Andrew Kelvin

[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 will discuss whether the Bank of Canada is signalling that rate cuts could be on the way as they held steady in today's decision with TD Securities Andrew Kelvin.

And in today's WebBroker education segment, Jason Hnatyk will show some of the different charts available in my broker.

Here's how you 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.

We will start here at home with the TSX Composite Index, a pullback of 192 points, a little shy of a full percent in the whole. We God Bank of Canada news but before we got that we got another print of inflation out of the states and not what the market was looking for. Lots of asset classes on the move today. Let's look at two of the names among the most actively traded on Bay Street at this hour, including Baytex.

At $5.23 per share, Baytex is up 1.75%.

Manulife is under pressure today.

At $32.93, it is pulling back 1.5%.

Now perhaps the real action south of the border, sticky inflation in the states, not moving in the direction that the markets want to see. The S&P 500 down about one full percent.

The tech heavy NASDAQ, let's see how it's hearing against the broader market.

Right now pretty much in line. Delta, though, I want to check in on this, we will tell you more about their quarterly report later on the show. It is just hanging there on the breakeven line. At $47.40, Delta is a .16%. And that's your market update.

While the Bank of Canada continues to hold the line on borrowing costs, Gov. Tiff Macklem says a June rate cut is in the realm of possibilities. That said, is that the most likely path? Joining us now to discuss, Andrew Kelvin, head of Canadian and global rate strategy at TD Securities.

Great to have you back.

>> Thanks for having me.

It's a very interesting day. There is a lot to parse through.

>> Let's start parsing through. We will start here at home with the BOC. The statement, speech itself, right out of the gate in the question-and-answer session, Tiff Macklem said June was in the realm of possibilities.

>> It was an interesting contrast because the press conference and the statement as well, they were pretty cagey and the MPR was a little more leaning to some of the more positive data.

The BOC showed that they are continuing to see progress and want to keep options open. Right at the gate, first press conference question, he was asked if June cuts were within the realm of possibility and he said yes.

In some respects, it is not a very obvious thing to say. June is two months from now.

June was priced at a 5050 chance of a cut going into the meeting. It's very unusual to hear a Bank of Canada governor say that.

Usually when asked about the next meeting, they will typically say they will not comment on the next meeting or they will take it meeting by meeting or they have to look at the data. You don't typically get that yes or no transparent answer. That was an interesting thing to see. Is that the most likely thing? We still think to live.

The question for the Bank of Canada is how much evidence do they need to see to feel confident that the progress that we have made on inflation will be sustained? They have this very sad old tweak in their language where they talked about seeing further and sustained inflation and now they are saying they need to see the current progress sustained. So the backdrop, the current economic backdrop is consistent with lower interest rates, they just need to be sure that this inflation backdrop will persist and it wasn't one or two months of downside surprises because Canadian data is always a little bit volatile and it becomes the philosophical question of how much evidence is enough?

We think they will be more comfortable going into life only because given that we have been overshooting the inflation target for several years now, given where wage growth is, given where inflation expectations are, they have not normalize yet, we think they prefer to err on the side of caution, we think they would rather hold at 5% a little bit too long then cut a little bit too early, particularly entering the spring housing market. We think that July is more likely but certainly the conversation should be in our view around a midyear start to an easing cycle. We think July, June being the second most likely.

>> If they do start in July, what does the rest of their look like? Are they on course to cut at every meeting or will it just be cut, step back, see what happens and see when they can go again?

>> Historically, a one-off cut would be very rare. It has happened before. We saw in 2016 but it would be a very rare thing and going from what is a restrictive policy stance, going from 5% to 4.75 and pausing would be a bit of a strange message to the market. When the BOC does start cutting, we think we will see to 25 point basis points. It will depend on the data about inflationary growth. We expect the economy to slow down again in the middle part of this year. Q1 data has been strong.

We don't think that will last. We think we can get for 25 basis point rate cuts this year so we think they will get to 4% by the end of this year but that will as always be just a product of how CPI performs and how the economy holds up.

>> As Canadians, we are accustomed to the Americans having the bigger spotlight.

They got the big market news this morning.

They came out with another inflation report. It is not moving in the direction that the markets want to see. The market reaction is clear on that.

Does this comp decayed things for the Bank of Canada's course if America's are in a situation hour they are pushing out cuts?

>> Not in the short term. The economic reality between Canada and the US is very different.

On a Q4 over Q4 basis, the US outpaced Canada by about 2% and that is despite our extraordinarily strong population growth in 2023.

The Bank of Canada fed can diverge for periods of time, particularly around turning points.

Given the economic realities on the ground in Canada you are a little bit weaker than they are in the US, I don't think whatever the Fed happens to do will really impact the timing of the first round of BOC cuts.

Not impacted by very much. We are all human. If the Bank of Canada is on the fence between cutting in June or July or September, the Fed can influence that for sure but fundamentally, when we talk about cuts in the US, we talk about a world where things have softened. In Canada, we have already seen that softening.

I think there's a fair bit of scope for the Bank of Canada to operate at a penalty for the first part of an easing cycle now.

If we get down the line and the Federal Reserve stays on hold for quite a long time or it's an extremely a shallow easing cycle in the US, that would have impact on the next round of rate cuts from the BOC.

While the BOC can get to 4 1/2 or 4 1/4 without the Fed doing anything, I think it would strain credibility for me to suggest that BOC is at no point bound by what the Federal Reserve does.

I think that's more of a discussion for 2025 rather than a current your discussion.

>> What you make of all these discussions now?

South of the border, based on the strength of the labour market, the inflation print we got today, not only hire for longer but I think there was even a Fed speaker last week that said prepare yourself for the possibility that we don't cut this year or we might have to hike.

This is not the mindset we had entering 2024.

>> No, absolutely not. The mindset we had entering 2024 mirrored the mindset we had entering 2023.

I don't think that's gonna happen this year.

The economy is softening globally versus where it was in 2023.

We have made a lot of progress on inflation globally than we had in 2023. I don't expect to see a repeat. I would also to sort of note that unlike the Bank of Canada were everyone tries to speak from the same script, but the governor acknowledges there was a diversity opinions in the room.

Maybe seeing hikes, I wouldn't take that as symptomatic has something being seriously discussed at the federal reserve. Having discussed that, monetary policy is always so funny exercise. We have an idea of where neutral rates will be, where the long-term steady-state value is for overnight rates but you also only figured that out by seeing how the economy reacts to the monetary policy in place and if US inflation doesn't moderate further from here, if US growth isn't moderate further from here, that would undercut the case or the magnitude of cuts that we expect and at the end of the day, if the economy is coming along just fine, why change things?

So that's a really interesting conversation in the US. That is not present nearly to the same extent as in Canada.

>> Fascinating stuff and a great start to the show. We are going to get your questions about the economy and interest rates for Andrew Kelvin in just a moment time. 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.

Nvidia in the spotlight, that's after shares of the chipmaker officially fell into correction territory.

On her hands right now a bit of a bounce back. Artificial intelligence boom drove Nvidia shares to all-time highs with more than a 200% gain in the past 12 months.

That said, at the close yesterday, the stock had pulled back 10% in recent weeks, the technical definition of a correction.

They are clawing back some of that territory. Let's talk Delta Airlines, they beat expectations for the bottom line is the carrier swung to a profit in its most recent quarter. The airline says bookings for both leisure and business traveller showing strength, perhaps a more notable one here, the industry is heading into the busy summer travel season. Delta also says revenue for the current quarter could come in above expectation. Right now the shares are just flat.

Closer to home, let's look at shares of roots, they were on the move higher earlier in the session. Right now they are off the highs but up about 2%. The clothing retailer managed to grow the bottom line in its most recent quarter, despite a modest decline in sales topline compared to the same period last year.

Roots is saying both its direct-to-consumer and partner sales were weaker for the quarter.

Quick check in on the markets. We will start on Bay Street with the TSX Composite Index. We are down 186 points, a little shy of a full percent. South of the border, as investors, I love that terminology, we digest inflation reports, better than indigestion.

More than a full percent to the downside.

We are back now with Andrew Kelvin, take your questions about interest rates on the economy.

What should we expect from the federal budget?

Now we have this BOC rate decision on the way, what about the federal budget?

>> There will be lots in it. There always is. I don't think this is a big spending budget.

It seems like there will not be another federal election until sometime next year.

I don't think this is an election budget therefore I don't think this is going to be particularly when we are in an environment where Canadians are concerned about the cost of living this would be a strange time for the government to come out with the expansion of fiscal policy.

I think is going to look a lot like the last budget, like the guidance we had in the fall statement. Deficit probably in the vicinity of $40 billion, it does seem like we will have little bits of spending out there for things like housing accelerators, food programs, the sorts of things but I don't think we are going to see any large signature fiscal program announced here. I think the thing that will be interesting to see it is the size of the borrowing program and also what bonds, long-term which weighs on interest rates or short-term borrowing which markets find easier to digest.

Those are the sorts of interesting things that we don't think this is going to be a budget that has too much of a change in course for the economy.

>> Is the budget itself another piece of the puzzle for Tiff Macklem?

At the end of his press conference, someone asked about the budget. He said at the next rate decision, we will have to see what the fiscal policy side is going to DO and bake that into our own projections.

>> It's a source of uncertainty for them.

If I'm entirely wrong about this not being a hugely expensive fiscal budget, that would have inflation growth implications.

Conversely, if it turns out to be an austerity budget, that would be disinflationary and it would be negative for growth.

This is a significant uncertainty for Gov.

Macklem. They would've incorporated the last official projections from the government which would have been out last fall. We haven't had any indication that they are going to diverge from that substantially in terms of either policy or dollars spent. In that sort of a world, it should keep the Bank of Canada on the course they think they are on to midyear rate cuts. My words, not theirs. But they do think they are on the path.

But again, until we actually see the budget, because the budget… >> They do a lot of pre-announcements but there will be something in there that will be fresh for us, I hope.

>> Be careful what you wish for.

>> Let's take another question from the audience. About divergence, we touched on this briefly off the top, how much could the Fed and the BOC diverge?

>> Historically, you've seen divergence of more than two percentage points for very short periods of time. They tend not to last. I think a divergence of 125 basis points over a few quarters is possible.

Historically, the BOC gets nervous, loads call it in Canadian dollar terms year at $0.71, the BOC starts to get nervous historically. The speed of the adjustment tends to matter as well. The thing that feeds into inflation is the change in value of the currency.

If we were to diverge to the extent where you had a I don't want to say disorderly but a pretty sharp move lower in the value of the Canadian dollar pushes you down towards that 7178 sub $0.70 area, I think historically that is where the Bank of Canada will start to get a bit nervous about moves in currency and that would be what restricts them. Given that we are at $0.73 on the dollar, we are not far off.

They have room to diverge in the first round of rate cuts. I think it will become more challenging at the Fed regains, the US regains resilience and the Fed remains on hold deep into this year. I think that divergence will become more challenging.

>> When I think about the dislocations during the pandemic across markets and our lives, there was a school of thought without having to worry about inflation that you get the looney down a little bit, it boosts experts and our economy but now we have the whole importing inflation part of the equation.

Everything is so complicated these days.

>> And the thing that's interesting to is that the world is different than what it was 25, 30 years ago. Our export sector, the while the profits of individual exporters are sensitive to fluctuations in currency, we have not seen big swings in the volume of non-energy exports in response to changes in the Canadian dollar. That sensitivity we have to the US from an export side, demand-side, is maybe a little bit less then it was in previous cycles.

This is largely on the fact that mainly Mexico, China, there have been big increases there, more and more of the growth in manufacturing in response to stronger US demand.

More of that investment happens in Mexico rather than Canada. That sensitivity to the US export channel… Conversely our sensitivity to the US through the interest rate channel is going to be higher because we are talking about the Bank of Canada but we don't just borrow overnight. People borrow on terms, two, three, four, five year terms. Those rates depend in part on what happens in the United States. We saw say after the TPI reading a pretty notable move higher in to your Canadian bond yields.

That will pass on to consumers.

There is less sensitivity to the US in terms of making things and selling it to the US. We have more sensitivity to the US through US rates influence our borrowing rates and we all have a lot more debt than we did 10 years ago.

>> Fascinating set. Another question from the audience. Someone wants to get your thoughts on the Bank of Canada declaring productivity and emergency in this country.

>> So if it's an emergency, it's been in all fully is slow burning emergency. We have been talking about poor productivity in Canada for years and years and years and years.

Some of this is compositional.

It tends to be when you grow the population quickly, it tends to in the near term depressed productivity because productivity is an average.

If you look at it on a cohort by cohort-based, I expect the numbers would not look quite that poor. People are not as productive as students as they are later in their lives. We have a lot of students in our population, that should depressed productivity growth.

Having said all that, this is not a new story. I was in university and were having conversations about the problem of poor productivity growth in Canada. It's, if it's an emergency, it's only because countries, broadly speaking are getting older on average and are going to be more challenged in growing the economy through purely population growth 20, 30 years down the road and something like productivity growth, this is about the capital stock in the economy, the structured in the economy. There isn't a government that can go out there and change to policies and fix the productivity problem.

I hope to be wrong on that but I would like to believe that if that did exist, one of the countries in the OECD would have figured that out by now.

It is going to continue, it is going to be something that as we see population growth start to slow, maybe in the latter part of this year, certainly if the government's recent announcements on immigration are to be believed by 2025, it will slow the overall growth rate in the Canadian economy and from an individual perspective, it will slow, the lower productivity is, the higher interest rates need to be for a given level of growth. So we have high productivity, you can have higher growth with the same level of interest rates. Thus the interplay between borrowing costs and productivity.

It's a problem just in the sense that Bank of Canada has it easier if they have high productivity growth because they don't need to tighten so much facing inflation in the future and second it is ultimately the measure of how much living standards increase.

>> As always, make sure you do your own research before making any investment decisions.

we will get back to your questions for Andrew Kelvin on interest rates in the economy in just a moment 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.

Charts are one tool an investor can use to analyse a possible investment and 20 is now to show as options available in my broker is Jason Hnatyk, Senior client education instructor with TD Direct Investing. Always great to see you. Let's talk about charts and how they can help investors identify some price history on web broker.

>> Yeah, it's great to be here, as always.

It you got that right. It's not uncommon for investors to use what happened in the past and charts can help but endeavour.

Let's jump into web broker and see what we are working with.

First of all looking at the chart on the screen here, we want to orient everybody.

We can pan around the chart on the bottom by pulling it and dragging around to look at more historical events and we got the ability to zoom in and zoom out. It's nice and easy that way.

Let's go through different controls at our fingertips. Looking first at the time.

Frequency, I'm looking at a one year chart with a one-day handle.

You can look at much more intraday information, or for the back, we can look at a much more ancient history if you want to call 10 years ancient, that's one way to look at it. And we can change the frequency of our candles that are there.

Moving down the line, we got a wide variety available but we have choices between different bar charts as well as line charts, whatever suits you best.

You can optimize it to your needs. Let's get into adding some indicators on the chart. There's two sections.

We got upper and lower indicators.

Let's add an exponential moving average at the top the list. The MA is now added showing us the average price over 25 day period.

There's a lot of different ways to look at. You're gonna scroll down and select Mac D.

It has been added as the title of the indicator, it is now below the chart.

Once you add studies onto your chart, we have noticed that the bubble here in the top left corner of the chart, if I click on that, it's going to give me the opportunity to learn what that study is trying to apply as well as the opportunity to make customizations to the study itself. I've got a 25 year moving average, maybe I want to add in a 200 as well. Once I update that to the chart, you can see another line.

You can also add events to the chart.

You can stay informed about important things that are happening with the company in question. I can select earnings, dividends as well as splits and consolidations, those opportunities for me to see visually on the chart.

>> Great primer there on how to start using charts and think about price action.

I know from this area and I only ever dipped my toe into it, there's so much to learn.

Where can we go on web broker if we really want to dive in?

>> You don't need to be a certified technical analyst or a charting wizard to get information from a chart but there's lots of space and web broker if you would like to begin broadening your horizons.

I will bring you back into the platform and show you where that's at.

The first thing I would like to elude us to is about the chart you will notice there is a technical tab on the right hand side.

We could spend many of our sessions here talking with this tab. There is volumes of information. Two things I want to highlight for you, first of all, right on the chart here, we got the opportunity where web broker is pointing out and finding specific technical events that are happening and it's highlighting us to the events happening on the right-hand side.

You can click on these events and learn how they might be significant to your own training.

During anybody's attention back to the top of the page, this graduation Is a great volume of information. On the left-hand side, once we have clicked on the graduation Is a number of different indicators to choose from. Let's go ahead and choose the indicators button. These ones are specific to moving averages. I got the opportunity to click on that, learn more about that and also get key information from a trade but we are not done here.

Quickly to show everybody, I want to highlight a learn tab at the top the page.

There is more than just technical analysis here. Focusing on charting, if you go to video lessons, there is a filter section on the right hand side. If I filter under picking investments, this technical analysis. If I apply the filter, you will notice there are 24 separate lessons all about the topic.

>> Great stuff as always. Thanks for that.

>> 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 the economy and interest rates for Andrew Kelvin, 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.

We are back with Andrew Kelvin, taking your questions about interest rates on the economy.

On the housing market, what's going on?

>> To the housing markets I think at a very interesting position right now because on the one hand, interest rates remain quite high, debt service ratios are rising. The consumer is not in a great spot in Canada. At the same time, we have been materially growing the population at a remarkable pace but we have not kept up with housing construction.

There is a poor affordability backdrop in the big cities and pent up demand for shelter whether it be rentals or owned accommodation.

That's one of the reasons why we have not seen as large price declines nationally as perhaps he might've expected given how quickly interest rates went up through 2022, 2023. It's something that also seems to provide a lot of support for the housing market. We have not seen the data gap for the really busy months. Easter came earlier this year, that was a prime buying weekend in March. We won't know what the spring housing market looks like until we get the April data. Sales have been firmer than expected.

By and large, if you are correct that interest rates will be moving lower in the middle part of this year, that provides a little bit more relief to households but the prices are still punitive for a lot of people and it provides a little bit more support for the housing market on margin.

We do think that the more likely out here is a moderate increase in prices this year despite what is again a pretty difficult backdrop.

There is not a supply demand balance which reflects in higher prices.

>> I think Gov. Macklem said one of the risks was geopolitical, shipping problems and to reignited housing market. I think that is near to the front for them.

>> It's the most interest rate sensitive part of the economy. It is the part of the economy that they think of first.

Residential investment is only six or 7% GDP but it's the part that moves around the most when interest rates change.

Previously we did not need to be bracing for more interest rate heights. We are in the spring market and just heard from the government of Canada that a June cut is a possibility.

We don't know if they will cut rates in June and think it's a July story but if you or somebody on the sidelines in the housing market, you are now going to in your purchase decision be incorporating perhaps a lower interest rate.

That can only make people more confident in terms of their buying decision or generally regarding prices. Particularly when there is a lack of supply. So we do think that despite poor affordability, is a further worsening of affordability.

>> Let's talk about politics now. The viewer wants to know about the US presidential election, is on the horizon, how could that impact the Canadian economy?

>> This is a really interesting, understatement of the year, this is a really interesting US Presidential election.

The Anglos going with there is that we have seen both of these presidents before.

We have seen a Biden administration. We have seen a trump administration.

The trump administration had some sort of ad hoc uncertainty around NAFTA. At the end of the day, we have seen trumps economic policy in action for four years.

We have seen Joe Biden's economic policy in action for four years. I think there's a lot less uncertainty facing the Canadian economy with the 2024 election than there was in 2016. I'm sure there will be, however it's in power, there will be curveballs but at the end of the day, it will be difficult for the incoming president to tear up a deal that he authored.

Joe Biden has his own protections in terms of the big subsidies. Not to the same extent as perhaps we are hearing potentially from a second trump administration but at the end of the day, we are going to be looking at a president who keeps the Canada US relationship mostly as it is and we are probably going to be getting a US president who will be running very large deficits for the foreseeable future.

Fiscally, the way the two administrations would conduct fiscal policy, the things they would spend the money on would probably be wildly different.

The amount might not be that different.

From a Canadian marked perspective, it's not actually has stark a contrast as it may look like from other dimensions.

>> Let's talk about spending.

We have had questions about how would a presidential election affects the economic standing of America in the world?

>> So right now, the US dollar is still the global reserve currency. We are moving towards a more multipolar world.

People are diversifying their reserves. At the end of the day, US economy is the largest in the world. It has, largely speaking, deep and mobile capital markets.

The US dollar should be king for the 5 to 10 year horizons and given that there isn't an option that is large enough and liquid enough internationally to absorb the sort of outflows of the US dollar that you would need to see to see the US dollar standing really decline, it remains sort of the reserve currency of choice by default because even if we would be in a world where Germany were to have really sound fiscal policy or Japan is seeing interest rates move higher, but there is not an obvious candidate of where US dollars would go today if we wanted to go 20 or 30 years down the road, who knows what politics looks like in every country of the world beyond the contender to the US dominance is China and the size of their economy, it's the second largest economy, but right now I just don't know that I see with geopolitical frictions a world where you see the majority of rich countries starting to move into that.

>> We will get back to your questions for Andrew Kelvin 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 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.

[music] We are having a look at TD's Advanced Dashboard, a platform designed for active traders available through TD Direct Investing.

We are looking at the heat map here, given your market update. This gives us a view of the market movers. We are looking at the TSX 60 by Price and volume. On a headline basis, you about the S&P TSX down about 180 points on my screen right now.

What a striking is lower? We are seeing weakness in the financials today, whether it's the big banks or some of the life codes as well to the downside.

This is the heavyweight. Talking about TSX Composite Index, it's no surprise that we are underwater. A mixed picture in energy space because you do have West Texas intermediate at $85.5, making a modest move higher, rallying on geopolitical concerns for a while now. You have CVE or Suncor up one, 1.5%. More mixed as he moved across the space but Cameco, uranium play, it is getting a bid as well. Across other buckets, little bit mixed. Shopify's down 2.5%. South of the border, Americans had another read on inflation and it was not what they wanted to see, not moving in the direction they wanted to. They do not have a lot of green on the screen.

Maybe it was just enough as of the close yesterday for Nvidia to have fallen into officially correction territory, down 10% from recent highs despite the fact that it's gone up in recent months.

Got a bit of a bid into today, the stock is up.

It's chip competitors AMD and Intel in negative territory, Tesla… Not a lot of green out there today.

You can find more information on TD Advanced Dashboard by visiting TD.com/advanceddashboard.

We are back now with Andrew Kelvin from TD Securities, let's get back to your questions on economies and rates. Are we out of the woods on a recession? They were warning for so long.

>> The short answer is no, we are not out of the woods.

It goes back to the productivity question to be honest.

We have been under investing in capital for many years and that creates a lower trendline of growth going forward and a lower trend line of growth means it is easier to fall into recession.

As a caveat, recessions are rates of change. I would put the economy mildly into excess supply. This like a small amount of slack in the economy here if you were to ask policymakers if they were taking this version of 2024 when the pandemic hit, they would all put their hands up in a split second. So I don't want to say it's terrible but the big thing that drives Canadian economy is the consumer.

The cost of living is a big issue on everyone's mind. We've seen debt service ratios continuing to rise.

We have a case even if we are correct that the BOC starts to cut rates. If the consumer really does start to come under pressure, you combine that with a slower impulse of population growth, it's easy to see a couple of quarters of modestly below zero, we are looking in the middle part of this year to see growth just a little bit above zero.

When you're talking about growth just a little bit above zero, recessions are a couple of coin tosses away, you flip tail twice and you have a recession.

I think certainly we are not out of the woods. It based on what we have seen thus far and implications that monetary easing is coming, if there was a recession, we would expect a mild one but our base case is just avoiding it.

>> I feel in the conversation is dying down a bit. If we are talking about the economy, if we are in a recession or not, how are we growing, GDP, capital.

Some people have a bee in their bonnet on this one.

>> It kind of goes back to that productivity discussion. We have been growing the population sharply.

That has been depressing GDP per capita.

If people are coming in, and there have been large numbers of students, students, while they do support GDP growth, I am certainly supporting GDP more now than I did when I was 20 and in university.

>> Yeah, I think I might be as well.

>> It depresses GDP per capita. I think people are right to look at it over the long term as a measure of the health of the economy but when you are in periods where your labour input and population input really swings around violently, that is going to have sort of a strange, distorted effect on GDP per capita.

>> We covered a lot in the show in terms of the BOC and often today, the US inflation report, the market reaction.

We have talked about this trip the show but maybe this wraps today. What is your outlook for the loonie?

>> We think the loonie will appreciate modestly in the coming year.

The thing I would come back to is at the end of the day, long term where the Fed is expecting to get to, the market is not pricing in much normalization from the Federal Reserve.

They are pricing in the Fed to stall out.

In Canada they are pricing in a move of 3%. I think that makes sense.

You can have the Fed and the Bank of Canada diverge for short periods of time by large mouth, you can have them diverge for medium periods of time for medium amount. At the end of the day, what history tells you, is that the Bank of Canada and Fed usually get to about the same place at about the same time. The market has not price that in. When the market does price setting, you would expect the Canadian dollar to appreciate because they view the price and not enough easing from the Fed, our view, or they have priced into many cuts from the BOC.

One of the other is probably true.

That's why we expect a little bit of appreciation over the course of this year, a couple of cents.

>> Always a fascinating discussion especially on days like these. Thanks for joining us. Great chat.

>> Always a pleasure. Thank you for having you.

>> Our thanks to Andrew Kelvin, head of Canadian and global rate strategy at TD Securities.

As always, make sure you do your own research before making any investment decisions.

if we didn't get time to get your question today, we will aim to get it into future shows. Stay tuned for tomorrow show.

Daniel Ghali will join us, a commodity strategist with TD Securities, we will be talking quantities. It's an interesting space.

You can get a head start with your questions. Just email MoneyTalkLive@TD.com. That's all the time her pleasure today. Thanks for watching.

We will see you tomorrow.

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