Andrew Kelvin – 7/05/2022

[theme music] [theme music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live brought to you by TD Direct Investing. It's a new program broadcast daily on WebBroker. Every day, I will be joined by guests from across TD, many of whom you will see only here. We will take you through what's moving the markets and answer your questions about investing. Coming up on today's show… We'll look at whether there is a growing risk of a recession with Andrew Kelvin from TD Securities. Ensign today's WebBroker education segment, we will look at how you can set alerts for specific stocks with the Nugwa Haruna. Before we get to our guest today, let's give you an overview about what's happening on the market. The weekend is fully in the rear view mirror for us in Canada and the Americans who were off yesterday, and is not a pretty it seen the in the equity markets. We will start on Bay Street with the TXX composite index. It's down a full 2% right now, 381 points. The idea of recession that is on the mind of a lot of investors. We are seeing a sizable pullback in the price of crude. I have West Texas intermediate, the American benchmark, breaking below hundred dollars on the session, a little bit to the tune of 9964 bucks, down more than a percent, there's a big pullback in the commodity space. It is hitting some of these names. In Canada, you have present point energy at $0.75 a share, down a full 9%. Not just the energy and names, but golden minors being hit. You have Barrick down to the tune of 5%, 22 bucks and $0.60 a share. South of the border, we've got the S&P 500 right now down 1 1/2%, 55 points, as the Americans come back from their independence day July 4 holiday. Again, concerns about a recession and really what central banks are going to do in terms of taming high inflation. What's the economic backdrop that? We will have more on that. Let's check out the tech stocks. NASDAQ down at 97 points. Ford one of the names underwater on Wall Street. They are down 3 1/2%. Carnival in the cruise business, let's check in on those shares as well. Actually in positive territory now. I was looking earlier in the morning and it was showing a bit of weakness but it has flipped, he bucks and $0.92 a share, up about 1%. That's your market update. The risk of a recession increasingly on the mind of some investors as central banks attempt to combat rampant inflation. With economic indicators showing mixed signals of Canada strengths, is a slow drown in growth imminent? 20 us to discuss is Andrew Kelvin, chief Canada strategist at TD Securities. Great to have you. This is the big question for a lot of people. A lot of recession talk. What are the real risks of a slowdown? >> I think they are material. I don't think we need to be worried about an imminent recession per se in terms of June, which is behind us now, or July or August. If we look into the first half of next year, we will be in a position where the last lingering impacts of fiscal stimulus have likely worn off. Interest rates will have been high for three quarters, essentially, and at that point we do think there is a risk that the combination ofLingering impact from fiscal policy running off in high rates will be biting into household. What's driving the economy right now is household spending. It households feel they need to start pulling back on their discretion or consumption in Q4 and Q one next year, that is something that could put the Canadian economy underwater. The one thing we do have is a tailwind, strong the population growth. We might've been in a scenario where GDP growth, usually recessions to negative quarters of GDP in a row. We might end up in a scenario where it's growing but it's only because we are adding more and more people, which is going to feel like a recession for a lot of people even if it doesn't technically meet that definition. >> Let's talk about consumer spending because I am really fascinated by the idea of a wealth effect. When your home value is on the rise, you feel wealthy. When your equity portfolio, investment portfolio is on the rise, you feel wealthy. This is not the story of 2022. We are seeing a slowdown in the housing. We are seeing a sizable pullback in the first half of the trading year and pull back in a lot of people's portfolio. As I have an impact on how we feel about the economy going forward, our spending, tipping us into a recession? >> If we are thinking about something that's going to be driven by a over tightening by central banks, housing is going to feel the brunt the most. Housing is the most interest rate sensitive sector of the economy. To your point about wealth effect, the housing market for Canadians in particular, there is the one number that rules them all. The one thing we look at to gauge the healthy economy. When the housing market is doing well but the rest of the economy is mediocre, people will often see that as a sign of robustness in Canada. If you look at the second quarter 2022, it was the opposite because a lot of the other indicators we look at for the strength of the economy, unemployment rate is at multi-decade lows, but the housing market has started to crumble and that has impacted consumer confidence. That's what we see in the consumer confidence data which has been sinking like a stone for several months. >> If we did end up, and obviously it's not F8 complete, but if we end up in a recession, how does Canada fare compared to other G-7 nations? Is there any reason our economy would feel worse off? >> It really depends on the form of the recession. And it really depends on how widespread it is and what triggers it. A recession that is triggered by very high interest rates, let's say inflation is even more persistent than we expect, and the Bank of Canada needs to tighten more than we realize and the Fed needs to tighten more than we realize, because markets are pricing at a move to about 3 1/2% approximately, if we see it's a 5%, picking the number out of thin air, but in that sort of scenario, Canada would be had quite a bit worse than the US, just given that we have very high levels of household leverage in this country which is a double-edged sword. The fact that Canadian households are so leveraged is one of the reasons why that in downturns we get a quick response from interest rate cuts. The big Canada cuts rates, people go out and spend more money, buy houses, etc. and Canada, in recent cycles… On the other hand, if you want to look at other supply shocks, things like a significant hike in oil prices, I know they are falling demonically today, but if you come up with a scenario where high energy prices cause slowdowns in Europe and that trickles into the rest of the world, Canada is relatively well compared to our neighbours because we do have that commodity component to our economy. If I look at the most likely thing that causes the global downturn, it's going to be at higher interest rates triggered by higher inflation, and Canada is a bit more at risk. Though I would add there is a feedback loop. If Canada has larger negative impact from high rates in the United States, since reason that the Bank of Canada will tighten less than the Federal Reserve in that scenario. >> Let's talk about the role of central banks in this. We had the business Outlook survey at this we can and… Whether you're talking to a business owner or household, they expect inflation to be around for a while. It seems to be opening the door to the 75 basis rate hike again. The supersized rate hikes, and a feeling anyone saw them coming. How long is this going to persist? >> It's amazing how quickly the conversation has shifted on what is not even possible or plausible but… Possible, I should say, because if you had told me in March that there were would be 75 basis point rate hikes by July, I would've laughed and walked out of the room. It didn't seem plausible at the time. Even in March when it was clear that Canada was behind the curve, because a lot of people had been looking for bank rates in January… I think that was obviously something they would like to take back in hindsight. But even if they lifted rates by 25 Basis Points in January, I think we would've been taken aback by how strong the sensation or policy has been, how broad it has been. I think that has really been the thing that the bank didn't anticipate, that a lot of forecasters didn't anticipate. One thing I've been saying recently is if you are looking at inflation advice, you would do better talking to mainstream over Bay Street. Transitory factors have persisted for over a year and normally people think they are transitory and that affects inflation anticipation. That's what we saw the business Outlook survey I came out yesterday and that's what we think scared the Bank of Canada when we got to June 1 and second, if they saw the results earlier. They need to act robustly to show there credibly. If they don't lift rates by 75 basis points next week, anything less than that, I think it's going to raise serious questions about how willing they are to take the difficult decisions necessary to tame inflation, and ultimately what that does is push pain down the road. As much as a robust interest rate hikes are going to prove painful for the economy, the alternative is potentially much worse. >> One of the things investors are looking at now is any sign that perhaps inflation has peaked. You mention the fact that the central banks didn't have a clear view of where we end up in this current inflationary environment. Transitory was used so many times before they retired it. Where should we be looking out for any signs of inflation has peaked or will peak in the near future? >> I think people have called several peaks over the last year in inflation, so I'm not going to call a peak today. I'm not going to tell you and inflation will peak because I'm not sure that's a helpful way of thinking about it at this point. If energy prices are off their peaks, if the move we see today in energy prices prove sustained, and energy prices have proven very volatile, I'm not going to bet one way or the other, that will take the edge off of inflation somewhat. I think the key thing here is because the inflation we are seeing is so broad, it's not just hotels and gasoline, it's really broadly spread across the economy, that sort of inflation tends to persist for longer. Even if we are near the peak the slow down in inflation will be more gradual than what we have seen in past cycles because it's not just one or two things driving this, it is a broad inflationary policy supported by a very tight labour market. One thing we saw in the business Outlook survey yesterday was the expected wage increases that businesses are budgeting is at record highs and that perpetuates inflation through time. >> Great start to the program. We will get your questions for Andrew Kelvin from TD Securities in just a moment. A reminder, you can get in touch with us anytime. Just email moneytalklive@td.com or fill out the viewer response box under the video player right here on WebBroker. Right now, I want to get you updated on some of the top stories we are following in the world of business and the market action. Tesla delivered fewer vehicles than expected in the second quarter. The electric carmakers points what it calls factors beyond its control,including supply chain challenges and factory shutdowns. Tesla delivered almost 255,000 vehicles over that three month period and that's an 18% sly compared to the first quarter. COVID lockdowns in China have proved challenging for the automakers factory production. Tesla's going to report its full financial results on July 20. The strike at CN Rail is coming to an end. Some 750 signals and communications workers at the railway went on strike on June 18 when hitting an impasse in talks over wages and benefits. The union represented if of the workers says they have agreed to binding arbitration. The union says the strike will and after the midnight. The workers will return to their jobs on Wednesday morning. CN Rail's last offer included 10% wage hike over three years. AstraZeneca says it has a deal to acquire cancer drugmaker Tenney 02, the deal is valued up to $1.27 billion. Teneo Two has a range of therapies to treat blood cancers. AstraZeneca says it expects the deal to close in the third quarter and it is not inspected to impact its full year 2022 Outlook. Quick check in on the market action. We will start at home on Bay Street. It's a tough trade with the Americans back from their long weekend. We are well now into the second half of the year. In terms of both the American and Canadian. It's rough. 18,642, the TSX Composite Index down a little more than 2%. South of the border, feeling those fears about a recession, what it could mean for company earnings going forward in the broader economy, we have the S&P 500, the broader read of the American market, down 1 1/3%. High got plenty of fewer questions coming in on the platform. Let's get to a few of them. We will start with the loonie. What is the outlook for the loonie? Why hasn't it been trading up with the price of oil? Don't we have a petro currency? >> We have less of a petro cure and see then we used to have. That would be my answer. The energy sector has become less of a vehicle for large-scale capital investment compared to previous cycles. if you go back to 2014, prior to the last oil price crash, I suppose, we've been seeing a significant ramp-up in investment in energy projects, which sucked labour into the oil sands, it created inflationary pressures which caused Bank of Canada to lift rates which cause the currency to appreciate ultimately. Today, even though we have seen the significant raise in oil prices, we are not seeing that accompanying increase in investment in the energy sector which fits with longer-term trends cords decarbonisation, issues around pipeline capacity. The long and short of it is that you are not seeing as much investment a company oil price increases, which means that while it is still beneficial for the Canadian economy overall to have high oil prices, it doesn't have quite the same impact on growth and inflation, and as a result does not have quite the same impact on currency. >> We understand. That was part of the business Outlook survey as well. A gloves into the mindset of the energy patch and why they are not taking all this free cash flow in the run-up of crude oil prices and investing back to the sector. Is this a longer-term trend that will hold? Will anything reverse it? At some point, does it become so attractive that there will be investment back into it? Why do you want to put this money into the ground if the world is changing? >> You have to have technological improvements. If you were to see improvements that reduced the payback periods that you need to make a new investment in energy in Canada make sense, that could hypothetically spur new investment. But given the current… Everything foreseeable, I don't see a scenario whereyou see a significant surge back into the energy sector in Canada becauseI think the decarbonization trend is here to stay. >>on the other side of the loonie argument, while we do have a currency lower compared to the US dollar, you have voices saying, well, this is a good thing for our manufacturers and exporters. Has that held true? Is there an advantage there for Canada at all to have that lower currency? >> There still is an advantage to have a lower, stable currency over time. We haven't seen any advantages to it in this cycle because we've also had significant supply chain disruptions but by the time those instructions are a result, we will be looking at growth and ultimately the currency pair that matters for manufacturers is versus the US dollars. The Canadian dollar has been very stable versus the US dollar in recent months and going forward we expected to be fairly stable, trading between… Call i 75 and $0.80. We don't see a lump scope for the Canadian dollar to move sharply in one direction or the other given that the Bank of Canada and Federal Reserve are moving on the same path. >>let's go back to viewer questions. We have another one from the platform. We touched on the housing market a little bit we have of you are asking about your view on the housing market in the current environment. I guess the current environment is high borrowing costs. >> Yeah. It's an interesting question because if you look at the behaviour of the housing market in 2020, particularly 2021, some of those house price gains were really outsized. They were probably unsustainable and they were probably not, frankly, helpful for society. With borrowing costs rising, we started to see house prices move a little bit lower. We are likely to see a reasonable sized house price declines across Canada this year. I'll be more intense in some areas than others, places that sell the largest increases in 2020 and 2021 are going to be the market segments that will be most at risk in 2022. The one thing that the housing market still has going for it, even though high borrowing costs are a head wound, we expect housing to be robust and as we bring in large numbers of new Canadians, these people need places to live in Canada has habitually been unable to build enough new homes for its growing population. So at some point, that will help the market find a level. But for the moment, following the froth of the last year or two, I think a moderate house price decline should be expected everywhere. >>in terms of economics ability, we know that the housing market and consumption overall has played an outsized role in growing this economy. If we are going to have something that resembles a more sane, normal, for the housing market, how does the economy make that transition? >> I think you just wind up in a period of relatively slow growth for several years. I think historically when you look at Canadian housing cycles, it hasn't been these calamitous drops. What you tended to see was a more moderate decline followed by long periods of flat housing. And you wind up essentially inflating away the remainder of the overvaluation in housing. I think in the current context, you are probably going to be in a scenario where if we see the share housing in the economy go back to something that is perhaps more proportionate, it's going to imply that we are going to be looking at growth that is maybe a little bit below what we think of as a trend through 2024, 2025, 2026. I think that would be the form it would take and hopefully you have another part of the economy the catches fire, as it were, and helps offset that normalization in the housing sector. >> I feel like that was Stephen Paul extreme when he was in… He talked about how there will be a handoff between the consumer and. . . The manufacturers and exporters. I think by the end of his tenure… Here's we would like to see happen. It doesn't transpire. How do we wrap our heads around? >> The economy is undergoing a longer-term sort of structural shifts. In the 1990s, I think in that context, if you were to unfold the context of the 1990s economy, you would see a significant increase in experts. That would've been my expectation then. But we seen manufacturing decrease as part of the economy across the OECD. That's as true in Canada as it is elsewhere. As the manufacturing sector becomes a smaller part of the economy relative to the services side, you would expect the economy… It's ability to sort of pick up the pieces, the slack of the rest of the economy, diminishes. >> Make sure to do your own research before making investment decisions. We will get back to your questions in just a moment. A reminder, you can get in touch with us at any time. Email moneytalklive@td.com. Right now, I want to get to our educational segment of the day. Let's say you find the stock that you're interested in buying but the price is a little too high for your liking. For the moment. WebBroker has tools that can help you keep tabs on it so you can snap it up when it falls to a price you are more comfortable paying. Here to show us how is Nugwa Haruna, Senior client education instructor at TD Direct Investing. Always great to have you with us. Let's jump in. How can investors use WebBroker to get notified about price changes? >> Hi, always a pleasure being here. As we know, there is a lot of uncertainty in the market. There is a huge market volatility right now. As for investors who already have an idea about what their potential entry and exit points are when it comes tobuying securities, they could potentially go ahead and use different kinds of order types. But there is also a wealth of investors who are not too sure want to get in because they haven't made up their mind about when to get in, what prices to pay or what prices to exit. Those investors can utilize the alerts feature within WebBroker. Once on WebBroker, and investors able to click on research. This investors also able to pull up the security they are interested in. We are going to stick with the energy sector today, with Enbridge. Once here, the investor can set alerts. As an investor, I'm able to set an alert to receive a notification of the price of my security goes above a certain point, drops below a certain point, and there's also something for everyone. For an investor who is more of a technical analyst, they are able to receive alerts if certain indicators are pointing at potential entry or exit points. For instance, if the simple moving average is giving a bullish signal, they can set an alert to receive information through their email, or through your cell phone, you can actually get a notification if you have the TD app installed. Finally, if I am more of a fundamental analyst, I can set an alert to receive information such as when dividends are announced or when there are things like the quarterly earnings announcements for that stock. >> Nugwa, I'm the kind of person who, in different facets of my life, including this area of investing, I will overdo things. You get crazy, set too many alerts, how do you manage all of them so you don't get a bombardment of alerts? >> I totally get that. All the alerts that you have set up, you are able to see if you receive these alerts one time or if they are ongoing. Once here, you can modify your alerts, you can delete alerts, you can edit your alerts. One more thing I will add as well as that you can receive alerts not just for stocks. You can set up alerts for exchange traded funds, for mutual funds or even for the markets as a whole. If you have a specific analyst report word and you want to receive an alert, you can do that as well and once here, you can manage those alerts. >> That's the kind of stuff I need to hear, Nugwa. Before we get back to your questions, a reminder of how you can get in touch with us. 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 any time@moneytalklive@td.com. Or you can use the question box under the screen at your own WebBroker. Write in your question and hit send. We will see if one of our guests can get you your answer right here at MoneyTalk Live. Your back with TD Securities Andrew Kelvin, talk about the economy and all things that come with it. We have of your question off the platform. Point blank, we touched a bit on this in our opening chat. Will a recession be worse for Canada or for the United States? >> It's a good question and a pull together a lot of the threads we've been talking about. Now, I would say if there is a recession, on a per capita basis, I would expect it to be worse in Canada than the US because it is something that is likely to have, as a principal driver, a higher interest rates causing a recession if it does materialize. [video buffering] so the actual sort of growth numbers I would expect in the event of a recessionwould be similar in Canada and the US. But I think were Canadian households, because of the debt burden, you probably feel it a bit more acutely at the individual level. >> There are some people who will make the argument because of that construct, the amount of debt we hold as households in this country, if we did end up in a recession, the central bank would ride to the rescue. But you end up in that cycle where we cut aggressively again in the first face of trouble, we haven't solved the longer-term structural problems. What you make of that argument? Will the market price and rate cuts? >> Yes, I think that's a reasonable thing for markets to be doing. The Bank of Canada's goal is 2% inflation. That's the goal. In past cycles, when inflation was relatively low and contain, as the economy started to weaken, it made sense for the Bank of Canada to cut rates and write to the rescue because, in their view, rising unemployment rates would cause lower inflation in the future. That's a very standard way of thinking about the economy. In this context, where inflation is well, well above 2%, there is a very reasonable chance it touches 8% in the year of June year-over-year. Expectations for inflation amongst businesses and households are spiraling into very uncomfortable territory. The Bank of Canada needs to focus first and foremost in bringing inflation under control. They are building to bail out households… I hate to use that word, but is probably the most apt word here. That will be greatly constrained compared to previous cycles. So I think their ability to sort of help everyone out with rate cuts if the economy does slow is going to be greatly impaired. I don't think this is a cycle for it. >> That means longer-term pain. Until you can get inflation wrestled to the floor, perhaps the central banks… Jerome Powell and maybe our central banks have said, this is the game to get the price pressures under control. We do not want to tip ourselves into recession, but it could happen. Even they are saying they can't rule it out. >> The question has been put to the Bank of Canada as well. I don't know the precise formulation of the question, so I'm going to paraphrase slightly, which is always dangerous but here we are. >> I would like to ask those questions to the governor of Canada. >> The Bank of Canada was asked recently if they would be prepared to risk a recession to bring inflation under control. The deputy of response was they did not expect they would need to cause a recession to bring inflation under control. The mandate is 2% inflation. You can read between the lines there and see the what was unsaid is that if the choices price stability and recession versus no price stability and no recession, their mandate is price stability. >> Let's do a quick check in on the market before we get back to your question. With the Americans back in volumes improving from the holiday yesterday, we were the only ones open, it's not a pretty picture. 18,665 right now for the TSX Composite Index. It is down a little more than 2%. A quick check on the S&P 500. We have been talking recession fears, those are weighing on the minds of investors. We got the S&P 500 right now, the broader REIT of the American market, down by 1.2%. Let's get back to the question. We got this one quite frequently. One of the upsides and downsides to investing in GICs right now? That story is changing. >> The main driver of almost any fixed income product is what are the excitations of the Bank of Canada? Prices are going to move to 3 1/2% of the Bank of Canada by the early part of next year and the yield curve is quite flat from two years out. I would imagine you would see that reflected in all sorts of fixed income products. Our expectation is that yields will finish the year perhaps just slightly above these levels. But qualitatively, around current levels. In that sense, we would say that for Canadian bond investors, these are not unreasonable of valuation. The risk would be that if rates and do you end up moving sharply higher from here because inflation is more persistent and the Bank of Canada needs to list rates a whole bunch more, all subsequent rates and all rates that are referencing Government of Canada rates to rise, in which case if you were locked into an instrument, you would be forgoing additional interest. The flipside is that if it turns out inflation comes under control quickly, the central banks can ease more quickly and 2023 or they don't have to hike much this year. Rates would fall and that would be advantageous to be locked in at a higher rate. That's how I would think about that question. >> That speaks to the uncertainty of right now because both positions make 100% perfect sense. In this kind of volatile environment, I wouldn't know where to place my chips. >> It's been a very challenging market environment. I don't envy anyone making decisions in this. I imagine not a lot of people envy me either. >> Indeed. Hey, you're in the big chair today. You're on the show. Plenty of and be out there. Let's get two of your question about the price of crude. They want to know if there's any chance it's gonna come down over the summer? We are already in the thick of it. >> I don't think it will come down over the summer. We expect oil prices to move lower by the end of this year and into a little bit lower again into next year just as a bit more supply comes online to meet the demand that applied by high prices, and as you see a little bit of demand destruction. Again, we are in an economy that is expected to slow in the latter part of 2022 and 2023, that implies a slower growth and demand for oil. So we think oil prices will finish the year below $100 a barrel. We think they will remain below that next year. Some relief is on the way. We expect it may not be the summer. >> The push and pull hereto is that if we end up in a recessionary environment, logically demand for energy products start to to fall off. where are we going to get the supply? This seems to be a hard equationthe flush out. >> And you have geopolitical concerns on top of it that can dramatically change with the supply demand dynamics. But our expectation is that oil prices at these levels are unlikely to persist into next year. >> Alright, we are going to get back to your questions for Andrew Kelvin from TD Securities in a moment. Make sure you do your own research before making any decisions. You can get in touch with us at any time. Do you have a question about investing or what's driving the market? Our guests are eager to hear with all your mind. Send us your questions. There are two ways you canget in touch with us. Send us an email anytime, moneytalklive@td.com. Or you can use the question box right below the screen here on WebBroker. Writing your question and hit send. We will see if one of our guests can get you the answer right here at MoneyTalk Live. Let's do a bit of a deeper dive into the market action right now. The Americans are back after their long weekend. We had our long weekend. So the two of us are trading both at the same time. We waited to get out of the long weekend situation so we are not in sync with each other. We are in sync it to the downside of the market. 18,000, 635 down on the TSX, down about 2% or 393 points. A lot of the energy names on the decline, Cenovus Energy down almost 2% the sour. The price of West Texas intermediary, the American benchmark crude, has broken below 100 bucks, 9964 right now for a barrel. 9930 as I refresh, a more than a percent pullback in just the session as well. It's a volatile space to be in. Let's take a look at the mining space. We will check in on Kinross and see how it's trading. It's down a percent, for bucks and 32 a share. We are seeing pain across the miners as well. Checking at the S&P 500, the broader read of the American market, it's down a little more than 1% or 45 points. As far as the NASDAQ is concerned, a barometer of the tax base, the NASDAQ 100 right now is down about 1/3 of a percent, not as much as the broader market. I noticed a bit of money moving earlier this session, tech names in Toronto as well. Freeport-McMoRan is under oppression to the tune of 27 and 22 a share. And Bank of America, let's check in on Wall Street, the big financial centres, they are down three quarters of a percent, $30.60 a share. We are back with Andrew Kelvin of TD Securities. We are talking about the Canadian economy, threats of a recession. Here's a question coming off the platform now. What's your perspective on her province like Alberta in this climate? >> I mentioned earlier that Canada benefits from higher oil prices overall. All you see those gains are not shared evenly geographically. If you or someone in the GTA community and paying two dollars plus a leader for gasoline, you probably do not see the upsides to high oil prices. Those gains are disproportionately enjoyed in the energy producing provinces. Alberta should be a notable outperform a relative to the rest of the country in this context. It unwinds several years of relatively slower growth in Alberta as you had the structural shifts in the energy sector take place as oil prices were a little bit lower. This year, we should see some of those years of underperformance reverse themselves. That would be true in the other commodity provinces as well. >> The question was specifically about Alberta but… It was so simple and equation, almost a binary thing. What was good for Alberta was bad for Ontario. If Alberta is enjoying good times, is Ontario in that position? >> No. Looking back at the investment in the energy sector, that had effects on the energy sector in Ontario. Generally speaking, if the Canadian economy is growing more quickly, it is good over time for the economy broadly. Every economic event, no matter how big or small, produces winners and losers and it's the job of the government to share those gains a little bit. That's why we have governments at some levels. But generally speaking, with those investment flows into the energy sector slowing in the cycle compared to past cycles, those gains probably aren't going to be shared quite as broadly as they were before. What we are seeing now is more of a boost in incomes for corporations that are based there, which are passed through to workers, which are passed through to the government treasury as well. The Government of Alberta expects a surplus this year which was not the case six months ago. It's still a scenario where I would rather, as Canadian, be looking at high oil prices than low, as someone who does not live in Alberta. I think that gains are probably not going to be quite as widely shared as they were in the previous cycle. >> If something else is to pick up the torch for me on the energy issue, which is important to the overall Canadian economy, for the housing market, what can Canada help five, 10, 15 years from now? Are we moving in any directions beyond what we already know how to do is the question. >> It's really going to be this shift to a services economy. Canada has a lot of well-regarded universities, produces a lot of English-speaking graduates and it's going to be a sort of this… My citation, I should say, would be that it's this almost global branch plant for services. 40 years ago, there was a branch plant to build cars here for some global corporation. The new branch plant might be a new US tech giant opening up an office in Kitchener Waterloo to tap into the tech talent there. The growth is likely to come in the services industry. It is going to be a question of how does this country sort of foster innovation and generate wealth that way? And ultimately, we are still in a highly globalized context. Instead of just exporting goods, we will be increasingly escorting services. >> Interesting question coming in here. I don't know, correct me if I'm wrong, but I don't think we've mentioned COVID once in our entire discussion about the economy and the path forward. At certain points of the pandemic, when I was in a former role, you and I would talk frequently about the effect of COVID. How do we feel about COVID and its impacts, if at all, going forward in this economy? >> They are still there. The fact is, COVID has not gone away. It is still causing absenteeism, which creates supply-chain bottlenecks on the service side, it still takes a toll on people just from a human suffering perspective. It does feel like we have crossed a bit of a threshold where we are unlikely to see the same magnitude of lockdowns that we saw, that pattern of the economy shuts down, reopens, partially shuts down. Our expectation is that that will not be repeated in the coming years, barring some significant mutation of the disease that changes its fearless. If you look out with going on today, as you said, we haven't talked about COVID. And the reason we haven't talked about COVID is because governments aren't talking nearly as much about COVID. We are not talking about restrictions despite the fact that there are no variant circulating. It's going to be with us, I expect, for quite some time. It will continue to create frictions and things like travel services from time to time. But it does seem that we have crossed this threshold where we are just not going to be shouting economies down for precautionary reasons. I think a lot of that has to do with the fact that we have very high vaccine penetration. >> Great round of questions coming in off the platform. I want to thank the viewers for sending those. We are running out of time for those. Any final thoughts for the audience? If you want to tie it into a final thought, what would it be? >> Here's what I would say. I find when I get on a rule, sometimes it seems very doom and gloom, right? I'm not trying to send a message that we are in deep trouble as an economy. I do think that we are likely to see a period of slower growth as we adjust to these higher rates. But at the end of the day, the focus in Canada needs to… We started in a very strong position, first off. A 5% economy rate is a good thing even if households are overheating of it. Canadian households are in stronger positions than they were in 2017 or 2018 and will be able to weather or difficulty. We will need to see for this economy to be prosperous in the long term will be stronger business investment and higher productivity growth and I think that is to be the focus for Canadian policy makers over short-term, medium-term, long-term. >> Great chat, Andrew. Really appreciated you showing up and enjoyed you being here. >> My pleasure. Thank you for having me. >> Andrew Kelvin, chief Canada strategist at TD Securities Butte stay tuned. Tomorrow, Damien Fernandez will be our guest tomorrow. You will be taking your questions on equity. That's all we have for today. This is MoneyTalk Live. We will see you next time. [theme music] [theme music] [theme music] [theme music] [theme music]