Show Transcript
Print Transcript
[music] >> Hello I'm Greg Bonnell and 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 will only see here.
We'll take you through it's moving the markets and answer your questions about investing. Coming up on today show Colin will get reactions on the latest rate hike from the bank of Canada with Andrew Kelvin, Chief Canada Strategist at TD Securities.
Anthony Okolie will have a look at what's proved popular among self-directed investors with the latest TD Direct Investing sentiment index. And in today's WebBroker education segment, Bryan Rogers will take us throughout you can use the platform to find out what stocks actually make of an index.
You can email us anytime at moneytalklive@td.com with your questions.
… The American benchmark, a bit of a down days let's check out Crescent Point Energy right now. Where it sits at the moment at nine bucks and $0.66 a share, nothing too dramatic, seeing some of the energy names pull back modestly. Let's take a look at Denison Mines as well.
Playing a role as of late, giving back today a buck 87 at Denison down 1/2%.
South of the border, still in the thick of earnings season, a bit of a soft sales forecast for Microsoft and seems to be weighing on broader market sentiment in terms of the Goldilocks scenario. If that gets to slow down the economy, some people lose their jobs and companies do just fine. The road is always a bit bumpier in Microsoft saying it, it looks like some of the softness of the end of last year's carrying into the current quarter. At 3986, the S&P 500 down, let's call that three quarters of a percent.
The tech heavy NASDAQ stacked up against the broader market, down 1 1/3%. Some of the chipmakers that were rallying pretty strongly in recent days including Nvidia, giving some of that back today. 189 bucks and change down about 1 3/4 of a percent on that one as well. And that's you market update.
The Bank of Canada raised its key interest rate by another 25 basis points.
Eight hike in a row. Now they are signalling that they expect a hold of this level for the time being.
Joining us now is more is Andrew Kelvin, Chief Canada Strategist at TD Securities. We are talking about 25 basis point rate hike expecting but pretty clear signal from the bank that they are done from now unless something else happens.
>> Yeah. And it was conditional.
They were very careful to explicitly qualify their statement that they expect to keep the overnight rate on hold, conditional on the economy folding in line with their expectations.
So inflation not coming down as quickly as they expect, they are telling us that they will hike rates again. If growth proves stronger than anticipated it would bring additional rate hikes back into play.
We do believe that the Bank of Canada is done here. I should say that up front. We did expect this 25 basis point move would be the last move from the Bank of Canada in the cycle. It seems the Bank of Canada does agree. One thing I like to believe is that after some of the difficulties with Communications, with the street and with the public, the bank experience really through the latter part of 2021 and 2022, they would not make these statements lightly.
So I have an idea that they have a high degree of confidence that there will be tightening in place and we are starting to see signs of the economy slowing giving them enough comfort that inflation will be slowing. From our perspective, the real question is not will the bank tighten again. It's more a question of when can they start easing?
>> They were fairly explicit in saying that right?
If I went through the statement, this was a pretty strong statement that we've done this and now we plan to sit back, watch the effect we had through the economy unless something forces our hand.
Was that a little more than we were expecting?
>> It's more than I was expecting certainly.
Just because again, giving some avian certainty around the economy, not just the cycle. The cycle is an extraordinary cycle giving all the fiscal stimulus. So many factors globally impacting the Canadian economy.
But in general, it's really hard to pick up turning points in a policy cycle.
The meeting, this was a tricky meeting for them in terms of their communication. The 25 basis points, that was the easy part.
It's the communication that was more difficult.
I would've thought they would want themselves having a little more wiggle room in terms of being able to adjust for April if the economy proved to be more resilient than anticipated.
But it is clear that they think there is enough tightening in place that we are starting to see those impacts and we will continue to see them through 2023.
Because one thing they did highlight is that we haven't seen the full impact of the rate hikes yet.
Monetary policies with a lag, interest rates don't reset instantaneously. Not all interest rates anyways.
The impacts of the tightening of seen prior to today still be felt through this year. I think they are very cognizant of that.
It does suggest that they are concerned about the risks of over tightening as well as the risk of under tightening.
Both of which are very real.
>> Part of the rationale behind this is that we are seeing some sign of slowing demand in the economy.
Let's pause and see the effect we've had.
Also the fight against inflation, they appear to be signalling that they are making some pretty good progress in terms of their projections.
Getting back to target by next year?
Is that feasible?
Is that realistic?
>> I think it is realistic to be to target by next year. Inflation, the target is a year-over-year number.
If they can get to a sustainable rate of inflation by the latter part of this year, it will get us back to target inflation in 2024. By the end of 2023, most of those inflation prints from last year, which were surprising to many of us, they won't be in the calculation anymore.
It's just the nature of inflation. Now, in terms of the composition here, the bank clearly has the evidence that goods inflation is… We've seen supply chains heal.
A lot of the supply chain issues we saw during the pandemic in 2020 and 2021, were the result of the global economy.
Not just Canadians but the global economy shifting from goods consumption.
Services consumption rather to goods consumption. When the entire world stopped going to restaurants and ordering consumer electronics, producing chips to produce those phones, stressed the ability of ports to handle the ships needed to take those from point A to point B. Now that goods demand is slowing globally, we are seeing those supply chain disruptions.
That will have a downward impact on goods inflation.
Services inflation will be a bit stickier. I think that is the real wildcard here.
Because we know that labour market is very tight. But the bank does believe that with the slowing of the economy that they expect to see, that will be enough to bring both goods inflation lower and a little bit of operation services inflation to all ultimately bring inflation back under control.
And ultimately, that has to be the bed here because of they didn't believe that, they wouldn't be able to signal a pause here.
> For anyone setting their countdown clocks, a little afternoon Eastern time, we are one week and roughly 2 hours away from hearing from the US Federal Reserve.
Now I don't think Jerome Powell is going to phone… And say I don't know what to do.
Guide my way.
But is there anything about what we are getting today from our central bank that might inform us about the future path of the Fed and what we might get from them?
>> I don't know if it will inform the Fed per se. But some of the factors impacting Canada are also impacting the Fed.
The goods inflation story is a global story. Not just a domestic story.
The same way we expect to see less in the way of goods and services in Canada, so too will be in the US.
Global prices.
With energy prices,…We have heard from Fed officials saying a slower pace of tightening would be more appropriate. So I do think it foreshadows we are likely to see from the Fed.
Not in terms of the guidance explicitly. We don't think the Fed will be done with this meeting. But it does sort of fit with this idea that central banks certainly in North America, are closer to the end and the other beginning.
Europe is another story but we can cover that another time.
>> We can get the question later in the show.
I just want to ask you about the fact that we are going to get from the Bank of Canada what we are not accustomed to.
The equivalent of the Fed, they will pull back the curtain and in the coming days, one week or two weeks away, will this put any more colour into these deliberations? Is this useful for us? As you know, people who watch the markets and watch the influence of central banks?
>> In an ideal world, no it will be useful.
We would know exactly why they did what they did but in the real world, any additional piece of information is helpful for context.
They are by their nature, backward -looking.
It tells us what they thought two weeks prior.
I'd be really interested to see how much detail goes and because we don't really know what these are going to look like.
Will they be scrubbed of all the interesting details?
Will we find out the differences in individual debiting Governors views? One thing that's different from Canada and the US, in the US, every Fed Gov. can go off and say whatever they think.
They can vote and it all becomes public. The Bank of Canada speaks with one voice.
When you hear from one deputy governor, you are hearing the same message from another deputy governor or the governor himself.
It will be interesting to see the variety of views across government if they allow that detail. Because again, they can scrub all the really interesting bits out if they so choose.
In which case, I will have to write a very dry report.
>>hahaha I hope you have something in there to hang your hat on we get those minutes. Great start the program. We will get to your questions for Andrew Kelvin on the economy in just a moment's time including Outlook for housing, whether the BOC will cut rates and whether GIC rates have peaked. A reminder that you can get in touch with us any time by emailing MoneyTalkLive@td.com or Philip of your response locks here on WebBroker.
Now let's get you updated and some of the top stories in the world of business and telemarketer training.
A softening sales outlook from Microsoft appears to be weighing on the broader US tech sector today.
The software giant says the slowdown in demand is starting in December, carrying into the current quarter.
Some of the largest names in tech of announced cost-cutting measures in recent weeks.
Including layoffs amid recession fears.
Microsoft was also in the news today as it faced outage for some of its cloud services.
Shares of Shopify are in the spotlight today.
The e-commerce company is raising its monthly fees across several of its plans, effective immediately for new clients. Existing Shopify customers will see a price change for about three months. Shopify also told us that they are scheduling or quarterly results for 2015.
A stock about 10% in today's news.
CN Rail boosting its dividend by 8%, following an earnings beat in its most recent quarter.
The railway benefited from higher fuel surcharge revenue and the currency impact of a weaker Canadian dollar. However CN is forecasting low single-digit earnings growth this year given the economic backdrop.
Down 4%. Let's check in the main benchmark indices starting on Bay Street with the TSX compass index.
A down day on both sides of the border.
I think were hearing Tesla after the bells today, down about 33 points and brought her reading the American market just up Stryver percent blowback.
We are back now with Andrew Kelvin taking your questions about the economy and interest rates. Let's get to them.
Here's a hot button topic right off the top.
What's the outlook for housing market given all this?
>> So it's a really interesting question because there are a bunch of factors operating in different directions here.
On one hand, obviously higher rates are negative for housing but if you go with the term structure, rates are actually a little bit lower than they were in the fall. So heading into the spring market, if interest rates remain at the same levels, finance conditions may actually be slightly easier than they were in the fall market.
Now we've already seen a pretty good correction in prices.
It's not to say that we couldn't see additional softness. We expect that we will see prices softening a little bit further in the spring but given we have probably seen the worst financial cost for fixed rate borrowing in our view, given that we are looking at a scenario where the population can grow and grow and grow, that does provide an underpinning of demand for housing.
Demanded a price can change. At the end of the day, if we had more people to the economy, it increases the demand for housing and that makes it more difficult to see large downward moves in house prices. So, we are likely to see in our view, a little bit of softening in the spring. It may be something pretty modest.
Something to the tune of 5% or so.
Beyond that, assuming that the Bank of Canada is in fact done at 4/2%, assume that as we get to the second part of the year, the market really does start to key in on rate cuts, it could be that the spring does Mark something pretty close to the bottom.
Contingent on the labour market that doesn't crack too terribly. Because obviously, if growth falls off a cliff and it spikes then that's an entirely different scenario.
>> You mentioned the fixed-rate markets. Interesting because rightly so, obviously aggressive rate hikes from central banks, have been focused on floating rate loans, the effect that crime is having on that.
Influenced by the Bank of Canada… The five year bond yield obviously, I know you were in a pandemic and a lot of people… A lot more popular.
But I think a five year fixed mortgage might still be in the lead in this country. We have seen bond yields come down.
Could that be a tale of sort of two different products this year with the housing market trying to figure out rates?
>> I think so. That strong take made a lot of sense in the context of a skyrocketing housing market. People just trying to find any little scrap of affordability they could.
As we go into 2023, we have probably seen the peak, we believe we've seen the peak, of the overnight rate.
That shouldn't imply that we are at the peak for all rates.
Given the sort of recession fears in the US, the idea that the Fed is going to be decelerating their pace of rate hikes and will reach their terminal rate in the next few meetings, that does support over the course of the year lower bond yields for the cross term structure.
By the time you hit the fall, mortgage rates could be lower than they are today.
20 basis points should lower by the end of this year.
That's something that should provide a little bit of relief relative to where we were in the fall. A more restrictive environment in 2021. But it does look like we may have seen the peak in terms of where we are on borrowing costs.
>> You mentioned population growth, obviously this has been listed as something with our aggressive target's in bringing new Canadians to the country.
Is there a danger going forward that the market doesn't keep up with that demand?
That we end up with accelerating skyhigh prices again?
>> I think it is a danger. Particularly if the bank of Canada can ease aggressively in 2024, 2025.
It's also something that I think is going to be evident before on the rent side of things.
As much as borrowing costs may depress home prices for purchasers, rent, it's a bit more of a straightforward supply and demand question. If anything, higher interest costs raise a sort of cost for landlords that they tend to try to pass on to tenants.
Whether that depends on the underlying market fundamentals.
But functionally, as I said, growing population implies higher demand for housing.
The difference between candidates today and the US in 2007, 2006, I spent a lot of my career trying to prevent people from associating Canada… >> It happened to them so it has to happen to us.
>> I think one of the key differences, a big key difference is the US is extremely overbuilt at that time.
I think nobody in Canada thinks we are overbuilt. There is housing shortage here rather than a surplus.
That is putting pressure on the markets today. I don't know that I see any relief there in the future.
And just again, with population growth, it's really hard to see a housing materialize.
>> The housing there, another question we have been getting quite a bit through the rate hiking cycle.
Now the question is turned on GICs.
Of you are wondering if GIC rates have peaked?
>> So I would say, when we look at the government of Canada curve, we were expecting yields to move lower through this year in a more gradual pace and we have actually seen. The strong performance in Canadian fixed income of the first part of 2023, we agreed with the direction, the magnitude of lower yields. It did surprises a bit. I would say if you look at our bond yield forecast, we don't see yields getting back to where they were last fall.
And insofar as government of Canada yields informing the rest of the rates universe, I would be surprised to see other rates products at the certain same level as they were at last fall.
It just given our government of Canada forecast.
>> Okay, for the people of the WebBroker platform keeping an eye these things, of course, you go to the research tab and you can pull up the whole "GIC rate sheet" under investments.
I did notice that in the one quote was only one left standing with a 5% rate in the rest of drop below five so there has been some movement.
You've probably noticed that. As always at home, make sure you do your own research before making any investment decisions.
We will get back to your questions with Andrew Kelvin on the economy and interest rates in just a moment time.
A reminder you get in touch of us anytime. Now let's get to our educational segment today.
If you're interested in finding out what stocks or assets actually make up an index WebBroker has tools which can help you. Joining us now for Maurice Bryan Rogers, Senior Client Education Instructor with TD Direct Investing.
Is there a quick way and WebBroker to find out which companies are part of an index?
>> Yeah Greg. It's one of my favourite tools.
Quite a long time ago but a simple step in WebBroker.
One I think is very valuable. Especially those that are new to investing and just getting familiar with it.
Different stocks. Looking for those ideas, potentially on a particular stock to identify.
So jumping into WebBroker, we can see under "research and investments," we go here. If you go under the "indices" section, indices meeting this is the plural for all the indexes that are listed in North America.
You can see the major indices coming up initially.
And everybody is going to recognize some of these things.
Like the Dow Jones industrial average… You can see the NASDAQ 100. Several listed. But what you want to do, is first click on one that you might be interested in.
Click on the Dow.
Most people don't really know a lot about it.
But when you think about it, the Dow only has about 30 stocks in the index.
So you can click on members.
And I can see all 30 stocks that are listed there.
You know this is the Dow Jones, the stocks here, you can see criteria like the last price, change, the volume, 52-week high low. Now you're getting a good picture. Even the dividend yield as well.
You're getting a picture of all 30 stocks that are in that index and you can click on any of these.
These are all hyperlinked and they can open up more information there. You can also even go on the "performance" as well.
You can see in the last week, last month, the last six months.
Even for the year.
How the stocks perform.
> That's the Dow.
You have 30 but if you look at the S&P 500 I think there's technically 503 or 504.
Then that's a lot of information on my screen.
So let's talk about ways to filter all this information.
>> Good point Greg. Once you're getting some indexes that have a lot more in their S&P 500 being a great example, there are several indexes there as well. I want to show you how you can use the drop down to identify some of the other common indexes. Maybe the TSX 60, like we said, the S&P 500, there are a lot of other ones thereto that you can explore and then you can see what stocks are on there. Even if you looking for a particular sector or some thing like that or an industry as well.
So jumping back into WebBroker, let's go to the same place where we were before. We can see the Dow Jones industrial average is on the "select an index". We want to drop down and now you have a whole bunch of different indexes open up to you.
You of the S&P 500, the NASDAQ 100, the S&P 600 and so on.
So just to Greg's point, you can filter. There's another way can filter.
A ministry that in a moment.
You can also, even if you want to look at the TSX banks… Actually, my apologies. Some of them be careful, they may not have some things in there but you can list through a lot of these if you're going through, say, financial index. That's where you'll probably find the banks. If you don't see anything in there, just keep trying to look for what you're looking for.
Now you can see there is a small list of the banks that we have available and TSX. But if we jump over to something like the S&P 500 that has a lot of positions there. You can do with this with anyone of the indexes.
Now you can filter this by all the criteria at the top.
If you want to go in reverse, I don't know why you want to do that… The last ones first or something like that.
You can click on the company.
You can filter any one of these calls.
Interesting to most people as you can look at "market".
I like looking at that one because you can see that it's a quick way to see one of the largest companies in the S&P 500?
You can see Apple's 2.3 trillion. Microsoft and so on… Then you can go for dividend yield is an example. You can click on that and see which ones as the highest dividends. Just click it twice.
Now it showing the highest to the lowest.
You can see different companies.
Then you go to the performance tab and you can look at it that way by dollar change or percentage change.
Maybe the past year, who's had the lowest percentage change or if you click it again, I will show you the highest.
Steel dynamics… It really gives you quick insight into just the overall list on the S&P 500.
Then you can click on this hyperlink and you can open a wholedays worth of research if you look at that.
I know that sounds exciting to Greg.
>> Good for Saturday and Sunday is in a brine?
> Absolutely.
>> Thanks great stuff as always.
>> My pleasure.
>> Our thanks to Bryan Rogers, Senior Client Education Instructor at TD Direct Investing.
Make sure to check out the learning centre and WebBroker for more educational segments videos, live interactive master classes and upcoming webinars.
And before we get back to our questions, a reminder of height get in touch with us.
Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com o you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live.
Okay. We are back now with Andrew Kelvin taking your questions about the economy and interest rates. One fresh coming up the platform, (reads question) >> It's a pretty complex question to be honest. I think, if you look at a broader history, that.
Over the 10 years prior to 2022, that's what looks like the historical anomaly to me.
We had this period of pervasive very low inflation attributed to lots of different things.
Different states, hopefully we don't repeat that anytime soon. Some of that was the impact of globalization which reduced downward pressure on goods inflation.
we have probably seen the peak benefits they are and if anything the conversations now are turning to onshoring. This a way off shoring was disinflationary, it should follow that onshoring will be inflationary especially in the short term.
So I don't know that we would expect a really wild ride ahead for the variation in the overnight rate.
But I think that period of overnight rates being pinned at their effective lower, close to it, as we saw a lot running through that period of approximately 2009 to 2022, I would not expect to repeat that in four not to be pinned to zero, it allows a lot more variation.
I, at the same time, don't believe that going back to the availability we saw in, call it the 1990s or, heaven forbid, the 1980s when it was extraordinarily volatile.
I think that period.
.
.
I would not expect to repeat that.
>> I remember doing interviews all through those years.
A bit of ahead scratcher. How can we stay as low in an interest-rate environment for so long.
The central banks were trying to get inflation to target up from being too low. Everyone was wondering what is going on. And of course the world changed pretty dramatically.
>> And that's a big reason why, I think central banks and forecasters such as myself, underestimated persistence of inflation in 2020, 2021.
Through this period of extremely low inflation believe that there was a sort of gravitational pull to lower inflation.
We needed the data to sort of overcome this burden of recent history. And sure enough, it did.
I would just say, going forward, that period were rates were exceptionally low, it's hard to believe rates will remain a stable… > Next question off the platform, this one about the state of the Canadian dollar. This one about the outlook for currency.
>> A few factors are at play here. As always, as is always the case with the Canadian dollar, we are going to be swept up a little bit by currents outside our borders. There is a general sense here that the US dollar story has peaked a bit.
The gross impacts in Europe of the conflict in Ukraine have not been as bad as feared.
The European economy has not been as bad, the US dollar weakens here which products props up the Canadian dollar by proxy.
A little bit of the support coming from higher oil prices that we expect later this year as well but that's not the main story here.
We do think that we can see the Canadian dollar finish the year 76, $0.77 would be a reasonable expectation we believe.
> Let's talk a bit about that idea of influence of oil and the petro currency.
I don't even know if it's a joke with the Canadian dollar. It's a petro currency until it's not. I once had Steven… The Gov. of the Bank of Canada.
Saying the lines were moving in tandem and it works until it doesn't work. Does it not work anymore?
>> I don't think it does.
It used to work because the energy sector was a large part of our growth pitch.
It's still an important piece particularly in our trade basket. So as oil prices move, in impacts trades, governments and corporation incomes. I'm not suggesting it's not important. But, the amount of investment in the energy sector has been declining pretty steadily from 2015 to 2021.
Rebounding just a little bit in 2022. But, we remain below 2019 levels.
With the move away from fossil fuels in the future, with sort of, strengthening environmental regulations, Canadian, the Canadian is not an attractive Centre… That is reducing the economy's sensitivity to energy prices. Which is why, to my thinking, we should not expect to see the same sort of sensitivity on the currency from oil prices that we used to. Because it's just not as big a piece of our future.
Our future growth basket.
>> Interesting stuff. Let's get to another question now. This went back to rate hikes.
A rate hike from the Bank of Canada today and they said they will stay on hold if they can to try to figure out the impact of our economy.
When you think the BOC or the Fed will begin to lower their interest rates?
>> The way I would think of the BOC going forward this year, their sintering on hold conditional on their forecast being filled. I would put forward that by the time the March meeting, we will only have time for… January, big legs.
There's an early March meeting as well. I don't think they will validate that forecast one way or the other.
It seems very very unlikely that the Bank of Canada will not move in March. We will get to April, June July, that's when we will have enough weight of evidence to really make an assessment on the forecast in the economy being correct or not. So to me, those are the meetings at a greatest risk for additional hiking.
Sort of, Q2, Q3. In terms of looking for rate cuts, I would focus on the latter part of 2023 and 2024. With the bank account of its forecast published today, I think you can make an argument that Q4 2023 rate cuts are a possibility.
It's not our expectation but those would be a possibility.
So that sort of timeframe that we are looking at when we will start worrying about rate cuts. Our expectation is that it will probably take until 2024 given some stickiness and inflation to the tight labour market and I think there should be a fair bit of caution for the Bank of Canada when it's time to cut rates.
They spent a lot of the last year trying to regain credibility after falling behind with the curve of inflation. I don't recall.
Where people were public in question to the extent that they have for the Bank of Canada in terms of the public and the media literally pay a lot of attention.
I think, given that context, it would be prudent for them to be very, very cautious before starting to remove some of this tightening.
Particularly given that, if they fall a little bit behind the curve on rate cuts, that can be less damaging to their overall mandate in following behind the curve on rate hikes.
>> Interesting stuff.
We will get back to your questions for Andrew Kelvin on the economy and interest rates in just a moment. As always, make sure you do your own research before making any investment decisions.
A reminder that you get in touch us at any time.
Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com > Every month TD Direct Investing puts together a survey of how investors are feeling with the markets.
Our Anthony Okolie joint is now the details on the latest results. Anthony.
>> Thanks so much Greg.
The TD Direct Investing came in at -66 in December.
That's down a whopping 43 points month over month.
That's the most bearish are self-directed have investors have been feeling the past six months.
Remember the DI I sentiments from +100 being the most bearish rather bullish rather to 100 minus being the most bearish. The biggest indicators are illustrated in the four distinctive investor behavioural proxies.
Interesting insights here. I will highlight two of those proxies. One is of course the proxy for a flight to safety or risk appetite. That was down 60 points to -13. A more bearish indicator.
A more negative value for this proxy means risk or more actual flight to safety for things like GICs, money market funds and so forth. The other proxies chasing trends. Now, this would self directing investors are buying on a rise in falling market. Chasing trends was down 20 points to -24.
That indicated that self directing investors bought prices falling in December.
Now, overall, sentiment across all sectors was again neutral to bearish as risk tolerance among investors, self-directed investors, tumbled last month.
Investors opted for defensive sectors like consumer staples in healthcare.
Sentiment to a new score of zero. Now, the high-risk technology or IT sector, consumer discretionary names, they saw the leased trading activity with sentiment falling to -8 and -12 Respectively in December.
Within consumer staples, grocers were among the active Securities blocked rather bought including Costco, Loblaw's and Maple leaf foods.
Investors focusing on the defensive sectors.
When we look at the sentiment by age, baby boomers were yet again, the most bearish on the market. There sentiments sunk 18 points to a score of -28.
Now, Jamesian millennial's with the least negative and they saw more moderate drop in their sentiment of four points to score of -4.
Across nearly all age groups, active bought Securities included beating down names like Tesla, CIBC and Algonquin power utilities. Greg?
>> Lots of fascinating information there.
So many ways to parse it out to.
You can take a look at the difference between sort of the active traders in the long term investors. What are we seeing there?
>> Exactly. As you mentioned, the sentiment gap between active traders, these are traders who have over 30 trades in the past three months.
And long-term investors have up to 29 trades in three months.
The sentiment gap widened to 25 points. Active traders sentiment fell 13 points to score -20. For long-term investors, that number dropped 30 points to score -45.
Investors have gained continuing to look for bargain sales where they can find them. Tesla began a stock over much of 2022. They continue to be a heavy trade stock by all demos and investor type with long-term and active traders.
>> Interesting stuff as always.
Thanks Anthony.
>> My pleasure.
… >> MoneyTalk Live's Anthony Okolie. Let's do a quick check of the market.
… Should know this, some of the energy names with downward pressure Cenovis fairly flat of the session now.
Waiting on the broader market sentiment with S&P 500.
The tech heavy NASDAQ, the broader market the last time we checked, a little bit deeper in the hole.
Maybe just take my word for it actually.
One 1/4% to the downside of the NASDAQ and Tesla, expecting to report today.
Down modestly.
We are back now with Andrew Kelvin, Chief Canada Strategist at TD Securities. Let's get back to your questions. We have a lot of them here.
Andrew, what you think about a slowdown or recession in 2023?
>> I think it's a real knife edge call.
When I say that, on the go back to the population growth aspect of the economy.
I think we are very likely to see the truly negative per capita GDP growth in Canada.
We probably already experienced in the fourth quarter.
We expect to see it all through 2023 and perhaps into the early parts of 24 as well.
But when you're going economy every year, it raises the bar to actually lower the amount of activity in the economy. So we expect that we will see two quarters pretty close to zero growth in Q1, Q2. It's right now what we are seeing, maximum risk recession. We do come down on the side of a recession in our forecast but it's in very, very, tight thing.
Just for a couple of quarters and he can just as easily be slightly above zero. With air bands around this forecast being what they are.
But I would say the maximum risk is probably the second quarter of this year. Given the way some of the rate hikes lag in the past and the economy. So certainly not out of the woods yet. But again, that growing population growth it just makes a lot more difficult to see a large decline.
>> We have two questions left. Running short on time but I think I can make these two questions part of the same thing. One of you wanted to know if there's a risk of inflation moving higher this year and the other wants to know if you expect any stimulus out of the Canadian government this year? One can sort of play with the other.
>> Absolutely.
And really, I probably should mention the stimulus question on the recession side of things because if you think that there will be large physical stimulus here, fiscal stimulus rather it will be hard to see. Our sense that we are not likely to see a fiscal stimulus, the government signal that is out there will have plans for big new spending packages that they want to try and fasten themselves as being distally responsible. After that very large stimulus.
During the pandemic. So we don't expect to see material stimulus in the upcoming budget.
the easiest way to get the inflation spike from here, I will come back to a scenario when inflation was at its peak but in terms of inflation becoming higher, the easiest way to do it is the quick recovery in oil prices which you can do just by slightly improving your expectations for growth in China. Now that China is reopening.
It looks permanent.
And with assumptions around what OPEC does with supplies. That's the easiest way to push inflation higher. If you can find rather if you combine that with a labour market remains externally tight, you can talk about very persistent services inflation.
Ultimately, we do believe it will win out the day which is why we continue to see inflation moving pretty quickly back to the 4% area and maybe a little bit more slowly thereafter. But I can tell a story were inflation maybe doesn't return to 8% but hangs out around 6% or goes a little bit higher if we have a quick spike in energy prices.
> Skilfully done, putting those two questions together.
Always a pleasure to have you.
>> Thank you very much.
>> Our thanks to Andrew Kelvin, Chief Canada Strategist at TD Securities. And stating on tomorrow's show, Julien Nono-Womdim, Semiconductor Analyst with TD Asset Management will be our guest take your questions about semiconductors. And a reminder that you get a head start, just email MoneyTalk Live@T. That's all the time we have for the show today. Thanks for watching and see you tomorrow.
[music]
Every day I'll be joined by guests from across TD, many of whom you will only see here.
We'll take you through it's moving the markets and answer your questions about investing. Coming up on today show Colin will get reactions on the latest rate hike from the bank of Canada with Andrew Kelvin, Chief Canada Strategist at TD Securities.
Anthony Okolie will have a look at what's proved popular among self-directed investors with the latest TD Direct Investing sentiment index. And in today's WebBroker education segment, Bryan Rogers will take us throughout you can use the platform to find out what stocks actually make of an index.
You can email us anytime at moneytalklive@td.com with your questions.
… The American benchmark, a bit of a down days let's check out Crescent Point Energy right now. Where it sits at the moment at nine bucks and $0.66 a share, nothing too dramatic, seeing some of the energy names pull back modestly. Let's take a look at Denison Mines as well.
Playing a role as of late, giving back today a buck 87 at Denison down 1/2%.
South of the border, still in the thick of earnings season, a bit of a soft sales forecast for Microsoft and seems to be weighing on broader market sentiment in terms of the Goldilocks scenario. If that gets to slow down the economy, some people lose their jobs and companies do just fine. The road is always a bit bumpier in Microsoft saying it, it looks like some of the softness of the end of last year's carrying into the current quarter. At 3986, the S&P 500 down, let's call that three quarters of a percent.
The tech heavy NASDAQ stacked up against the broader market, down 1 1/3%. Some of the chipmakers that were rallying pretty strongly in recent days including Nvidia, giving some of that back today. 189 bucks and change down about 1 3/4 of a percent on that one as well. And that's you market update.
The Bank of Canada raised its key interest rate by another 25 basis points.
Eight hike in a row. Now they are signalling that they expect a hold of this level for the time being.
Joining us now is more is Andrew Kelvin, Chief Canada Strategist at TD Securities. We are talking about 25 basis point rate hike expecting but pretty clear signal from the bank that they are done from now unless something else happens.
>> Yeah. And it was conditional.
They were very careful to explicitly qualify their statement that they expect to keep the overnight rate on hold, conditional on the economy folding in line with their expectations.
So inflation not coming down as quickly as they expect, they are telling us that they will hike rates again. If growth proves stronger than anticipated it would bring additional rate hikes back into play.
We do believe that the Bank of Canada is done here. I should say that up front. We did expect this 25 basis point move would be the last move from the Bank of Canada in the cycle. It seems the Bank of Canada does agree. One thing I like to believe is that after some of the difficulties with Communications, with the street and with the public, the bank experience really through the latter part of 2021 and 2022, they would not make these statements lightly.
So I have an idea that they have a high degree of confidence that there will be tightening in place and we are starting to see signs of the economy slowing giving them enough comfort that inflation will be slowing. From our perspective, the real question is not will the bank tighten again. It's more a question of when can they start easing?
>> They were fairly explicit in saying that right?
If I went through the statement, this was a pretty strong statement that we've done this and now we plan to sit back, watch the effect we had through the economy unless something forces our hand.
Was that a little more than we were expecting?
>> It's more than I was expecting certainly.
Just because again, giving some avian certainty around the economy, not just the cycle. The cycle is an extraordinary cycle giving all the fiscal stimulus. So many factors globally impacting the Canadian economy.
But in general, it's really hard to pick up turning points in a policy cycle.
The meeting, this was a tricky meeting for them in terms of their communication. The 25 basis points, that was the easy part.
It's the communication that was more difficult.
I would've thought they would want themselves having a little more wiggle room in terms of being able to adjust for April if the economy proved to be more resilient than anticipated.
But it is clear that they think there is enough tightening in place that we are starting to see those impacts and we will continue to see them through 2023.
Because one thing they did highlight is that we haven't seen the full impact of the rate hikes yet.
Monetary policies with a lag, interest rates don't reset instantaneously. Not all interest rates anyways.
The impacts of the tightening of seen prior to today still be felt through this year. I think they are very cognizant of that.
It does suggest that they are concerned about the risks of over tightening as well as the risk of under tightening.
Both of which are very real.
>> Part of the rationale behind this is that we are seeing some sign of slowing demand in the economy.
Let's pause and see the effect we've had.
Also the fight against inflation, they appear to be signalling that they are making some pretty good progress in terms of their projections.
Getting back to target by next year?
Is that feasible?
Is that realistic?
>> I think it is realistic to be to target by next year. Inflation, the target is a year-over-year number.
If they can get to a sustainable rate of inflation by the latter part of this year, it will get us back to target inflation in 2024. By the end of 2023, most of those inflation prints from last year, which were surprising to many of us, they won't be in the calculation anymore.
It's just the nature of inflation. Now, in terms of the composition here, the bank clearly has the evidence that goods inflation is… We've seen supply chains heal.
A lot of the supply chain issues we saw during the pandemic in 2020 and 2021, were the result of the global economy.
Not just Canadians but the global economy shifting from goods consumption.
Services consumption rather to goods consumption. When the entire world stopped going to restaurants and ordering consumer electronics, producing chips to produce those phones, stressed the ability of ports to handle the ships needed to take those from point A to point B. Now that goods demand is slowing globally, we are seeing those supply chain disruptions.
That will have a downward impact on goods inflation.
Services inflation will be a bit stickier. I think that is the real wildcard here.
Because we know that labour market is very tight. But the bank does believe that with the slowing of the economy that they expect to see, that will be enough to bring both goods inflation lower and a little bit of operation services inflation to all ultimately bring inflation back under control.
And ultimately, that has to be the bed here because of they didn't believe that, they wouldn't be able to signal a pause here.
> For anyone setting their countdown clocks, a little afternoon Eastern time, we are one week and roughly 2 hours away from hearing from the US Federal Reserve.
Now I don't think Jerome Powell is going to phone… And say I don't know what to do.
Guide my way.
But is there anything about what we are getting today from our central bank that might inform us about the future path of the Fed and what we might get from them?
>> I don't know if it will inform the Fed per se. But some of the factors impacting Canada are also impacting the Fed.
The goods inflation story is a global story. Not just a domestic story.
The same way we expect to see less in the way of goods and services in Canada, so too will be in the US.
Global prices.
With energy prices,…We have heard from Fed officials saying a slower pace of tightening would be more appropriate. So I do think it foreshadows we are likely to see from the Fed.
Not in terms of the guidance explicitly. We don't think the Fed will be done with this meeting. But it does sort of fit with this idea that central banks certainly in North America, are closer to the end and the other beginning.
Europe is another story but we can cover that another time.
>> We can get the question later in the show.
I just want to ask you about the fact that we are going to get from the Bank of Canada what we are not accustomed to.
The equivalent of the Fed, they will pull back the curtain and in the coming days, one week or two weeks away, will this put any more colour into these deliberations? Is this useful for us? As you know, people who watch the markets and watch the influence of central banks?
>> In an ideal world, no it will be useful.
We would know exactly why they did what they did but in the real world, any additional piece of information is helpful for context.
They are by their nature, backward -looking.
It tells us what they thought two weeks prior.
I'd be really interested to see how much detail goes and because we don't really know what these are going to look like.
Will they be scrubbed of all the interesting details?
Will we find out the differences in individual debiting Governors views? One thing that's different from Canada and the US, in the US, every Fed Gov. can go off and say whatever they think.
They can vote and it all becomes public. The Bank of Canada speaks with one voice.
When you hear from one deputy governor, you are hearing the same message from another deputy governor or the governor himself.
It will be interesting to see the variety of views across government if they allow that detail. Because again, they can scrub all the really interesting bits out if they so choose.
In which case, I will have to write a very dry report.
>>hahaha I hope you have something in there to hang your hat on we get those minutes. Great start the program. We will get to your questions for Andrew Kelvin on the economy in just a moment's time including Outlook for housing, whether the BOC will cut rates and whether GIC rates have peaked. A reminder that you can get in touch with us any time by emailing MoneyTalkLive@td.com or Philip of your response locks here on WebBroker.
Now let's get you updated and some of the top stories in the world of business and telemarketer training.
A softening sales outlook from Microsoft appears to be weighing on the broader US tech sector today.
The software giant says the slowdown in demand is starting in December, carrying into the current quarter.
Some of the largest names in tech of announced cost-cutting measures in recent weeks.
Including layoffs amid recession fears.
Microsoft was also in the news today as it faced outage for some of its cloud services.
Shares of Shopify are in the spotlight today.
The e-commerce company is raising its monthly fees across several of its plans, effective immediately for new clients. Existing Shopify customers will see a price change for about three months. Shopify also told us that they are scheduling or quarterly results for 2015.
A stock about 10% in today's news.
CN Rail boosting its dividend by 8%, following an earnings beat in its most recent quarter.
The railway benefited from higher fuel surcharge revenue and the currency impact of a weaker Canadian dollar. However CN is forecasting low single-digit earnings growth this year given the economic backdrop.
Down 4%. Let's check in the main benchmark indices starting on Bay Street with the TSX compass index.
A down day on both sides of the border.
I think were hearing Tesla after the bells today, down about 33 points and brought her reading the American market just up Stryver percent blowback.
We are back now with Andrew Kelvin taking your questions about the economy and interest rates. Let's get to them.
Here's a hot button topic right off the top.
What's the outlook for housing market given all this?
>> So it's a really interesting question because there are a bunch of factors operating in different directions here.
On one hand, obviously higher rates are negative for housing but if you go with the term structure, rates are actually a little bit lower than they were in the fall. So heading into the spring market, if interest rates remain at the same levels, finance conditions may actually be slightly easier than they were in the fall market.
Now we've already seen a pretty good correction in prices.
It's not to say that we couldn't see additional softness. We expect that we will see prices softening a little bit further in the spring but given we have probably seen the worst financial cost for fixed rate borrowing in our view, given that we are looking at a scenario where the population can grow and grow and grow, that does provide an underpinning of demand for housing.
Demanded a price can change. At the end of the day, if we had more people to the economy, it increases the demand for housing and that makes it more difficult to see large downward moves in house prices. So, we are likely to see in our view, a little bit of softening in the spring. It may be something pretty modest.
Something to the tune of 5% or so.
Beyond that, assuming that the Bank of Canada is in fact done at 4/2%, assume that as we get to the second part of the year, the market really does start to key in on rate cuts, it could be that the spring does Mark something pretty close to the bottom.
Contingent on the labour market that doesn't crack too terribly. Because obviously, if growth falls off a cliff and it spikes then that's an entirely different scenario.
>> You mentioned the fixed-rate markets. Interesting because rightly so, obviously aggressive rate hikes from central banks, have been focused on floating rate loans, the effect that crime is having on that.
Influenced by the Bank of Canada… The five year bond yield obviously, I know you were in a pandemic and a lot of people… A lot more popular.
But I think a five year fixed mortgage might still be in the lead in this country. We have seen bond yields come down.
Could that be a tale of sort of two different products this year with the housing market trying to figure out rates?
>> I think so. That strong take made a lot of sense in the context of a skyrocketing housing market. People just trying to find any little scrap of affordability they could.
As we go into 2023, we have probably seen the peak, we believe we've seen the peak, of the overnight rate.
That shouldn't imply that we are at the peak for all rates.
Given the sort of recession fears in the US, the idea that the Fed is going to be decelerating their pace of rate hikes and will reach their terminal rate in the next few meetings, that does support over the course of the year lower bond yields for the cross term structure.
By the time you hit the fall, mortgage rates could be lower than they are today.
20 basis points should lower by the end of this year.
That's something that should provide a little bit of relief relative to where we were in the fall. A more restrictive environment in 2021. But it does look like we may have seen the peak in terms of where we are on borrowing costs.
>> You mentioned population growth, obviously this has been listed as something with our aggressive target's in bringing new Canadians to the country.
Is there a danger going forward that the market doesn't keep up with that demand?
That we end up with accelerating skyhigh prices again?
>> I think it is a danger. Particularly if the bank of Canada can ease aggressively in 2024, 2025.
It's also something that I think is going to be evident before on the rent side of things.
As much as borrowing costs may depress home prices for purchasers, rent, it's a bit more of a straightforward supply and demand question. If anything, higher interest costs raise a sort of cost for landlords that they tend to try to pass on to tenants.
Whether that depends on the underlying market fundamentals.
But functionally, as I said, growing population implies higher demand for housing.
The difference between candidates today and the US in 2007, 2006, I spent a lot of my career trying to prevent people from associating Canada… >> It happened to them so it has to happen to us.
>> I think one of the key differences, a big key difference is the US is extremely overbuilt at that time.
I think nobody in Canada thinks we are overbuilt. There is housing shortage here rather than a surplus.
That is putting pressure on the markets today. I don't know that I see any relief there in the future.
And just again, with population growth, it's really hard to see a housing materialize.
>> The housing there, another question we have been getting quite a bit through the rate hiking cycle.
Now the question is turned on GICs.
Of you are wondering if GIC rates have peaked?
>> So I would say, when we look at the government of Canada curve, we were expecting yields to move lower through this year in a more gradual pace and we have actually seen. The strong performance in Canadian fixed income of the first part of 2023, we agreed with the direction, the magnitude of lower yields. It did surprises a bit. I would say if you look at our bond yield forecast, we don't see yields getting back to where they were last fall.
And insofar as government of Canada yields informing the rest of the rates universe, I would be surprised to see other rates products at the certain same level as they were at last fall.
It just given our government of Canada forecast.
>> Okay, for the people of the WebBroker platform keeping an eye these things, of course, you go to the research tab and you can pull up the whole "GIC rate sheet" under investments.
I did notice that in the one quote was only one left standing with a 5% rate in the rest of drop below five so there has been some movement.
You've probably noticed that. As always at home, make sure you do your own research before making any investment decisions.
We will get back to your questions with Andrew Kelvin on the economy and interest rates in just a moment time.
A reminder you get in touch of us anytime. Now let's get to our educational segment today.
If you're interested in finding out what stocks or assets actually make up an index WebBroker has tools which can help you. Joining us now for Maurice Bryan Rogers, Senior Client Education Instructor with TD Direct Investing.
Is there a quick way and WebBroker to find out which companies are part of an index?
>> Yeah Greg. It's one of my favourite tools.
Quite a long time ago but a simple step in WebBroker.
One I think is very valuable. Especially those that are new to investing and just getting familiar with it.
Different stocks. Looking for those ideas, potentially on a particular stock to identify.
So jumping into WebBroker, we can see under "research and investments," we go here. If you go under the "indices" section, indices meeting this is the plural for all the indexes that are listed in North America.
You can see the major indices coming up initially.
And everybody is going to recognize some of these things.
Like the Dow Jones industrial average… You can see the NASDAQ 100. Several listed. But what you want to do, is first click on one that you might be interested in.
Click on the Dow.
Most people don't really know a lot about it.
But when you think about it, the Dow only has about 30 stocks in the index.
So you can click on members.
And I can see all 30 stocks that are listed there.
You know this is the Dow Jones, the stocks here, you can see criteria like the last price, change, the volume, 52-week high low. Now you're getting a good picture. Even the dividend yield as well.
You're getting a picture of all 30 stocks that are in that index and you can click on any of these.
These are all hyperlinked and they can open up more information there. You can also even go on the "performance" as well.
You can see in the last week, last month, the last six months.
Even for the year.
How the stocks perform.
> That's the Dow.
You have 30 but if you look at the S&P 500 I think there's technically 503 or 504.
Then that's a lot of information on my screen.
So let's talk about ways to filter all this information.
>> Good point Greg. Once you're getting some indexes that have a lot more in their S&P 500 being a great example, there are several indexes there as well. I want to show you how you can use the drop down to identify some of the other common indexes. Maybe the TSX 60, like we said, the S&P 500, there are a lot of other ones thereto that you can explore and then you can see what stocks are on there. Even if you looking for a particular sector or some thing like that or an industry as well.
So jumping back into WebBroker, let's go to the same place where we were before. We can see the Dow Jones industrial average is on the "select an index". We want to drop down and now you have a whole bunch of different indexes open up to you.
You of the S&P 500, the NASDAQ 100, the S&P 600 and so on.
So just to Greg's point, you can filter. There's another way can filter.
A ministry that in a moment.
You can also, even if you want to look at the TSX banks… Actually, my apologies. Some of them be careful, they may not have some things in there but you can list through a lot of these if you're going through, say, financial index. That's where you'll probably find the banks. If you don't see anything in there, just keep trying to look for what you're looking for.
Now you can see there is a small list of the banks that we have available and TSX. But if we jump over to something like the S&P 500 that has a lot of positions there. You can do with this with anyone of the indexes.
Now you can filter this by all the criteria at the top.
If you want to go in reverse, I don't know why you want to do that… The last ones first or something like that.
You can click on the company.
You can filter any one of these calls.
Interesting to most people as you can look at "market".
I like looking at that one because you can see that it's a quick way to see one of the largest companies in the S&P 500?
You can see Apple's 2.3 trillion. Microsoft and so on… Then you can go for dividend yield is an example. You can click on that and see which ones as the highest dividends. Just click it twice.
Now it showing the highest to the lowest.
You can see different companies.
Then you go to the performance tab and you can look at it that way by dollar change or percentage change.
Maybe the past year, who's had the lowest percentage change or if you click it again, I will show you the highest.
Steel dynamics… It really gives you quick insight into just the overall list on the S&P 500.
Then you can click on this hyperlink and you can open a wholedays worth of research if you look at that.
I know that sounds exciting to Greg.
>> Good for Saturday and Sunday is in a brine?
> Absolutely.
>> Thanks great stuff as always.
>> My pleasure.
>> Our thanks to Bryan Rogers, Senior Client Education Instructor at TD Direct Investing.
Make sure to check out the learning centre and WebBroker for more educational segments videos, live interactive master classes and upcoming webinars.
And before we get back to our questions, a reminder of height get in touch with us.
Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com o you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live.
Okay. We are back now with Andrew Kelvin taking your questions about the economy and interest rates. One fresh coming up the platform, (reads question) >> It's a pretty complex question to be honest. I think, if you look at a broader history, that.
Over the 10 years prior to 2022, that's what looks like the historical anomaly to me.
We had this period of pervasive very low inflation attributed to lots of different things.
Different states, hopefully we don't repeat that anytime soon. Some of that was the impact of globalization which reduced downward pressure on goods inflation.
we have probably seen the peak benefits they are and if anything the conversations now are turning to onshoring. This a way off shoring was disinflationary, it should follow that onshoring will be inflationary especially in the short term.
So I don't know that we would expect a really wild ride ahead for the variation in the overnight rate.
But I think that period of overnight rates being pinned at their effective lower, close to it, as we saw a lot running through that period of approximately 2009 to 2022, I would not expect to repeat that in four not to be pinned to zero, it allows a lot more variation.
I, at the same time, don't believe that going back to the availability we saw in, call it the 1990s or, heaven forbid, the 1980s when it was extraordinarily volatile.
I think that period.
.
.
I would not expect to repeat that.
>> I remember doing interviews all through those years.
A bit of ahead scratcher. How can we stay as low in an interest-rate environment for so long.
The central banks were trying to get inflation to target up from being too low. Everyone was wondering what is going on. And of course the world changed pretty dramatically.
>> And that's a big reason why, I think central banks and forecasters such as myself, underestimated persistence of inflation in 2020, 2021.
Through this period of extremely low inflation believe that there was a sort of gravitational pull to lower inflation.
We needed the data to sort of overcome this burden of recent history. And sure enough, it did.
I would just say, going forward, that period were rates were exceptionally low, it's hard to believe rates will remain a stable… > Next question off the platform, this one about the state of the Canadian dollar. This one about the outlook for currency.
>> A few factors are at play here. As always, as is always the case with the Canadian dollar, we are going to be swept up a little bit by currents outside our borders. There is a general sense here that the US dollar story has peaked a bit.
The gross impacts in Europe of the conflict in Ukraine have not been as bad as feared.
The European economy has not been as bad, the US dollar weakens here which products props up the Canadian dollar by proxy.
A little bit of the support coming from higher oil prices that we expect later this year as well but that's not the main story here.
We do think that we can see the Canadian dollar finish the year 76, $0.77 would be a reasonable expectation we believe.
> Let's talk a bit about that idea of influence of oil and the petro currency.
I don't even know if it's a joke with the Canadian dollar. It's a petro currency until it's not. I once had Steven… The Gov. of the Bank of Canada.
Saying the lines were moving in tandem and it works until it doesn't work. Does it not work anymore?
>> I don't think it does.
It used to work because the energy sector was a large part of our growth pitch.
It's still an important piece particularly in our trade basket. So as oil prices move, in impacts trades, governments and corporation incomes. I'm not suggesting it's not important. But, the amount of investment in the energy sector has been declining pretty steadily from 2015 to 2021.
Rebounding just a little bit in 2022. But, we remain below 2019 levels.
With the move away from fossil fuels in the future, with sort of, strengthening environmental regulations, Canadian, the Canadian is not an attractive Centre… That is reducing the economy's sensitivity to energy prices. Which is why, to my thinking, we should not expect to see the same sort of sensitivity on the currency from oil prices that we used to. Because it's just not as big a piece of our future.
Our future growth basket.
>> Interesting stuff. Let's get to another question now. This went back to rate hikes.
A rate hike from the Bank of Canada today and they said they will stay on hold if they can to try to figure out the impact of our economy.
When you think the BOC or the Fed will begin to lower their interest rates?
>> The way I would think of the BOC going forward this year, their sintering on hold conditional on their forecast being filled. I would put forward that by the time the March meeting, we will only have time for… January, big legs.
There's an early March meeting as well. I don't think they will validate that forecast one way or the other.
It seems very very unlikely that the Bank of Canada will not move in March. We will get to April, June July, that's when we will have enough weight of evidence to really make an assessment on the forecast in the economy being correct or not. So to me, those are the meetings at a greatest risk for additional hiking.
Sort of, Q2, Q3. In terms of looking for rate cuts, I would focus on the latter part of 2023 and 2024. With the bank account of its forecast published today, I think you can make an argument that Q4 2023 rate cuts are a possibility.
It's not our expectation but those would be a possibility.
So that sort of timeframe that we are looking at when we will start worrying about rate cuts. Our expectation is that it will probably take until 2024 given some stickiness and inflation to the tight labour market and I think there should be a fair bit of caution for the Bank of Canada when it's time to cut rates.
They spent a lot of the last year trying to regain credibility after falling behind with the curve of inflation. I don't recall.
Where people were public in question to the extent that they have for the Bank of Canada in terms of the public and the media literally pay a lot of attention.
I think, given that context, it would be prudent for them to be very, very cautious before starting to remove some of this tightening.
Particularly given that, if they fall a little bit behind the curve on rate cuts, that can be less damaging to their overall mandate in following behind the curve on rate hikes.
>> Interesting stuff.
We will get back to your questions for Andrew Kelvin on the economy and interest rates in just a moment. As always, make sure you do your own research before making any investment decisions.
A reminder that you get in touch us at any time.
Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com > Every month TD Direct Investing puts together a survey of how investors are feeling with the markets.
Our Anthony Okolie joint is now the details on the latest results. Anthony.
>> Thanks so much Greg.
The TD Direct Investing came in at -66 in December.
That's down a whopping 43 points month over month.
That's the most bearish are self-directed have investors have been feeling the past six months.
Remember the DI I sentiments from +100 being the most bearish rather bullish rather to 100 minus being the most bearish. The biggest indicators are illustrated in the four distinctive investor behavioural proxies.
Interesting insights here. I will highlight two of those proxies. One is of course the proxy for a flight to safety or risk appetite. That was down 60 points to -13. A more bearish indicator.
A more negative value for this proxy means risk or more actual flight to safety for things like GICs, money market funds and so forth. The other proxies chasing trends. Now, this would self directing investors are buying on a rise in falling market. Chasing trends was down 20 points to -24.
That indicated that self directing investors bought prices falling in December.
Now, overall, sentiment across all sectors was again neutral to bearish as risk tolerance among investors, self-directed investors, tumbled last month.
Investors opted for defensive sectors like consumer staples in healthcare.
Sentiment to a new score of zero. Now, the high-risk technology or IT sector, consumer discretionary names, they saw the leased trading activity with sentiment falling to -8 and -12 Respectively in December.
Within consumer staples, grocers were among the active Securities blocked rather bought including Costco, Loblaw's and Maple leaf foods.
Investors focusing on the defensive sectors.
When we look at the sentiment by age, baby boomers were yet again, the most bearish on the market. There sentiments sunk 18 points to a score of -28.
Now, Jamesian millennial's with the least negative and they saw more moderate drop in their sentiment of four points to score of -4.
Across nearly all age groups, active bought Securities included beating down names like Tesla, CIBC and Algonquin power utilities. Greg?
>> Lots of fascinating information there.
So many ways to parse it out to.
You can take a look at the difference between sort of the active traders in the long term investors. What are we seeing there?
>> Exactly. As you mentioned, the sentiment gap between active traders, these are traders who have over 30 trades in the past three months.
And long-term investors have up to 29 trades in three months.
The sentiment gap widened to 25 points. Active traders sentiment fell 13 points to score -20. For long-term investors, that number dropped 30 points to score -45.
Investors have gained continuing to look for bargain sales where they can find them. Tesla began a stock over much of 2022. They continue to be a heavy trade stock by all demos and investor type with long-term and active traders.
>> Interesting stuff as always.
Thanks Anthony.
>> My pleasure.
… >> MoneyTalk Live's Anthony Okolie. Let's do a quick check of the market.
… Should know this, some of the energy names with downward pressure Cenovis fairly flat of the session now.
Waiting on the broader market sentiment with S&P 500.
The tech heavy NASDAQ, the broader market the last time we checked, a little bit deeper in the hole.
Maybe just take my word for it actually.
One 1/4% to the downside of the NASDAQ and Tesla, expecting to report today.
Down modestly.
We are back now with Andrew Kelvin, Chief Canada Strategist at TD Securities. Let's get back to your questions. We have a lot of them here.
Andrew, what you think about a slowdown or recession in 2023?
>> I think it's a real knife edge call.
When I say that, on the go back to the population growth aspect of the economy.
I think we are very likely to see the truly negative per capita GDP growth in Canada.
We probably already experienced in the fourth quarter.
We expect to see it all through 2023 and perhaps into the early parts of 24 as well.
But when you're going economy every year, it raises the bar to actually lower the amount of activity in the economy. So we expect that we will see two quarters pretty close to zero growth in Q1, Q2. It's right now what we are seeing, maximum risk recession. We do come down on the side of a recession in our forecast but it's in very, very, tight thing.
Just for a couple of quarters and he can just as easily be slightly above zero. With air bands around this forecast being what they are.
But I would say the maximum risk is probably the second quarter of this year. Given the way some of the rate hikes lag in the past and the economy. So certainly not out of the woods yet. But again, that growing population growth it just makes a lot more difficult to see a large decline.
>> We have two questions left. Running short on time but I think I can make these two questions part of the same thing. One of you wanted to know if there's a risk of inflation moving higher this year and the other wants to know if you expect any stimulus out of the Canadian government this year? One can sort of play with the other.
>> Absolutely.
And really, I probably should mention the stimulus question on the recession side of things because if you think that there will be large physical stimulus here, fiscal stimulus rather it will be hard to see. Our sense that we are not likely to see a fiscal stimulus, the government signal that is out there will have plans for big new spending packages that they want to try and fasten themselves as being distally responsible. After that very large stimulus.
During the pandemic. So we don't expect to see material stimulus in the upcoming budget.
the easiest way to get the inflation spike from here, I will come back to a scenario when inflation was at its peak but in terms of inflation becoming higher, the easiest way to do it is the quick recovery in oil prices which you can do just by slightly improving your expectations for growth in China. Now that China is reopening.
It looks permanent.
And with assumptions around what OPEC does with supplies. That's the easiest way to push inflation higher. If you can find rather if you combine that with a labour market remains externally tight, you can talk about very persistent services inflation.
Ultimately, we do believe it will win out the day which is why we continue to see inflation moving pretty quickly back to the 4% area and maybe a little bit more slowly thereafter. But I can tell a story were inflation maybe doesn't return to 8% but hangs out around 6% or goes a little bit higher if we have a quick spike in energy prices.
> Skilfully done, putting those two questions together.
Always a pleasure to have you.
>> Thank you very much.
>> Our thanks to Andrew Kelvin, Chief Canada Strategist at TD Securities. And stating on tomorrow's show, Julien Nono-Womdim, Semiconductor Analyst with TD Asset Management will be our guest take your questions about semiconductors. And a reminder that you get a head start, just email MoneyTalk Live@T. That's all the time we have for the show today. Thanks for watching and see you tomorrow.
[music]
