on? Investors are concerned about the forecast. In a note to clients, TD Cowen says an increase in operating expenses will likely weigh on operating margin going forward. That seems to be a concern that has rolled into the price action today. Stronger-than-expected sales at Tim Hortons that help power and earning speed for parent company Restaurant Brands International. Same-store sales, which is a key metric for the industry, were up 5.8% across all of its banners, including Burger King, Popeyes and Tims. That said, we are looking at a stock that is down 3%.
Restaurant Brands did sound some cautious notes on the weakening consumer and their input costs.
Also want to check in on shares of SS are mining.
They are one of the most actively traded on the TSX composition today. The company has suspended operations at its Copler gold mine in Turkey. The miners is a large slip occurred on a leach pad were or is pleased, forcing the suspension of activity. There is the suggestion that some workers are missing as well. The stock is down more than 55%. Let's check in on the markets, starting with Bay Street and the TSX Composite Index. It is a risk off session. Seeing a sizable pullback.
400 points deficit right now, almost 2%.
See if the selling pressure is intensifying south of the border. Pretty much where we started the program. We are down 60 points on the S&P 500, which broke over 5000 for the first time last week and closed above it, but higher-than-expected inflation print has it below 5000 today.
We are back with Alex Gorewicz, taking your questions about fixed income.
Some perspective outside our two countries. Does your guest see any opportunities outside of Canada and the United States?
>> Yes, actually. I assume the question is being asked within the fixed income market space. So maybe two things to think about.
One is more may be near-term and the other is a little bit more medium to long term.
To the extent that today CPI number did not throw the Fed off course and the pivot is still very much intact which, for what it's worth, at the moment, I still believe that to be the case and I still think June will be the first rate cut, to the extent that we get that pivot and those rate cuts follow, it will likely put some downward pressure medium-term on the US dollar vis-à-vis the others which means emerging markets actually are very attractive as an area for higher yields effectively, for carry.
But near-term, today's reaction, for example, to CPI, was that the dollar was up across the board.
EM markets, it doesn't matter what asset classes you are talking about, generally don't do well in that environment. That's more of a medium-term consideration once that easing cycle gets underway.
Near-term, there's been a lot of I would say sort of coincidence in terms of how developed market central banks have progressed in their tightening cycle and now how they are all seeming to pivot to we are going to be on pause, we are not hiking anymore, and eventually we will cut rates. There is a lot of coincidence there.
But there are small variations depending on where each market is vis-à-vis its disinflation cycle. There are 2 Markets outside of North America that we think are presenting quite favourable opportunities just because investors in those markets have been priced in rate cuts as aggressively for 24 as they have in North America.
Those two markets are UK and Australia.
The fact that today's negative reaction we will call it in US bonds because of that hotter than expected inflation has pushed out some rate cuts in the US, you basically have more of a compression between yields in UK and Australia vis-à-vis the US and even to some extent Canada. That is more of a near-term opportunity.
And I think over the next couple of months, you could see further interest rate convergence between the two markets with the UK and Australia outperforming North America.
But eventually, once those rate cuts come through, particularly for the Bank of Canada and the US, it should be relatively indifferent between developed markets.
>> I have another audience question.
This one is a bit of an idea. Let's run this idea passing.
In an article in the Globe and Mail. It Tim Shufelt reference to a research paper from Benjamin Felix at PWL Capital.
Apparently he ran the data through a million simulations of an ideal portfolio and concluded that "Bonds add virtually no value." I would appreciate your guest's thoughts on this. Bonds add virtually no value?
>> Thanks, Greg.
I have to think through my answer here.
There is some existential crisis now for my entire asset class. It all hinges on my answer.
Mea culpa, I don't know this research paper that the viewer is referring to.
But there are two parts of my brain that are going right now.
The first one is the practitioner side of me that says history has shown that asset classes had evolved, have, first, emerged and then evolved out of needs, and that's true for bonds, for stocks, for private assets of all kinds, furniture capital, infrastructure, etc., even more recently, crypto. But what we have to respect is that, and I don't know what timeframe we are talking about with this research paper, if we think it through even the last 50 years, there have been times where bonds have outperform stocks and vice versa and then they've both done well and times when they both not done well, 2022 for example.
So every asset class, and I just use stocks and bonds, but the reality is every single one of those different asset classes that I've mentioned has had their time in the sun and the time in the doldrums.
That's the practitioner side of me. And timing matters because again, not knowing the methodology and timeframe of this research paper one the simulations were run, where they'd done backward looking, on an ex-ante basis forward-looking, I'm not sure, the point is, depending as an investor on your time horizon, he may have found that some asset classes work better for your portfolio and helping you generate returns and compound those returns and other asset classes. And most of the time, I don't know an investor for example who started saving and then 50 years later did not once touch their portfolio. Your life events will ultimately dictate how and when you draw on your investment portfolio and on your savings.
So that's the practitioner side of me. The academic side of me thinks back to grad school and it's fascinating.
In undergrad, you spend all this time learning content. In grad school, you spend a lot more time thinking through research papers and you start looking at pure reviews, what criticisms you peers have of the methodology, have the data sources, of the approach, etc.
So I guess the one thing I would say is not having seen that, perhaps this viewer that asked the question should have a look at what the pure reviews say about this paper and its findings. And if there are no pure reviews or if the limitations of the assumptions used in the paper are not highlighted, the my question is, what is this person trying to sell you? So just be mindful in terms of how you consume conclusions from people's research work.
>> An interesting discussion on that one.
We are going to get to a much more straightforward question for Alex.
>> Thank you.
>> Are the Bank of Canada and the Fed on a divergent path when it comes to interest rates?
>> Are they on divergent paths? No, but I think both of them will very likely start cutting interest rates later this year. I would say let's say said June and maybe Bank of Canada could be July or maybe even June, we will see.
I would say what has changed in terms of my expectations is if you had asked me a few months ago when it was very clear that Canada's economic dynamics were stagnating, potentially even on the verge of contracting, I would have expected that Bank of Canada would begin to cut interest rates much sooner. And if we just look at the economic growth picture, for sure, Bank of Canada has more reasons to cut them the Fed. The flipside is more recent data, the way that I mentioned earlier and showed that it's been strong for the US, it's actually been meeting expectations in Canada as well.
And why that's relevant is that given our well telegraphed housing supply challenges, the one thing that Bank of Canada is very worried about is beginning to cut interest rates and seeing the housing bubble expand even more.
>> That's like last year at this time.
They are on pause, the housing market took off in the spring and then they shorted back up again with more hikes.
>> That housing impact, we will call it the housing transmission channel of monetary policy is actually quite strong in Canada.
Most people are really consumed by how much is their house worth and how does that contribute to their overall feeling of wealth. The fear from the Bank of Canada is if they start cutting interest rates and the housing effect takes on new life that you could actually see inflation reemerge very quickly. Not to mention the fact that although we had hotter than expected inflation in the US, in Canada, it's also been meeting expectations but most importantly it's been beating the Bank of Canada's forecasted expectations.
So now my expectation is Bank of Canada cuts in line with the Fed or even a little bit after them.
>> Interesting stuff.
As always, make sure you do your own research before making any investment decisions.
we are going to get back to questions for Alex Gorewicz on fixed income in just a moment's time.
You can get in touch with us at any time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now let's get our educational segment of the day.
In yesterday's show, we did take a look at using trailing stops on the platform.
Today's education segment, we are having a look at another type of order, a conditional order. Bryan Rogers, Senior client education instructor with TD Direct Investing joins us now with more.
Great to see you. Let's talk about why you might want to use a conditional order.
>> Thanks, Greg.
He mentioned trailing stops that we talked about yesterday. I wanted to build on that because I think a lot of self-directed investors have heard of these conditional, sometimes you hear them called contingent orders and they are just that, they are conditional or contingent on certain factors.
You may not necessarily need it but I do want to make you aware of it. There's a really good one that's very simple to use and I think once you see how it works, it's something you can easily implement into your daily trading activity if you're more of an active trader or even long-term as well to be able to do multiple actions.
If we jump into WebBroker, I want to show a quick example in a small chart that we have here. I have Suncor Energy up, I just pulled up a random stock. What I wanted to show in the chart was if it's trading at $43 today, it's about between 40 and 45, if you bought it recently around that price and you notice that oftentimes it has some resistance appeared 47 1/2, so maybe you want to sell it at 48 or 49 or 50.
If you are to enter a limit order, it's only gonna let you enter one order at a time.
Whether you enter a sell order, maybe a limit order of $50 or something like that, but you might want to protect yourself on the downside at the same time. In the past, you had to choose, I'm going to put in a stop order here it may be $40 because it came down to 40 recently said to protect myself I'm going to enter a stop order, but then I have to sit and watch and wait until it climbs up to enter my other sell order.
So these conditional orders give you the ability to enter both because the one I'm talking about today is called one cancels the other. If the stock went up to whatever you set, it will sell your stock and cancel your stop order.
This is now giving you the ability to enter both orders at the same time and you're getting the best of both worlds, you can put in an order to sell higher and in order to protect myself lower like a stop order.
>> We got the rationale here and understand why you would want to use an order like this. How do you enter one on WebBroker?
>> That's the tricky part. We go into WebBroker, it's fairly simple once you know how to do it but you need to have someone show you in the strategy section in WebBroker but once you've done it once it's easy to do. There are multiple variations as well.
We will show you where you can find those in WebBroker.
I'm going to click on the sell button.
That's when to pull up the order to get that most of us are used to. If I put in the sell order for 100 shares, once I do that if I do it market or limit, I can enter any other orders on that particular stock. If I go over here to strategies, maybe you stumble on this before didn't know what it is, there are four different types of conditional orders. These ones are more related to options on the far right hand side to this technically three different ones that you have. We have one triggers another, you can read through and it will tell you a little about what these are about.
Say you own the stock already and you click on this one cancels other.
We will put in the same symbol.
And then I can click on sell and put in my number of shares and I'm gonna do the first part of my order.
Like if I put in $50, for example. I put that in and that's my high side. That's where we will hopefully sell above the market. And then below the market if I want to protect myself, I can use a plane stop order, notice the other orders here at the top, I can click sell, you have to put the symbol again, you can use this with different symbols as well if you want to be creative, but this is a simpler version. So I put in 100 shares here, and now stop limit or trailing stop order stock market. If I wanted to trigger a market order when it drops down to maybe $40, if I want to protect myself on the downside, once these are all set up and I go confirm and send and preview the order is I will have an order that's above the market and one that's below the market and when one goes through, the other one is automatically cancelled so I don't have to worry about that getting filled. That's about it on just one of the conditional orders. You can explore those other ones there but I think that's probably the most common one, using the bracket order, being able to sell higher and lower and now you know how to use one of the conditional orders.
>> Thanks for that.
>> Thanks, Greg.
>> Bryan Rogers, Senior client education investor 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.
Alright, we are back with Alex Gorewicz, taking your questions on fixed income.
This one just coming in in the past couple of moments. An intriguing thought.
Our interest rate cuts this year unrealistic?
>> I think that's an excellent question and I think more people need to be asking that question.
So I will say, I will start off by saying yes, they are realistic, even if you don't believe inflation get sustainably back to 2% and I will talk about some of the reasons why, but first I will say I mentioned earlier for rate cuts are priced to the end of this year from the Fed. Now, we look at that number is the probability way to the outcome of every single market participants expectations. It doesn't mean everybody out there thinks it's good to be for. But how do you come up with for?
Well, you probably have a whole cohort of people, let's call it 60%, and then we will say about 30% who think it will be six, I'm making up these numbers, and then 10% to think there won't be any.
The 10% who think there won't be any, it's actually a little bit less than 10% but based off some of the more recent numbers I've seen, it's less than 10%.
I think that number should be more than 10%. And I actually felt that way even after the December meeting when the Fed said, okay, we are now ready to start thinking about when to cut rates, how long we will be on pause and then went to cut rates.
And then, based on what we saw today, inflation is not sustainably on a path in a credible way that we can all agree that is going back to 2%, but a couple of things are very clear. You remember how I mentioned earlier that disinflation has not been off track, it's maybe just stalled for now and maybe will stall for the next couple of months.
Even if that's the case, if things move effectively sideways and you get stuck around 3% inflation, with the Fed at 5 1/2%, what it means is more time passes, the more you actually contract, if you will, credit conditions and financial conditions in the economy. So the Fed can stand still but still have a tightening effect on the economy and that will be especially true if after the stall in disinflation we go back to inflation coming back down, which I think happens around April or May.
If that's true, then you are tightening standard actually gets even tighter. So the Fed, just to stand still in its monetary policy stance, actually has to start cutting rates and that's effectively why, whether you believe in disinflation or not, the Fed has told you that they are going to cut rates. My mantra is don't fight the Fed. They are going to cut rates.
But I do think in terms of how the market is pricing, especially when we came into the start of this year, six rate cuts to the end of the year, I thought that was egregious. For is more reasonable. Three, which is what the Fed has been telling us in there.plot, that they will cut three times this year, I think if we got to that in the market, I think that's probably appropriate.
>> Rate breakdown of the big issues there.
Let's take another audience question. This one about the United States.
Are we worried about treasury issue? Is that an issue?
>> So thereto, there is a sort of short-term and medium to long-term considerations. Short-term, the answer is no.
When we look at the refunding announcement a few weeks ago, there were no surprises there.
If anything, mildly better than expected.
In other words, less issuance, although still really big numbers. Who are we kidding? Anything more than a trillion, it's still bad.
And in addition to that, the Treasury made sure that how it's funding that deficit it is not in a way that increases for example the supply of longer bonds which investors are a little bit more cautious about. And what we can actually see over the last week, we have had a series of treasury auctions. Three year, 10 year, 30 year, across the curve, we are better-than-expected. So yields actually came down, bond yields came down after those options which is a good sign that investors are willing to take down these big deficits. That short term. Short-term, not an issue. And if anything, treasury supply is in good demand. Medium to long term, and we will have a better sense after the US election at the end of this year, but neither party as it stands right now is really looking to do anything to address the longer-term debt challenge.
Although the Fed is intent on beginning to lower interest rates later this year, it's very clear to everybody, we are not going back to 0% policy rates.
So we will get some rate cuts and if the economy starts to weaken even more, maybe we will get a few more rate cuts.
But if in aggregate between now and over the next couple of years, interest rates come down let's call it 250 basis points, call it 300 basis points, you're still almost 300 basis points higher than you were when we read zero.
That's important because it means to finance this big debt pile that neither party wants to do anything about, the party in DC, he gets more costly and time.
So I think medium to long term, US government debt is a problem, but near term, it's under control.
>> Very interesting stuff. We'll get back to your questions for Alex Gorewicz on fixed income in just a moment's time. As always, make sure you do your own research before making any investment decisions.
and a reminder that you can get 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.
TD Direct Investing Index for the month of January has been released and MoneyTalk's Anthony Okolie has been going over the numbers and has more in this report.
>> The TD Direct Investing Index for the month of January has been released and the main story was that self-directed investors stayed at modestly bullish one month into 2024.
Here are the details. First, let's start with the overall TD Direct Investing Index which measures sentiment in a range from -100 for very bearish to +104 very bullish. They landed at +9, a slight three point drop month over month. Investor sentiment clung to the bullish camp in January, often seen as a barometer for the market. In other words, the market ended January on a high note which is considered a positive sign for the remainder of the year and vice versa.
While the overall DII score declined modestly in January, sentiment remained bullish for the third month in a row and was three points higher versus January one year ago. When we look at the components that make up the DII, one proxy that helps us better understand why sentiment slipped in January, chasing trends which measures how many investors bought stocks on a rising or falling market tumbled 11 points month over month to +5, indicating fewer investors bought a share prices rose. A few key points that stood out.
First, similar to last month, technology was a big winner in January was sentiment rising five points month over month to +18. Secondly, active traders, those with 30 or more trades over the past three months, or more optimistic than long-term investors, those with 29 trades or less over the last three months. Developments in artificial intelligence and optimism over the technology's ability to generate big profits well into the future have been a tailwind for the IT sector. The most heavily bought stocks tech stocks last month included tech giant Nvidia following a monumental rise in 2023.
Other heavily bought stocks included AMD, Shopify and Microsoft which eclipsed Apple to become the world's largest company by market capitalization.
When we look at trading activity based on investor type, active traders were the most positive was sentiment at +20 after edging down five points month over month.
Tech stocks proved to be popular in January for active traders, led by Tesla, Nvidia and Shopify.
And that is you are TD Direct Investing Index highlights for January 2024.
>> That was MoneyTalk's Anthony Okolie.
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, he gives us a view of the market movers on the TSX 60 by Price and volume.
You're not seeing a lot of green on that screen whatsoever. Shopify standing out, obviously a big pullback. The quarter was pretty decent. It's all about the outlook these days.
Rising costs and squeezing margins have investors concerned.
South of the border, hotter than expected inflation, we talked about the S&P 500 in recent days breaking about 5000 for the first time setting record highs and today a bit of a pullback. Still noticing some modest screen on the screen and little pockets but pretty much broadly across the board, we are seeing selling pressure off the back of that report.
You can find more information on TD Advanced Dashboard by visiting TD.com/advanceddashboard.
All right, we are back with Alex Gorewicz from TD Asset Management, talking fixed income. We briefly mention the fact about political parties in the states with debt issuance. What about the US election itself, what reaction could be seen in the bond market?
I'm thinking about the lead up to the election and after.
>> I think to summarize what you just said, there will be more interest rate volatility. Maybe not higher than we are today but one thing that's very clear is that even sense we will call it the Fed to bid at the December meeting, interest rate volatility that's priced in by the market has come down marginally but is still sort of stubbornly high versus many years ago.
It tends to be a more US phenomenon. More troubling than that, it tends to imply higher sovereign risk than normal for the US specifically.
Again, we are not same as for other developed markets even though we've all been on this wild ride in capital markets for the last couple of years. And in the US in particular, it started to diverge versus other developed markets around the beginning of last year. If you think back to January 2023, we had the speaker of the house elections which was a very messy process. It took many, many rounds of voting to get McCarthy elected.
Then we had the bank crisis in March, April. Policymakers all had to come together to come up with a quick Band-Aid solution. Then, we had governments shut down concerns, then treasury issuance concerns that a few months after that and then McCarthy was ousted in the fall and then they elected a new speaker. Round after round, what it did is when we look at sovereign risk, we are actually looking at something called credit default swaps which most people think trade on corporations but they also trade for sovereigns.
The US is the risk-free benchmark of the world, it is the input to every other market the output into every other asset classes output, you would really expect any kind of sovereign risk. Who really thinks the US is not going to pay back its debt? The fact that the CDS gap has continued to widen from each of these events I've mentioned, you can see it almost to the day or week or month that all these pops higher have not been able to come and settle back down even after the Fed pivoted. I was really hoping that part of that manifestation of higher sovereign risk was in part because of how quickly the Fed was tightening interest rates although I had my doubts because every other central bank including the Bank of Canada was also raising their interest rates very quickly and they didn't see that kind of increase in sovereign risk. So to me, it really boils down to cohesion in politics.
If there is a lot of dysfunction in DC, I don't think that investors, broadly speaking, have confidence that the US exceptionalism will persist. So to me, it means higher interest rate volatility in the US, which translates into higher volatility or capital markets everywhere, regardless of who wins the election.
>> Always fascinating insights and a pleasure to have you on the show.
>> Thanks.
>> Alex Gorewicz, VP and Dir. of active fixed income Portfolio management at TD Asset Management.
As always, make sure you do your own research before making any investment decisions.
stay tuned for tomorrow show. Vince Valentini, managing director for equity research at TD Cowen will be our guest, he must take your questions about telecom and media stocks.
You can get a head start on those questions.
Just email MoneyTalkLive@TD.com.
That's all the time have the show today.
Thanks for watching.
We will see you tomorrow.
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