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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 are going to discuss developments in the market for crypto current CTS with TD Securities Andres Rincon.
MoneyTalk's Anthony Okolie is going to break down the latest Canadian GDP report.
And in today's WebBroker education segment, Jason Hnatyk is going to take us through how do all listed shares work and how you can find them on the platform.
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.
Last trading day of the shortened trading week.
And we are at the end of the first quarter. Let's check in on how we are doing the TSX Composite Index not too bad, putting 85 points on the table, about one third of a percent. Some names notably moving today include BRP, Bombardier Recreational Products, the makers of Ski-Doo's NCDs. Even though they are seeing sales come off those pandemic highs because people were buying a lot of those pleasure class, right now at $90.51 per share, they are up about 5%. They boosted the dividend. I will tell you more about BRP later in the program.
Noticing weakness among the lumber producers. A Canfor, representative of the group, at $17.21, down 1.5%.
South of the border, the S&P 500 is about to close the books on its best first quarter performance since 2019, putting a very modest 6 1/2 points on the table today to cap off the quarter, up about 1/10 of a percent. Tech heavy NASDAQ, it's lagging the broader market.
It is modestly to the downside, about nine points, nothing too dramatic.
AMC Entertainment, shares under pressure.
They are selling 250 million stocks, they need an injection of liquidity due to sluggish a box office performance. AMC is pulling back about 15% on today's session.
And that's a market update.
A lot of excitement in the markets around the launch of Spot bitcoin exchange traded funds in the United States, but how has the space of all tensile launch in January? Joining us now to discuss that and some other things is Andres Rincon, managing Dir. and head of ETF sales and strategy at TD Securities. Great to have you back on the program.
>> Thank you for having me.
>> Spot bitcoin ETFs launched in January.
We have a few months under our belt. How is the space evolve?
>> It's really fascinating.
As we talked about at the time, 11 bitcoin ETFs were approved and relaunched in the US and it has been a lot of activity, we have seen a lot of excitement, a lot of news. It's been in the news consistently in the US. Really, what we were seeing was new money coming to the space which was very interesting. We have seen some money flow from existing crypto products that were already in the space into the ETF structure but we have also seen a lot of the money come into the space and that's what's really in my opinion exciting.
Now that you have behemoths like BlackRock and Fidelity putting their name behind a crypto ETF, you will also have a lot of advisors now and other investors saying, maybe this is a little bit more legitimate and we could allocate a little bit into these funds.
The evolution really has been that now we are seeing advisors and investors put a small allocation into their traditional portfolio, let's say 3% or 5%, or what was perhaps your gold exposure before is now your crypto exposure.
We are seeing a little bit more of this transition and what's really interesting is that this was expected but really unintended.
What I mean by that is that the SEC was basically forced to approve many of these ETFs.
>> That was big caveat, right? They were not saying we endorse these investor products, they since he said there was a decision and here we are.
>> It was very clear, there are a lot of risks.
They weren't necessarily endorsed but here we are. I have all these ETFs with big games behind them so they are trading a lot more. Since then, we have also seen a lot of different funds for other types of crypto.
We have ether ETFs.
We have crypto ETFs in Canada and we also have ether ETFs which the US does not have us of today. We do expect the United States will get them in the not too distant future. I think the SEC will take its time on that one.
But given what we are seeing in Europe, for example, we expect that we will see Ethereum and other crypto currencies eventually come on more. The reason we haven't seen that in Canada past Ethereum his one restriction has been needing to be able to trade futures but those restrictions are not necessarily there in the US. I suspect is going to be a lot more of that in the US.
>> Clearly we have seen the interest in the space. Remind us of the risks around these products?
>> I am speaking on behalf of the SEC, the SEC has already talked quite a bit about the risks. If you look what they appointed to, a couple of the risks is that there are a lot of manipulation in the crypto current itself and most importantly, the SEC cannot control that market, it's not a regulated market. Because they can't regulate, they feel uncomfortable us what happens in those markets. In some respects, they see there is a lot of flow in money going into the space that they cannot regulate either from a money-laundering point of view, so there's a lot of conversation there.
But there is also the concern of custody at the end of the day. These are digital assets and the custodian for all these ETFs is heavily regulated, it's digital, it's a new process compared to the traditional custody model.
There are many risks to these ETFs and obviously there's a lot of volatility in crypto currency so there's obviously the risk of loss from these ETFs.
>> An interesting space.
Crypto, good run this year, a bit shaky but been rising.
How about some other commodities you've seen in the markets?
>> Similar to crypto that's done really well from a performance point of view, so bitcoin has done really well. Other commodities or other areas that have done really well our commodities. You've seen the price of gold continue to skyrocket.
Oil continues to skyrocket. What's really interesting is that commodities have been really resilient during times of distress.
We Lipic COVID, Ukraine Russia conflict, the current conflict in a ran near the waters, a lot of that is pushing these commodities higher.
And not just these two, gold and oil, but across the board.
Despite that though, the allocation to commodities is relatively low these days.
So if you look at flows in commodity ETFs in the US and in Canada last year, it was fairly muted. This year, it slightly up.
But last year in Canada it was slightly down. It's interesting to see how these assets have done so well but the allocations have been fairly muted. Given they are resilient and diversified portfolio, the one area that's often overlooked.
You have gold ETFs, oil ETFs, base metal ETFs, agriculture ETFs, we have many different areas you can invest here in both Canada and the US.
>> Let's talk about covered call ETFs. We have discussed them before in a previous appearance here. What does the space look like right now? Is it so popular?
>> Let me put it this way. Canada, this has been one of the areas that Canada has really thrived in. We have over 160 covered call ETFs just here in Canada and the space is fairly large, over $24 billion. Why is that? We have investors that need and want yield.
Now in the US, although they launched the first covered call ETFs in the world, PP b-boy Invesco, it didn't really catch on for many years. But it wasn't until 2020 when David Morgan launched JEP Q that it really started to catch on and grow.
The industry has gone considerably higher over time. A lot of money has piled into the space. They have fewer products.
30 something product that they are now at $68 billion.
It's really interesting and the products are slightly different. They are more broad market focused in the US. In Canada they are sector based.
We have more products and more breadth that here. The popularity in the US has gone very, very high, now every single issuer is launching new covered call ETFs because they are seeing the success of those products.
>> What do investors need to be aware of in this? From what I understand covered call generates income but maybe you don't take part in all of the upside.
>> Basically, when you are investing in a yield enhanced or covered call ETFs, you are making an active decision to give away some of your growth in exchange for income today. So you're saying, I prefer in this environment or in the current environment time and as an investor, I preferred to get income today versus the growth that I might get in the future and the benefits of that.
To many retirees, this is exactly what they want. It also depends on your lifestyle.
It's for people who want income. That's what these products offer.
>> We have a bit of an anniversary and the ETF space as well. It's been 34 years and something happened.
>> Yes.
A lot of people don't know this but the first ETF ever launched here in Canada. It was a very tight competition between what we call the tips, it attracted the TSX 35 index. That was the first ETF ever launched in the world shortly after SPY, which is the world's largest ETF launched, but Canada launched the first ETF. In March, it was the 34th anniversary of ETF and also we had a couple of very good milestone. We have 40 issuers now, 1400 Products in Canada and over $400 billion in assets under management in the ETF industry so we had a couple of milestones in February and March in the ETF industry in Canada.
>> Interesting stuff and a great start to the program. We are going to get your questions for Andres in just a moment's time. A little later in the show, we are going to get a preview of his show Buyside Views. And a reminder that 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.
Home Depot is making a multibillion-dollar pay to attract professional contractors.
The home-improvement chain says if I SRS Distribution $418.25 billion, the largest acquisition in the company's history.
Home Depot has been making moves to attract pro-customers including building large warehouses across North America, including in the greater Toronto area.
Tesla is facing some more competition in China. Smart phone company Xiaomi plans to sell its first electric vehicle car for less than Tesla's model three in that market, although the company concedes it will be selling the vehicle at a loss.
The company showcased the car last month at the Mobile world Congress in Barcelona.
It appears demand for Ski-Doo's NCDs has moderated from pandemic highs. BRP is reporting a pullback in sales and profit for its most recent quarter, compared to the same period last year.
Despite that sales softness compared to the pandemic, BRP is raising its dividend payout to investors and that has the stock of a little shy of 5%.
Let's check in on the market. We will start here at home with the TSX Composite Index, last trading day of the week, last trading day of the quarter. Got some green on the screen. We will be kind and round that up to 80 points, a little more than one third of a percent.
South of the border, the S&P 500, very modest, we will round them up to five points to the upside.
Alright we are back with Andres Rincon taking your questions about exchange traded funds.
First one for you here. What should we make of the big outflows we have seen from a US crypto ETF like greyscale?
There are some interesting details around this one.
>> As I was mentioning, and the industry itself, we've seen inflows, about $30 billion. Greyscale is interesting because it was one of the largest products already out there the targeted bitcoin and specifically spot bitcoin. It was about a $30 billion fund before it changed and what happened is that this was a closed structure so and ETF is an open-ended structure where anyone can go in and out of the fund but an enclosed infrastructure, if you want to sell you have to find a buyer.
There were always a certain number of units outstanding. Greyscale decided they wanted to convert their closed structure fund into an ETF. When I did that, it allowed a lot of people to come out of the ETF without necessarily finding a buyer for that ETF. So what we are seeing is a lot of switches from the greyscale product two other ETF's that have perhaps a management fee. What's interesting is that the greyscale product has the management fee and expense ratio in total is about 1.55 which is much higher than the 20 beeps and 25 being offered by many of the other competitors.
Obviously if you are now unitholder of DBT C, you would say why my holding this one I would perhaps prefer to hold something much deeper in getting the same exposure?
Forcing a lot of that.
You are seeing around $7 billion in outflows. They've gone from $30 billion-$23 billion. They are still the largest bitcoin ETF in the world today but not for long.
There is a new one at $16 million in just a couple of months and they are tracking heavily. We have seen a peak in the flows there but at the end of the day, they are continuing to bring in money so we suspect that within a couple of months, they will no longer be the largest ETF in the world.
That's why we've seen so many outflows, it's a switch from one to the other in that case.
>> An interesting space to keep an eye on their on some of the constructs. Another audience question. Many ETF such as BMO Z Series offer higher dividends than the underlying stocks in the fund. Where is the extra risk for this extra ward?
>> Just to clarify, I don't think BMO offers a Z Series. All BMO ETF start with a Z so maybe that's where that question is coming from.
Looking at the BMO lineup, they offer a T series which is a mutual fund specifically which what it does is it pays rock specifically. That's very different. When you have a fund that is T series, it will pay yield and rock, it's paid part of its capital, part of its value how to investors so that's why they that's where the question was coming from because in theory, yes, you are providing higher yield than what the stocks are actually paying out in dividends or perhaps we are talking about the cover call lineup which is calls on these names, getting a higher yield but in a normal BMO ETF that starts with a Z, the ETFs will just pay out whatever dividend comes into the fund from the stocks underlying so they are not paying anything else about that.
>> Interesting stuff. Another question from the audience. Someone will say your thoughts on Mexico and what ETF options would be best suited for this market?
>> This is not an area that we talk about very often, to be honest, but with onshoring now we are hearing more and more about Mexico. Instead of the focus being on Taiwan sometimes, with all the microchip producers moving back to North America and all the infrastructure spending that the US is doing in North America, we are seeing more interest in Mexico. The reason being that a lot of that production is going to Mexico.
There are a couple ETFs in the US that focus on this area. They are not sizable.
They are $2.2 billion in assets under management.
It's mostly one ETF, E WW from iShares. If management fee is slightly higher at around 50 beeps or so but there's a couple other ones that are offered, from Franklin that is considered cheaper, 19 beeps, it provides very similar exposure. EW W icing covers 99% of the Mexican stock market and the Franklin one is a bit tighter, 90%, so you're getting similar exposure but a cheaper fee.
>> One of the risks one can imagine is the Mexican market.
>> You are not just playing the whole production in onshoring angle, you're also playing whatever politics happened within Mexico which as we know historically there are a lot of risks there.
>> Interesting stuff. Regular viewers of our program also know that Andrews hosts his own show called Buyside Views, where he speaks with prominent members of the investing community about the industry trends they are seeing. The latest episode just launched and features the AGF Management CEO, Ken Tsang, and ash floors, head of AGF capital partners. They talk about the role the asset class fills in portfolio.
>> I think there's a lot of commentary about you just get higher returns from private markets and I think that leads to people going into private markets one, one, it may not be appropriate for them, or two, they haven't spent the time to be really diligent and understand the managers and when you are going into something that semiliquid or in some cases illiquid, you have to put it in the right part of your portfolio.
This can be part of the portfolio you might need in September to pay tuition.
This is a part of your portfolio that you have a long-term view on that you will ride through market cycles and leave there.
>> Interesting. Talk to us a bit about the episode and some of the other things you talked about.
>> For starters, it's fascinating. I work in ETFs which is completely opposite of private markets. We value our securities on a daily basis on the millisecond by speed and private markets are the opposite.
What's interesting is that private market is considerably larger than public market.
It's at about $13 trillion and is growing at a 20% clip while public markets, we are seeing fewer IPOs, we are seeing a bit of a slowdown in public markets and companies wanting to IPO at that rate. AGF is actually leading the space and making a lot of acquisitions in the space. We had Ash Lawrence who heads the private markets called the alternative world for ETFs but we also had the CFO there.
I encourage everybody to join me on Buyside Views. It's on our website is also available on Apple, Google podcast and modify.
Feel free to subscribe and go to the website for more information.
>> Thank you for correcting Mr. Tsang's title. That's Buyside Views.
As always, make sure you do your own research before making any investment decisions.
we are going to back to questions for Andres Rincon on ETFs and just moments time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, look at our educational segment of the day.
You may have noticed that some stocks trade on more than one exchange. Joining us now with insulators Jason Hnatyk, Senior client education instructor with TD Direct Investing.
Always great to see you. How can you identify which stocks are dual listed and what are the benefits?
>> TD Direct Investing prides itself on giving his client's choice and using dual listed securities can help amplify those choices, they can help you target investments using currency you have on hand, maybe you've got Canadian or US dollars and with that turns into is the opportunity to save on foreign exchange.
Let's jump into the platform. I will show us where we can identify stocks that have that dualistic capability and know-how that can be best taken advantage of.
We will use our search bar in the top right-hand corner on the stocks overview page. I'm going to put in ENB for Enbridge.
The first thing I want to look at is hit myself off is I can see there is both Canadian as well as a US flag next to two different Enbridge symbols.
It's the same stock, it's just identifying that it's trading on both sides of the border in different currencies.
If I jump into our Canadian trade.
This is all Canadian dollars, the price is Canadian, the changes Canadian. Click buy or sell, we are getting a buy or sell order in Canadian dollars. But take a look at the top of the page. Next where the ticker is indicated, there is a Canadian flag. Whichever account is appropriate, this hyperlink will bring up the US quote.
We can see the prices differently keep in mind, this is the same security, it's just that the prices off by the exchange rate.
There is typically not going to be charged opportunities but this is in our tipoff because you got the US flag at the top of the page that we would be trading in US dollars. If I go ahead and proceed by clicking the buy button on the screen, that's going to quickly bring up in order to get. I notice that the symbol is highlighted by showing us about the US indicator next to the symbol. It's going to be a tipoff. A quick word to the wise for those in the keep in mind that you are choosing the right account to you. I have my Canadian margin as my default account set up so that flow pops up.
>> Now we have a good understanding there of what they are and where to find them.
Can you transfer a dual listed stock between currencies on WebBroker?
>> Yeah. One nice thing is we can do it in my broker where it will be a real time transfer but you can also do it on the mobile app.
It's very similar as to how you would do a cash transfer but this time you're transferring an asset between our accounts.
Let's jump into the platform and I will show you how that can be taken care of.
If we go to the top of the screen, we will see our accounts tab.
Under transfers and withdrawals, their different choices.
Still we are after here is third one down.
Transfer securities within your TD investing account.
The nice thing here is that maybe I had US dollars when I purchased my shares and I wanted to make sure… When I make my sale and one Canadian dollars back because I know Enbridge in this particular case is traded in Canadian dollars and I can transfer it from my US account and move it over to my Canadian account. My demo account, I don't have the assets to allow me to go further but this is a great way since we are transferring an asset and not cash, we are not making a sale.
It's nice and convenient. Can be accomplished here in my broker as well as the mobile app that you can have in the palm of your hand.
>> Great stuff as always. Thanks.
>> It's my pleasure.
>> Jason Hnatyk, Senior 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.
Now before you back your questions about ETFs for Andres Rincon, a reminder of how you can get in touch with us.
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.
Okay, we're back with Andres Rincon, take your questions about exchange traded funds.
Someone wants to know what do you think of the bank equal weight ETF Z EBD? Is it good for long-term dividend growth?
>> I can't recommend it one ETF over another.
Those ETFs invest in all the banks equally weighted so it's a very easy, passive way to get exposure to the banks and the growth of dividends that those banks have.
They tend to be a big source of income for a lot of Canadians in fact, there are very big holdings amongst Canadians. If you look at TD Direct Investing as a client base, many of the holders within TD DIR banks. This is an easy way to say, I don't know which one to pay, might as well pick all of them because many of them are somewhat similar so it's a very easy way to possibly invest in the space and enjoyed the dividend growth of the banks in general.
>> Interesting. Someone is asking about we talked about Ethereum off the top.
There is a spot Ethereum ETF coming out, will it be as popular as bitcoin?
>> A lot of people look at it as having a slightly different application in the world but it obviously is still the most second popular coherence he in the world and I think what you can use as an analogy is Canada. So we had the first big point ETF lunch in Canada and we had the first Ethereum ETF launched not long after.
The first big point ETF came with a lot of momentum and a lot of enthusiasm and suited Ethereum but not to the same degree.
If you look at the asset breakdown, there's a lot more money going into bitcoin then into ether in general. I think it's fair to say that we would expect the same in the US. The SEC will take its time, as I mentioned earlier.
There are already at nine products filed from many of the same issuers.
The bitcoin filers have also filed for Ethereum. They will likely be approved at the same time.
There are a lot of different funds that are already in a closed structure or other structures that have a lot of money from investors that it we are likely going to see huge shifts into those ETFs to so we are like the way to see new money and existing money and either move into those products.
>> An interesting space to watch as those things were low. Another question from the audience. Someone has read the past investing in ETFs is much less popular in Canada than in the US and other countries.
Is that true and why?
>> I wouldn't say that it's less popular in Canada. I would you say that actively managed ETFs here in Canada are more popular than in the US because of regulatory reasons. In Canada you can launch and ETF series from a mutual fund which you cannot easily do in the US. We talked about this more detail but it's a little bit harder for your traditional mutual fund issuer in the US to launch an ETF series of that existing, very large mutual fund. Because of that, I means they have to launch a new strategy which is more costly for them and there are also transparency regulations in Canada versus the US. In Canada, you do not need to be transparent on the disclosure of the holdings of your ETF on a daily basis but in the US you do.
This means that for an active manager might be a little bit harder to, for them to launch… They might not want to show their holdings on a daily basis.
It's really a structural conversation.
>> Another question. Some prominent investors like David Einhorn have said that passive investing is breaking the market.
Does the rise of ETF investing pose a major risk to the function of markets?
>> Similar to the other conversation, what I would say is that people don't realize that mutual funds are still much larger than ETFs.
The mutual fund world is to some degree index but also active. So now people look at it because ETF's are somewhat like the fund becoming public, it seems that way.
They are more on the news, they are followed, they are covered while a lot of mutual funds are not.
It seems that there's a lot of money going into ETFs but there still a lot of money in the mutual fund space.
In Canada, 25%, over 25%, over 1/4 of the ETFs in Canada are active strategies so there still a lot of money going into portfolios where the PM is deciding where they want the money to go into.
The same thing is happening in the US. We have a lot of discretionary strategies in the US and its smaller as a percentage of all assets because we have the behemoths, spider or the very large passive ETFs that are used globally to get exposure to the US but you have spaces growing faster than others, that actively managed base is growing.
Obviously, passive is been in the news quite a bit when it comes ETF structure but active is also a very big part of the ETF world and it is growing.
>> Interesting stat. Another question here. Someone says they are just interested in a discussion on covered call ETFs, their pros and cons, particularly in the current market picture. If not now, when is a good time to use them?
Let's break it down.
>> Income is why you are buying these products.
They also have a different correlation.
They behave different light. Why? Because what they are doing is they are selling a call over your long stock which means that you are giving up some of that upside in that stock.
What's really interesting is that you're getting income for that.
Basically what it's doing is taking away some of the volatility in your portfolio and giving it to you in the form of cash today and so that works for some investors and doesn't work for other investors.
What I would look at this product for it is in times of volatility they generally do well from a yield point of view. They also tend to do fairly well and sideways markets are down markets which is when you have a lot of volatility generally speaking because what happens in high volatility, yet higher premiums on the options which means you get higher yields on these products.
In a bull market they tend to underperform in us because they are capping the upside.
Most investors do not use it as a beta for the portfolio obviously because you're giving up a lot of the upside but they use it as a sleeve or tactical allocation where they want more focus on yield.
>> Fascinating stuff. We'll go back to your questions for Andres Rincon on ETFs and just moments 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.
Let's talk about the Canadian economy. It kicked off the on a positive note. We got the numbers and for the first quarter, continued the momentum of the final three months of last year. We got some solid evidence now that inflation is cooling. We had a strong GDP. What does all mean for the Bank of Canada and that first potential rate cut?
Our Anthony Okolie has been taking a look at a TD Economics report on that very thing and breaks it down for us.
>> The Canadian economy came roaring back in the first quarter growing up .6% month over month in January, well above consensus for 0.4% read./Estimates for February point to a healthy advance of .4% as well. Looking into the details of the report, a big driver in the first quarter was primarily services driven which was up .7% month over month with a large tailwind from the end of the public sector strikes in Québec as a rebound in education contributed three percentage points to a headline growth. Healthcare information, culture, arts and recreation were large movers in the services sector.
Meanwhile, the good sector did eke out a .2% month over month advance led by both manufacturing and utilities.
Overall, it was a pretty broad-based gains. 18 of 20 Industries Expanded in January which makes it more difficult to dismiss the contribution from education or the flash estimates for another robust print in February.
As I mentioned, the advance reading of .4% month over month growth in February is expected to come from a rebound in oil and gas with further gains coming out of manufacturing as well as finance and insurance sectors.
If this is realized, the flash estimate for February would leave first quarter GDP tracking at a 3.3% quarter over quarter annualized gain which is well above expectation. This contrasts sharply with the banks .5% reduction from the January monetary policy report.
Today's report should raise the bar for any dovish pivoted at the April Bank of Canada meeting as the Bank of Canada will likely want to see more evidence from February and March before it is ready to shift to a dovish stance.
>> Further out, what are we thinking about that first potential rate cut?
>> Currently, markets are pricing and or are hopeful for a potential rate cut in June but TD Economics believes that a July rate cut is much more likely by the Bank of Canada. Excluding education sector rebound, growth in January still presented a solid month over month gain while a seasonably warm winter may be contributing to the heating up of the economic activity.
I think they're going to need to see more evidence that the economy is cooling.
>> Interesting stuff. Thanks.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, for an update on the markets.
To 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, giving us a view of the market movers. We are looking at the TSX 60 by Price and volume. It's clear who is leading the session today.
That would be the mining stocks. We have gold moving higher today and we have some names levered to that space including Kinross up about 3%, Barrick up a little more than 2%. Across the rest of the board, even though we have farming in the price of crude, it's lifting some of the oil names, not as dramatically as some of those oil names.
South of the border, we were seeing best first quarter performance for the S&P 500 since 2019. Just gonna drill down to the 100 and give us a clear picture. Sort of mixed today.
AMD, Intel, Nvidia up modestly, the chip plays, some other tech companies modestly to the downside.
We told you off the top of it has low getting more competition in China, pretty keen market, and that stock is down a little more than 1%.
You can find more information on TD Advanced Dashboard by visiting TD.com/advanceddashboard.
We are back with Andres Rincon. What is your view of low volatility mutual funds or ETFs in this market?
>> This is an interesting space because low volatility products in general, what they do is they give you exposure, as the name implies, to low volatility stocks or whatever assets they are looking for.
How they do that generally is they look at the standard deviation of the actual volatility of the stock and say, this is low volatility.
It was like that yesterday, one month ago, a year or whatever it is, therefore, I'm going to invest in this low volatility stocks going forward.
These products do imply that because they were low volatility before that they will be low volatility later which is not necessarily always the case obviously.
This is one of the risks for these products. But what they do hope to engage and Harriet is giving a portfolio a low volatility going forward.
So if you think that the market is going to see some volatility, perhaps a downturn, these products are designed to hopefully provide lower volatility in those markets.
Now in reality, these products are split between low volatility and what they call minimal volatility and low beta. These different metrics. Low beta targets low beta stocks which are different than the others.
Low beta is a bit different because it targets names that don't really correlate well with the market today and as such will provide a little bit less correlated returns if the market were to turn lower.
So that's something very important for investors keep in mind when they're looking at low volatility, minimal volatility and low beta products as to what they want to obtain.
They can be used as beta for your portfolio, they can be used as a tactical allocation depending on what you want.
Some products are really annex hugging where they are basically targeting let's say the S&P 500 and they are targeting a lower volatility version of that.
Some really skew it in terms of low volatility is so they are better positioned for impact allocation because they will really move the relation of your entire portfolio. It's important to do your homework and understand the different products out there.
It's a fairly large space, but $66 billion in assets in that space today. Many products in Canada and the US. US MD is the largest in the US, about $24 billion, you also have SPL V in the US. In Canada, BMO has a fairly extensive lineup, is ELB, CLU for Canada and the US giving you exposure to low volatility or low volatility in the case of BMO exposure through an ETF.
>> Always a pleasure to have you here and to talk ETF.
>> Thank you for having me.
>> Our thanks Andres Rincon, managing Dir.
and head of ETF sales and strategy at TD Securities.
As always, make sure you do your own research before making any investment decisions.
if we didn't have time to get your question today, we will aim to get it into future shows.
On a program you know, we will be off tomorrow for Good Friday and we will be back on Monday with an update on the markets and some of our more recent interviews covering personal finance issues facing us Canadians. That's all the time you have for the show today.
Thanks for watching and we'll see you on the next one.
[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 are going to discuss developments in the market for crypto current CTS with TD Securities Andres Rincon.
MoneyTalk's Anthony Okolie is going to break down the latest Canadian GDP report.
And in today's WebBroker education segment, Jason Hnatyk is going to take us through how do all listed shares work and how you can find them on the platform.
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.
Last trading day of the shortened trading week.
And we are at the end of the first quarter. Let's check in on how we are doing the TSX Composite Index not too bad, putting 85 points on the table, about one third of a percent. Some names notably moving today include BRP, Bombardier Recreational Products, the makers of Ski-Doo's NCDs. Even though they are seeing sales come off those pandemic highs because people were buying a lot of those pleasure class, right now at $90.51 per share, they are up about 5%. They boosted the dividend. I will tell you more about BRP later in the program.
Noticing weakness among the lumber producers. A Canfor, representative of the group, at $17.21, down 1.5%.
South of the border, the S&P 500 is about to close the books on its best first quarter performance since 2019, putting a very modest 6 1/2 points on the table today to cap off the quarter, up about 1/10 of a percent. Tech heavy NASDAQ, it's lagging the broader market.
It is modestly to the downside, about nine points, nothing too dramatic.
AMC Entertainment, shares under pressure.
They are selling 250 million stocks, they need an injection of liquidity due to sluggish a box office performance. AMC is pulling back about 15% on today's session.
And that's a market update.
A lot of excitement in the markets around the launch of Spot bitcoin exchange traded funds in the United States, but how has the space of all tensile launch in January? Joining us now to discuss that and some other things is Andres Rincon, managing Dir. and head of ETF sales and strategy at TD Securities. Great to have you back on the program.
>> Thank you for having me.
>> Spot bitcoin ETFs launched in January.
We have a few months under our belt. How is the space evolve?
>> It's really fascinating.
As we talked about at the time, 11 bitcoin ETFs were approved and relaunched in the US and it has been a lot of activity, we have seen a lot of excitement, a lot of news. It's been in the news consistently in the US. Really, what we were seeing was new money coming to the space which was very interesting. We have seen some money flow from existing crypto products that were already in the space into the ETF structure but we have also seen a lot of the money come into the space and that's what's really in my opinion exciting.
Now that you have behemoths like BlackRock and Fidelity putting their name behind a crypto ETF, you will also have a lot of advisors now and other investors saying, maybe this is a little bit more legitimate and we could allocate a little bit into these funds.
The evolution really has been that now we are seeing advisors and investors put a small allocation into their traditional portfolio, let's say 3% or 5%, or what was perhaps your gold exposure before is now your crypto exposure.
We are seeing a little bit more of this transition and what's really interesting is that this was expected but really unintended.
What I mean by that is that the SEC was basically forced to approve many of these ETFs.
>> That was big caveat, right? They were not saying we endorse these investor products, they since he said there was a decision and here we are.
>> It was very clear, there are a lot of risks.
They weren't necessarily endorsed but here we are. I have all these ETFs with big games behind them so they are trading a lot more. Since then, we have also seen a lot of different funds for other types of crypto.
We have ether ETFs.
We have crypto ETFs in Canada and we also have ether ETFs which the US does not have us of today. We do expect the United States will get them in the not too distant future. I think the SEC will take its time on that one.
But given what we are seeing in Europe, for example, we expect that we will see Ethereum and other crypto currencies eventually come on more. The reason we haven't seen that in Canada past Ethereum his one restriction has been needing to be able to trade futures but those restrictions are not necessarily there in the US. I suspect is going to be a lot more of that in the US.
>> Clearly we have seen the interest in the space. Remind us of the risks around these products?
>> I am speaking on behalf of the SEC, the SEC has already talked quite a bit about the risks. If you look what they appointed to, a couple of the risks is that there are a lot of manipulation in the crypto current itself and most importantly, the SEC cannot control that market, it's not a regulated market. Because they can't regulate, they feel uncomfortable us what happens in those markets. In some respects, they see there is a lot of flow in money going into the space that they cannot regulate either from a money-laundering point of view, so there's a lot of conversation there.
But there is also the concern of custody at the end of the day. These are digital assets and the custodian for all these ETFs is heavily regulated, it's digital, it's a new process compared to the traditional custody model.
There are many risks to these ETFs and obviously there's a lot of volatility in crypto currency so there's obviously the risk of loss from these ETFs.
>> An interesting space.
Crypto, good run this year, a bit shaky but been rising.
How about some other commodities you've seen in the markets?
>> Similar to crypto that's done really well from a performance point of view, so bitcoin has done really well. Other commodities or other areas that have done really well our commodities. You've seen the price of gold continue to skyrocket.
Oil continues to skyrocket. What's really interesting is that commodities have been really resilient during times of distress.
We Lipic COVID, Ukraine Russia conflict, the current conflict in a ran near the waters, a lot of that is pushing these commodities higher.
And not just these two, gold and oil, but across the board.
Despite that though, the allocation to commodities is relatively low these days.
So if you look at flows in commodity ETFs in the US and in Canada last year, it was fairly muted. This year, it slightly up.
But last year in Canada it was slightly down. It's interesting to see how these assets have done so well but the allocations have been fairly muted. Given they are resilient and diversified portfolio, the one area that's often overlooked.
You have gold ETFs, oil ETFs, base metal ETFs, agriculture ETFs, we have many different areas you can invest here in both Canada and the US.
>> Let's talk about covered call ETFs. We have discussed them before in a previous appearance here. What does the space look like right now? Is it so popular?
>> Let me put it this way. Canada, this has been one of the areas that Canada has really thrived in. We have over 160 covered call ETFs just here in Canada and the space is fairly large, over $24 billion. Why is that? We have investors that need and want yield.
Now in the US, although they launched the first covered call ETFs in the world, PP b-boy Invesco, it didn't really catch on for many years. But it wasn't until 2020 when David Morgan launched JEP Q that it really started to catch on and grow.
The industry has gone considerably higher over time. A lot of money has piled into the space. They have fewer products.
30 something product that they are now at $68 billion.
It's really interesting and the products are slightly different. They are more broad market focused in the US. In Canada they are sector based.
We have more products and more breadth that here. The popularity in the US has gone very, very high, now every single issuer is launching new covered call ETFs because they are seeing the success of those products.
>> What do investors need to be aware of in this? From what I understand covered call generates income but maybe you don't take part in all of the upside.
>> Basically, when you are investing in a yield enhanced or covered call ETFs, you are making an active decision to give away some of your growth in exchange for income today. So you're saying, I prefer in this environment or in the current environment time and as an investor, I preferred to get income today versus the growth that I might get in the future and the benefits of that.
To many retirees, this is exactly what they want. It also depends on your lifestyle.
It's for people who want income. That's what these products offer.
>> We have a bit of an anniversary and the ETF space as well. It's been 34 years and something happened.
>> Yes.
A lot of people don't know this but the first ETF ever launched here in Canada. It was a very tight competition between what we call the tips, it attracted the TSX 35 index. That was the first ETF ever launched in the world shortly after SPY, which is the world's largest ETF launched, but Canada launched the first ETF. In March, it was the 34th anniversary of ETF and also we had a couple of very good milestone. We have 40 issuers now, 1400 Products in Canada and over $400 billion in assets under management in the ETF industry so we had a couple of milestones in February and March in the ETF industry in Canada.
>> Interesting stuff and a great start to the program. We are going to get your questions for Andres in just a moment's time. A little later in the show, we are going to get a preview of his show Buyside Views. And a reminder that 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.
Home Depot is making a multibillion-dollar pay to attract professional contractors.
The home-improvement chain says if I SRS Distribution $418.25 billion, the largest acquisition in the company's history.
Home Depot has been making moves to attract pro-customers including building large warehouses across North America, including in the greater Toronto area.
Tesla is facing some more competition in China. Smart phone company Xiaomi plans to sell its first electric vehicle car for less than Tesla's model three in that market, although the company concedes it will be selling the vehicle at a loss.
The company showcased the car last month at the Mobile world Congress in Barcelona.
It appears demand for Ski-Doo's NCDs has moderated from pandemic highs. BRP is reporting a pullback in sales and profit for its most recent quarter, compared to the same period last year.
Despite that sales softness compared to the pandemic, BRP is raising its dividend payout to investors and that has the stock of a little shy of 5%.
Let's check in on the market. We will start here at home with the TSX Composite Index, last trading day of the week, last trading day of the quarter. Got some green on the screen. We will be kind and round that up to 80 points, a little more than one third of a percent.
South of the border, the S&P 500, very modest, we will round them up to five points to the upside.
Alright we are back with Andres Rincon taking your questions about exchange traded funds.
First one for you here. What should we make of the big outflows we have seen from a US crypto ETF like greyscale?
There are some interesting details around this one.
>> As I was mentioning, and the industry itself, we've seen inflows, about $30 billion. Greyscale is interesting because it was one of the largest products already out there the targeted bitcoin and specifically spot bitcoin. It was about a $30 billion fund before it changed and what happened is that this was a closed structure so and ETF is an open-ended structure where anyone can go in and out of the fund but an enclosed infrastructure, if you want to sell you have to find a buyer.
There were always a certain number of units outstanding. Greyscale decided they wanted to convert their closed structure fund into an ETF. When I did that, it allowed a lot of people to come out of the ETF without necessarily finding a buyer for that ETF. So what we are seeing is a lot of switches from the greyscale product two other ETF's that have perhaps a management fee. What's interesting is that the greyscale product has the management fee and expense ratio in total is about 1.55 which is much higher than the 20 beeps and 25 being offered by many of the other competitors.
Obviously if you are now unitholder of DBT C, you would say why my holding this one I would perhaps prefer to hold something much deeper in getting the same exposure?
Forcing a lot of that.
You are seeing around $7 billion in outflows. They've gone from $30 billion-$23 billion. They are still the largest bitcoin ETF in the world today but not for long.
There is a new one at $16 million in just a couple of months and they are tracking heavily. We have seen a peak in the flows there but at the end of the day, they are continuing to bring in money so we suspect that within a couple of months, they will no longer be the largest ETF in the world.
That's why we've seen so many outflows, it's a switch from one to the other in that case.
>> An interesting space to keep an eye on their on some of the constructs. Another audience question. Many ETF such as BMO Z Series offer higher dividends than the underlying stocks in the fund. Where is the extra risk for this extra ward?
>> Just to clarify, I don't think BMO offers a Z Series. All BMO ETF start with a Z so maybe that's where that question is coming from.
Looking at the BMO lineup, they offer a T series which is a mutual fund specifically which what it does is it pays rock specifically. That's very different. When you have a fund that is T series, it will pay yield and rock, it's paid part of its capital, part of its value how to investors so that's why they that's where the question was coming from because in theory, yes, you are providing higher yield than what the stocks are actually paying out in dividends or perhaps we are talking about the cover call lineup which is calls on these names, getting a higher yield but in a normal BMO ETF that starts with a Z, the ETFs will just pay out whatever dividend comes into the fund from the stocks underlying so they are not paying anything else about that.
>> Interesting stuff. Another question from the audience. Someone will say your thoughts on Mexico and what ETF options would be best suited for this market?
>> This is not an area that we talk about very often, to be honest, but with onshoring now we are hearing more and more about Mexico. Instead of the focus being on Taiwan sometimes, with all the microchip producers moving back to North America and all the infrastructure spending that the US is doing in North America, we are seeing more interest in Mexico. The reason being that a lot of that production is going to Mexico.
There are a couple ETFs in the US that focus on this area. They are not sizable.
They are $2.2 billion in assets under management.
It's mostly one ETF, E WW from iShares. If management fee is slightly higher at around 50 beeps or so but there's a couple other ones that are offered, from Franklin that is considered cheaper, 19 beeps, it provides very similar exposure. EW W icing covers 99% of the Mexican stock market and the Franklin one is a bit tighter, 90%, so you're getting similar exposure but a cheaper fee.
>> One of the risks one can imagine is the Mexican market.
>> You are not just playing the whole production in onshoring angle, you're also playing whatever politics happened within Mexico which as we know historically there are a lot of risks there.
>> Interesting stuff. Regular viewers of our program also know that Andrews hosts his own show called Buyside Views, where he speaks with prominent members of the investing community about the industry trends they are seeing. The latest episode just launched and features the AGF Management CEO, Ken Tsang, and ash floors, head of AGF capital partners. They talk about the role the asset class fills in portfolio.
>> I think there's a lot of commentary about you just get higher returns from private markets and I think that leads to people going into private markets one, one, it may not be appropriate for them, or two, they haven't spent the time to be really diligent and understand the managers and when you are going into something that semiliquid or in some cases illiquid, you have to put it in the right part of your portfolio.
This can be part of the portfolio you might need in September to pay tuition.
This is a part of your portfolio that you have a long-term view on that you will ride through market cycles and leave there.
>> Interesting. Talk to us a bit about the episode and some of the other things you talked about.
>> For starters, it's fascinating. I work in ETFs which is completely opposite of private markets. We value our securities on a daily basis on the millisecond by speed and private markets are the opposite.
What's interesting is that private market is considerably larger than public market.
It's at about $13 trillion and is growing at a 20% clip while public markets, we are seeing fewer IPOs, we are seeing a bit of a slowdown in public markets and companies wanting to IPO at that rate. AGF is actually leading the space and making a lot of acquisitions in the space. We had Ash Lawrence who heads the private markets called the alternative world for ETFs but we also had the CFO there.
I encourage everybody to join me on Buyside Views. It's on our website is also available on Apple, Google podcast and modify.
Feel free to subscribe and go to the website for more information.
>> Thank you for correcting Mr. Tsang's title. That's Buyside Views.
As always, make sure you do your own research before making any investment decisions.
we are going to back to questions for Andres Rincon on ETFs and just moments time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, look at our educational segment of the day.
You may have noticed that some stocks trade on more than one exchange. Joining us now with insulators Jason Hnatyk, Senior client education instructor with TD Direct Investing.
Always great to see you. How can you identify which stocks are dual listed and what are the benefits?
>> TD Direct Investing prides itself on giving his client's choice and using dual listed securities can help amplify those choices, they can help you target investments using currency you have on hand, maybe you've got Canadian or US dollars and with that turns into is the opportunity to save on foreign exchange.
Let's jump into the platform. I will show us where we can identify stocks that have that dualistic capability and know-how that can be best taken advantage of.
We will use our search bar in the top right-hand corner on the stocks overview page. I'm going to put in ENB for Enbridge.
The first thing I want to look at is hit myself off is I can see there is both Canadian as well as a US flag next to two different Enbridge symbols.
It's the same stock, it's just identifying that it's trading on both sides of the border in different currencies.
If I jump into our Canadian trade.
This is all Canadian dollars, the price is Canadian, the changes Canadian. Click buy or sell, we are getting a buy or sell order in Canadian dollars. But take a look at the top of the page. Next where the ticker is indicated, there is a Canadian flag. Whichever account is appropriate, this hyperlink will bring up the US quote.
We can see the prices differently keep in mind, this is the same security, it's just that the prices off by the exchange rate.
There is typically not going to be charged opportunities but this is in our tipoff because you got the US flag at the top of the page that we would be trading in US dollars. If I go ahead and proceed by clicking the buy button on the screen, that's going to quickly bring up in order to get. I notice that the symbol is highlighted by showing us about the US indicator next to the symbol. It's going to be a tipoff. A quick word to the wise for those in the keep in mind that you are choosing the right account to you. I have my Canadian margin as my default account set up so that flow pops up.
>> Now we have a good understanding there of what they are and where to find them.
Can you transfer a dual listed stock between currencies on WebBroker?
>> Yeah. One nice thing is we can do it in my broker where it will be a real time transfer but you can also do it on the mobile app.
It's very similar as to how you would do a cash transfer but this time you're transferring an asset between our accounts.
Let's jump into the platform and I will show you how that can be taken care of.
If we go to the top of the screen, we will see our accounts tab.
Under transfers and withdrawals, their different choices.
Still we are after here is third one down.
Transfer securities within your TD investing account.
The nice thing here is that maybe I had US dollars when I purchased my shares and I wanted to make sure… When I make my sale and one Canadian dollars back because I know Enbridge in this particular case is traded in Canadian dollars and I can transfer it from my US account and move it over to my Canadian account. My demo account, I don't have the assets to allow me to go further but this is a great way since we are transferring an asset and not cash, we are not making a sale.
It's nice and convenient. Can be accomplished here in my broker as well as the mobile app that you can have in the palm of your hand.
>> Great stuff as always. Thanks.
>> It's my pleasure.
>> Jason Hnatyk, Senior 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.
Now before you back your questions about ETFs for Andres Rincon, a reminder of how you can get in touch with us.
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.
Okay, we're back with Andres Rincon, take your questions about exchange traded funds.
Someone wants to know what do you think of the bank equal weight ETF Z EBD? Is it good for long-term dividend growth?
>> I can't recommend it one ETF over another.
Those ETFs invest in all the banks equally weighted so it's a very easy, passive way to get exposure to the banks and the growth of dividends that those banks have.
They tend to be a big source of income for a lot of Canadians in fact, there are very big holdings amongst Canadians. If you look at TD Direct Investing as a client base, many of the holders within TD DIR banks. This is an easy way to say, I don't know which one to pay, might as well pick all of them because many of them are somewhat similar so it's a very easy way to possibly invest in the space and enjoyed the dividend growth of the banks in general.
>> Interesting. Someone is asking about we talked about Ethereum off the top.
There is a spot Ethereum ETF coming out, will it be as popular as bitcoin?
>> A lot of people look at it as having a slightly different application in the world but it obviously is still the most second popular coherence he in the world and I think what you can use as an analogy is Canada. So we had the first big point ETF lunch in Canada and we had the first Ethereum ETF launched not long after.
The first big point ETF came with a lot of momentum and a lot of enthusiasm and suited Ethereum but not to the same degree.
If you look at the asset breakdown, there's a lot more money going into bitcoin then into ether in general. I think it's fair to say that we would expect the same in the US. The SEC will take its time, as I mentioned earlier.
There are already at nine products filed from many of the same issuers.
The bitcoin filers have also filed for Ethereum. They will likely be approved at the same time.
There are a lot of different funds that are already in a closed structure or other structures that have a lot of money from investors that it we are likely going to see huge shifts into those ETFs to so we are like the way to see new money and existing money and either move into those products.
>> An interesting space to watch as those things were low. Another question from the audience. Someone has read the past investing in ETFs is much less popular in Canada than in the US and other countries.
Is that true and why?
>> I wouldn't say that it's less popular in Canada. I would you say that actively managed ETFs here in Canada are more popular than in the US because of regulatory reasons. In Canada you can launch and ETF series from a mutual fund which you cannot easily do in the US. We talked about this more detail but it's a little bit harder for your traditional mutual fund issuer in the US to launch an ETF series of that existing, very large mutual fund. Because of that, I means they have to launch a new strategy which is more costly for them and there are also transparency regulations in Canada versus the US. In Canada, you do not need to be transparent on the disclosure of the holdings of your ETF on a daily basis but in the US you do.
This means that for an active manager might be a little bit harder to, for them to launch… They might not want to show their holdings on a daily basis.
It's really a structural conversation.
>> Another question. Some prominent investors like David Einhorn have said that passive investing is breaking the market.
Does the rise of ETF investing pose a major risk to the function of markets?
>> Similar to the other conversation, what I would say is that people don't realize that mutual funds are still much larger than ETFs.
The mutual fund world is to some degree index but also active. So now people look at it because ETF's are somewhat like the fund becoming public, it seems that way.
They are more on the news, they are followed, they are covered while a lot of mutual funds are not.
It seems that there's a lot of money going into ETFs but there still a lot of money in the mutual fund space.
In Canada, 25%, over 25%, over 1/4 of the ETFs in Canada are active strategies so there still a lot of money going into portfolios where the PM is deciding where they want the money to go into.
The same thing is happening in the US. We have a lot of discretionary strategies in the US and its smaller as a percentage of all assets because we have the behemoths, spider or the very large passive ETFs that are used globally to get exposure to the US but you have spaces growing faster than others, that actively managed base is growing.
Obviously, passive is been in the news quite a bit when it comes ETF structure but active is also a very big part of the ETF world and it is growing.
>> Interesting stat. Another question here. Someone says they are just interested in a discussion on covered call ETFs, their pros and cons, particularly in the current market picture. If not now, when is a good time to use them?
Let's break it down.
>> Income is why you are buying these products.
They also have a different correlation.
They behave different light. Why? Because what they are doing is they are selling a call over your long stock which means that you are giving up some of that upside in that stock.
What's really interesting is that you're getting income for that.
Basically what it's doing is taking away some of the volatility in your portfolio and giving it to you in the form of cash today and so that works for some investors and doesn't work for other investors.
What I would look at this product for it is in times of volatility they generally do well from a yield point of view. They also tend to do fairly well and sideways markets are down markets which is when you have a lot of volatility generally speaking because what happens in high volatility, yet higher premiums on the options which means you get higher yields on these products.
In a bull market they tend to underperform in us because they are capping the upside.
Most investors do not use it as a beta for the portfolio obviously because you're giving up a lot of the upside but they use it as a sleeve or tactical allocation where they want more focus on yield.
>> Fascinating stuff. We'll go back to your questions for Andres Rincon on ETFs and just moments 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.
Let's talk about the Canadian economy. It kicked off the on a positive note. We got the numbers and for the first quarter, continued the momentum of the final three months of last year. We got some solid evidence now that inflation is cooling. We had a strong GDP. What does all mean for the Bank of Canada and that first potential rate cut?
Our Anthony Okolie has been taking a look at a TD Economics report on that very thing and breaks it down for us.
>> The Canadian economy came roaring back in the first quarter growing up .6% month over month in January, well above consensus for 0.4% read./Estimates for February point to a healthy advance of .4% as well. Looking into the details of the report, a big driver in the first quarter was primarily services driven which was up .7% month over month with a large tailwind from the end of the public sector strikes in Québec as a rebound in education contributed three percentage points to a headline growth. Healthcare information, culture, arts and recreation were large movers in the services sector.
Meanwhile, the good sector did eke out a .2% month over month advance led by both manufacturing and utilities.
Overall, it was a pretty broad-based gains. 18 of 20 Industries Expanded in January which makes it more difficult to dismiss the contribution from education or the flash estimates for another robust print in February.
As I mentioned, the advance reading of .4% month over month growth in February is expected to come from a rebound in oil and gas with further gains coming out of manufacturing as well as finance and insurance sectors.
If this is realized, the flash estimate for February would leave first quarter GDP tracking at a 3.3% quarter over quarter annualized gain which is well above expectation. This contrasts sharply with the banks .5% reduction from the January monetary policy report.
Today's report should raise the bar for any dovish pivoted at the April Bank of Canada meeting as the Bank of Canada will likely want to see more evidence from February and March before it is ready to shift to a dovish stance.
>> Further out, what are we thinking about that first potential rate cut?
>> Currently, markets are pricing and or are hopeful for a potential rate cut in June but TD Economics believes that a July rate cut is much more likely by the Bank of Canada. Excluding education sector rebound, growth in January still presented a solid month over month gain while a seasonably warm winter may be contributing to the heating up of the economic activity.
I think they're going to need to see more evidence that the economy is cooling.
>> Interesting stuff. Thanks.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, for an update on the markets.
To 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, giving us a view of the market movers. We are looking at the TSX 60 by Price and volume. It's clear who is leading the session today.
That would be the mining stocks. We have gold moving higher today and we have some names levered to that space including Kinross up about 3%, Barrick up a little more than 2%. Across the rest of the board, even though we have farming in the price of crude, it's lifting some of the oil names, not as dramatically as some of those oil names.
South of the border, we were seeing best first quarter performance for the S&P 500 since 2019. Just gonna drill down to the 100 and give us a clear picture. Sort of mixed today.
AMD, Intel, Nvidia up modestly, the chip plays, some other tech companies modestly to the downside.
We told you off the top of it has low getting more competition in China, pretty keen market, and that stock is down a little more than 1%.
You can find more information on TD Advanced Dashboard by visiting TD.com/advanceddashboard.
We are back with Andres Rincon. What is your view of low volatility mutual funds or ETFs in this market?
>> This is an interesting space because low volatility products in general, what they do is they give you exposure, as the name implies, to low volatility stocks or whatever assets they are looking for.
How they do that generally is they look at the standard deviation of the actual volatility of the stock and say, this is low volatility.
It was like that yesterday, one month ago, a year or whatever it is, therefore, I'm going to invest in this low volatility stocks going forward.
These products do imply that because they were low volatility before that they will be low volatility later which is not necessarily always the case obviously.
This is one of the risks for these products. But what they do hope to engage and Harriet is giving a portfolio a low volatility going forward.
So if you think that the market is going to see some volatility, perhaps a downturn, these products are designed to hopefully provide lower volatility in those markets.
Now in reality, these products are split between low volatility and what they call minimal volatility and low beta. These different metrics. Low beta targets low beta stocks which are different than the others.
Low beta is a bit different because it targets names that don't really correlate well with the market today and as such will provide a little bit less correlated returns if the market were to turn lower.
So that's something very important for investors keep in mind when they're looking at low volatility, minimal volatility and low beta products as to what they want to obtain.
They can be used as beta for your portfolio, they can be used as a tactical allocation depending on what you want.
Some products are really annex hugging where they are basically targeting let's say the S&P 500 and they are targeting a lower volatility version of that.
Some really skew it in terms of low volatility is so they are better positioned for impact allocation because they will really move the relation of your entire portfolio. It's important to do your homework and understand the different products out there.
It's a fairly large space, but $66 billion in assets in that space today. Many products in Canada and the US. US MD is the largest in the US, about $24 billion, you also have SPL V in the US. In Canada, BMO has a fairly extensive lineup, is ELB, CLU for Canada and the US giving you exposure to low volatility or low volatility in the case of BMO exposure through an ETF.
>> Always a pleasure to have you here and to talk ETF.
>> Thank you for having me.
>> Our thanks Andres Rincon, managing Dir.
and head of ETF sales and strategy at TD Securities.
As always, make sure you do your own research before making any investment decisions.
if we didn't have time to get your question today, we will aim to get it into future shows.
On a program you know, we will be off tomorrow for Good Friday and we will be back on Monday with an update on the markets and some of our more recent interviews covering personal finance issues facing us Canadians. That's all the time you have for the show today.
Thanks for watching and we'll see you on the next one.
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