Anna Castro

[music] > Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing. Every day, I'll be joined by guest from across TD, many of whom you'll only see here. We'll take you through what's moving the markets and answer your questions about investing. Coming up on today show, will be joined by TD Asset Management's Anna Castro to discuss where she's seeing potential opportunity amid all this market volatility. And in today's WebBroker education segment, Caitlin Cormier will take us through how you can set goals using the WebBroker platform. Here's how you can get in touch with us. Email moneytalklive@td.com or Philip the viewer response box under the video player here in WebBroker. Before we get to our guest of today, let's get you an update on the markets. We've got some green on the screen on both sides of the border, starting here at home with the TSX Composite Indexat 19,074. Up a pretty healthy 156 points, we will call it, a little shy of a full percent. We do have American benchmark crude up about half a percent. A bit of pullback in the yield space two. There is pullback on both sides of the border. Some of the tech names getting a bit. This is going to be a big week for tech earnings out of the United States. A Shopify's on the list as well. Shopify up 2.7% at $40.57 a share. Scholastica coming out with an earnings beat that's clearly pleasing the market and investors, that stock north of 15 bucks, up almost 15% at the start. South of the border, let's check out the S&P 500, the broader read of the American market. We are seeing a bit of a calming in the yield space, a pullback and money moving into equities building on the rallies of recent days, 3846, up 50 points or 1 1/3%. Let's check out the tech heavy NASDAQ with the mega-cap tech names reporting today, 11,169. The NASDAQ is up we will call by 2%. And Alphabet, the report after the closing bell today, how are they faring head of that? Up 1. 2%, almost $100 a share. That's your market update. What may be the worst bond market in a century has even the most conservative investors wondering where they can find opportunity. Well, our future guest today says fixed income is becoming increasingly interesting after a volatile year. For more on this, we are joined by Anna Castro, senior portfolio manager at TD Asset Management. Welcome to the program. >> Hi, thanks for having me. >> Let's talk about a lot of investors that watch the show, they wonder where is the opportunity in this market. It's been tough. As I said, even for the most conservative investor, there have been a lot of places to hide. >> You make a good point. Most conservative investors appreciate the stable income from fixed income and yes, it is the worst bond market in the century, and history practically,so this year, the bond market has been down, you know, an index of Canadian bonds has been down 15%. The worst prior to this year was low single digits, mid single digits, I mean, down 7%. Even high quality debt from the US government, US treasuries 20 year term is down 30%, so that's the landscape that bond investors are faced to sell off. The other thing that has been challenging is that there has been no diversification. And what does that mean? In the past, when it was a growth type of shock that people were worried about when equities fall, fixed income would be positive, especially government bonds. In this case, because the focus has been inflation, and to your point, with the selloff, in March, when the US Federal Reserve started hiking rates, inflation was already 7%. So that's the highest since 1988 when they started the last hiking cycle. And then from zero interest rate, practically easy money, six months later, we are up 3% in terms of interest rate. And because of that, that's what pushed fixed income down and also equities. US equities are down 20%. Canadian equities have fared basically better, maybe because they have a higher rate in energy equity is and energy prices have benefited from this inflationary environment. >> What is it going to take, it has been a painful year, for the pain to start to subside and perhaps some opportunity to start presenting itself? >> So first of all, in the near term, we expect bond volatility to remain because before the growth outlook as well as inflation will continue. So the good thing, the positive thing, you asked for opportunities, the positive thing is that the hiking cycle, the Federal Reserve, central banks around the world, have started increasing rates. So we are maybe two thirds past that, and we are now talking about where they might pause next year. And so we've also started to see some economic indicators that their effort to tone down inflation or have it in control is working. So we've had slow down in the manufacturing activity as well as you've seen commodity prices come down, but what has been sticky has been wage increasesand the strength in the labour market and what it would take is we need to see inflation back to the level that they are more comfortable with, so the 2% target, and know that it will stay there. so that's the tricky part. Before, we were so used to one institution, the central bank, doing something to ease an economic challenge or market condition, but here we have millions of people, companies, etc. needing to address the letdown, higher interest rates low into the system for employment market, labour market slowdown, for wages to calm down, and the rent prices to go down, and so once you have that, you would have some stability on how the Federal Reserve and central bank will approach inflation. And so you asked about what it would take. For equity investors, what you would need to see is earnings revisions go lower, earnings growth estimates to show that slower economic growth or even economic growth is reflected there. And when the fixed income side it is an interesting set up because this bond volatility impacts prices. So where are we right now? Yields have increased, and so fixed income investors can now get higher income from a higher interest rate. >> But that should make bonds more attractive, right? >> Exactly. So let's go back to the basics of fixed income investor, what does it mean. You literally have a contract, a borrower, a contract and that a borrower, and this borrower has to pay an interest rate and eventually pay back the principal. And so now that interest rates are higher, as an investor, you are getting a higher income. There could be bond volatility prices market to market or on paper, but you are getting an income and you can do your due diligence, you're going to get your money back at that point in the future. >> Okay, the due diligence in terms of getting her money back in the future, we talked about bonds and now we can talk about government bonds, there's corporate bonds and there's high-yield bonds. When we talk about the opportunity in the space, the something look more attractive than anything else or is it a matter of doing your homework? >> First of all, we have to do our homework, of course, whether it's government or corporate bonds, whoever the borrower would be. In this case, I will share with you what we are doing andaaside from our asset allocation team, we have a lot of people are fixed income team helping us with our due diligence. We are seeing opportunities into categories. With what happened to interest rates, yields picking up on the two-year bonds, both on government, government of Canada and US, you see 4% yields, yields that you haven't seen before, and you can see corporate bonds, so high-quality debt from high-quality issuers at the 5 to 6% level. And this is debt that you can get the principal back in two years. So we have a team that's doing due diligence to make sure that there's quality business models and cash flows behind it to make sure that even whatever happens, you have economic slowdown, etc., you're going to get paid that interest as well is that principal back in two years. That's one bucket of opportunity in the short term. The other bucket of opportunity that we have seen is there has been an increase in yields as well on the long end. So US and Canadian long dated bondsour at 3 1/2, 4% levels, again, levels you haven't seen before. so the value of this set up is that while you are waiting, you get that higher income, but the interesting was long dated bonds is that they are sensitive to long-term expectations of growth and inflation. So if we believe that central banks are very aggressive at reducing rates and they will slow down the economy to tame inflation, then you have growth come down and inflation come down. So going back to Bonn. When yields go down, bond prices go up, so these long dated government bonds will provide a recession and surge as well during that time, as well as opportunity to get paid three, 4% while you wait. So there are those two combinations I want to give us an example of how we are using active management and we are being very selective to make sure that we preserve capital and you also have flexibility because you can sell this… >> You can sell your position, right? >> Yes, exactly. You can sell out of it. For example, if you are seeing indicators showing that earnings revisions have come down and the recovery is about to start and investors are forward-looking, so you can actually sell these bones, these are liquid instruments and position to buy into quality equities and also sell it off as well as high-yield credit. >> What's the biggest risk here in terms of selling? Things are being set up that could be quite advantageous for fixed income investors, opportunities in the bond market. What is the biggest risk? Is it the waiting for the right conditions? >> So the biggest risk, I would highlight two of them. So I started off saying that we are probably two thirds there. The biggest risk with that there would be another shock in the system that causes inflation to spike up and it will be stickier again and harder to push down and then you have central banks meeting to be more aggressive from where we think they would be to raising rates. That's one. The second part is when the explanation I gave on those long bonds, US and Canadian bonds, if you don't have an economic slowdown soon, you might be waiting for a bit. We believe that the recession is just a matter of when, and when and if. So that would be the risk for that. Like, you would be waiting until you have a more negative news, more bad news for it to be good or better for that. >> Fascinating stuff and a great start to the program. We are going to get your questions about asset allocation for Anna Castro in just a moment. A reminder that you get in touch with us at any time. Email moneytalklive@td.com or fellow that viewer response box right under the video player in WebBroker. Let's say you updated on some of the top stories in the world of business and take a look at how the markets are trading. Coca-Cola raising its annual forecast on signs of strong demand despite higher selling prices for its products. The soft drink giant has been dealing with higher expenses in the face of soaring inflation, and it is successfully passing those costs on to its consumers. Coca-Cola's average selling prices were up some 12% in the most recent quarter and sales volumes up 4%. The higher cost of living doesn't appear to have dented demand for new vehicles. General Motors has beatenThe streets estimates for the latest quarter. The Detroit-based automaker says inflation is not having an impact on demand for its products. Rival Ford is on deck to report tomorrow. Snarled supply chains and inflation are hitting the bottom line at Xerox. Adjusted quarterly profit came in well below excitationsFor the office equipment maker. And Xerox is also warning investors that sales revenue will come in softer than expected for the full year, in part because of the strength of the US dollar right now.. A quick check on the broader indices. We will start here at home on Bay Street with the TSX Composite Index, of 148 points, a little more than three quarters of a percent. South of the border, in the thick of earnings season with some big tech names reporting this week including after hours today. We've got a 49 point gain on the S&P 500 to the tune of 1 1/3%. We are back now with Anna Castro. We are taking questions about asset allocation. Here's a big one. What should we expect from the Bank of Canada? You will hear from them in the morning. >> With the high inflation print last week, especially on food and shelter, we think the Bank of Canada will continue raising rates and it could be a 75 basis points increase this coming meeting, and it's… They've been very focused on getting inflation controlled and they'd rather frontloaded and assess how the data is after. The other consideration they would have is they talked about concerns about the weakness in the Canadian dollar. So keeping up the base with how the Fed is might be a consideration, but whether it's 75 basis points or 50, they're not done, but I can that the more important part in terms of what we think as investors. >> We've been getting enough labour of that from officials, including Gov. Tiff Macklem and regarding the weakness of the Canadian dollar versus the strength of the US dollar versus everything this year. It seems to be a tricky path for a bank to be on, trying to figure out hey, how do we bring down the man in our country but still realize the fact that we are still buying a lot of stuff that to the border that will elevate cost? >> Totally. That's basically the challenge of all central banks. How do you do this? Have some credibility to manage and address inflation challenge. And it's rent, wages, etc. and balance that out from what you are also consuming currently and what's happening to businesses, right? So there's going to be a leg. But that's something that they are balancing. >> Obviously, there are concerns that given the amount of household debt that we carry in this country given the run-up in the housing market, before the pandemic and into the pandemic, when the cost of borrowing went down to almost 0, that at some point we won't be able to be as aggressive. Is that just false hope among people who think the Bank of Canada is going to stop at some point? >> No, mainly because the Bank of Canada, it is right, Canadian consumers have higher debt, especially when their real estate side, so that would be a consideration in terms of how aggressive they would be following the news from the Fed. That's why we expect them to diverge for a while. Right now, he has been very focused, he needs inflation under control and they believe that employment is very strong. The labour market is very strong. We have supplied challenges in labour and also high wages and so right now it's basically inflation, but being cognizant of the fact that a lot of Canadians have high debt. >> A great primer for what's to, at 10 AM Eastern time tomorrow when the Bank of Canada will come out with its latest rate decision. let's take another question from the platform. What is a big implicationsfrom the end of the Chinese party conference? It has been good for some Chinese tech stocks this week. >> Yes, so I will start off in terms of what surprised me. First of all, it was expected that the president would be maintaining his power, his solid hold of the party, but what happened is what surprised people was thatthe most they have the seven most important political leaders and the mix now are basically all allies. And so when you think about Will there be a moderate voice or some sort of dissent or even a successor, that wasn't evident in the chosen key people. So what spoke to people was that he was going to be tightening his hold and there might be more of a focus on more political objectives or ideologies instead of ensuring that you have long-term economic growth. And so that could mean higher tension with the US in terms of technology, trade and some territorial disputes. That's one concern. The other concern is to that one of the things that people hope for is that they will kick out zero COVID policy. That has been such an overhang on the economy and of course it is very well known that there is a slowdown in the property market. So that was one near-term catalyst that people were holding out for finally that we don't be as strict on the zero COVID and economic growth would slowly recover and that wasn't clear during that-- after that meeting and it's going to be delayed and what is also interesting, there is no vaccine mechanism or planned yet. So you're not sure if it's going to the middle of next year or towards the end of next year. So those would be the key points. It's also going back to when you think about the background of the people he's chosen to surround him, very much allies, Loyalists. There was a concern that the person he was choosing for premier is someone whowas the one who led the COVID-- manage the COVID lockdown in Shanghai. And so it very much follows what the president says. However, it may not have as much economic work background is what people expected. Little things like that that made people feel that he was basically strengthening his hold and that might mean some instability or concern about future growth. As well as the political tensions. >> The strengthening of that hold, obviously some of the big tech names in China, doesn't seem like the president had the same vision that they had about how they should be doing their businesses. The strengthening of the hold seems to hit those stocks pretty hard. What is the tension here between companies that appear to be doing well in the Chinese leadership? >> That was one of the other takeaways that popped up. The focus would be what is important for national security, national identity and probably broader, more inclusive type of economy, more competition, etc. It's less about entrepreneurial pursuits and that's what spoke also that those leaders in the technological companies and if you have a higher tension with the US, then you are just going to have this back-and-forth of scrutiny in terms of these technological companies have global ambitions and having a higher geopolitical tensions and concerns with the US put those-- that perception of stability in play. >> Great insight as always. At home, do your own research before making financial decisions. We will be back with your questions for Anna Castro in a moment. Contact us by emailing moneytalklive@td.com. It does get to the educational segment. If you are looking to hit certain goals, where broker has tools that can help. It joining us now from Maurice Caitlin Cormier, client education instructor at TD Direct Investing. Great to see you. >> Hey, Greg. It's always a pleasure to be here. Absolutely, one of the foundations of investing is how to figure out your goals before you jump headfirst into investing. It's important to know what you are saving for, have a good picture of what that looks like before you jump in with both feet. I'm sure a lot of us don't take the time to do that. We see the investments and the outcome and we want to jump there for us, but it's really important to have goals in place and luckily WebBroker has something to help youon the right track. So let's jump right into WebBroker. But we are going to do is we're going to click on the goals tab here. Once we get here, we are going to have a little prompt to get started. So we're just going to go ahead and click there. Now, we do have an option to choose goals for retirement, major purchase or just to have your buddy grow. So it's important to keep in mind it doesn't matter what you are saving for, you can always have a plan in place. Let's just choose a major purchase goal from today. It let us say that we are currently 30, we ought to have $50,000 in investments and we want to have it by age 45 so I can purchase a vacation home, we will dream big. And I will name my goal cottage. All right, so you're going to click save and continue. So the next thing is going to ask us is what type of investor are we which is a hard question to answer. You have to think about a lot of things. You need to understand yourself emotionally as well as understand what you are looking for as far as returns but we have a couple of profiles here we can look at. You can also watch a video to learn more about the profiles and you can also click compare. I can actually put conservative, moderate and aggressive side-by-side and really get an idea of what historical returns look like, with the risk levels look like, what that asset mix looks like for those types of profiles and there is the option also to see some more detail in there about what that breakdown looks like. We can see more detail in each of these. If I think moderate might be what I am as an investor, I can really make sure that all of these terms match my feelings and also get a peek here at what that portfolio might look like as far as the breakdown of Canadian, US, international type of investments within that portfolio. >> Sorry, I cut you off there. Keep going. >> I'm just going to click on the choose profile and quickly run through. Click save and continue. Once we get in here, we can choose any accounts that we have to count towards our goal. We can say that we've saved some money already, I'll just put in 5000 for example, and we're gonna put in luscious a $100 biweekly. So we can put in all this information about what we are saving, let's save and continue. And all of a sudden we see our projections. This is a great outcome. We only want to have 50,000 and we are actually going to have 70,000, so this is a pat on the back for us. We can go in and change and say maybe I can scale back and maybe do a little bit sooner. Okay, maybe I'm a little bit too optimistic. Let's say by 42, I'm almost right on. I can make changes to my target amount, my contribution, my frequency and kind of see how that rearranges my goal. But really quick way to go through, answer couple questions and see if you are track to meet your goals were not. >> I think a famous musician said, life is what happens when you're busy making other plans. So you set your goals and maybe like changes, time goes by. Can you go back in and sort of alter those? >> Of course. We are saying $100 biweekly now but maybe that's not going to work out with things happening down the road. What we are going to do is we do need to say that we are going to start with discipline, make sure get saved and anytime we can come back to our goal dashboard. Right now it says needs attention because he made a couple changes. But all we have to do is simply click view details and we can make those adjustments as we go along. So just go back to our age 45, let's say, you know what, I can maybe only contribute $75 biweekly. Recalculate. This is more realistic for what is going to look like. Okay, now I have a buffer. I'm gonna save my changes. I can always come back and look at my goals. And I can review all the different information I input and make any changes I need to make during that timeframe. So the goal dashboard is the place to go in order to be able to see where you are, keep on track with what's going on with your investment see if you're outperforming your projection and make any changes that you need to along the way for those bumps in the road that may come. >> Good stuff as always. Think that. >> Thanks. > Thanks to Caitlin Cormier, client education instructor at TD Direct Investing. Make sure to check out our Learning Center in WebBroker for more educational videos, live, interactive master classes and upcoming webinars. Now before you get back to your questions about asset allocation for Anna Castro, a reminder on how you 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 anytime at moneytalklive@td.com. Or you can use the question box right below the screen here in WebBroker. Just writing your question and hit send. we will see if one of our guest can get you your answer right here at MoneyTalk Live. We are back now with Anna Castro, take your questions about asset allocation. Let's get back to them. If you are asking, is it too late to invest in the energy sector? >>So it depends on your timeframe. It's never too late if you are a long-term investor mainly because when we think about where the energy cycle is right now, you have a limited supply which would have some support for energy prices in the future. However, right now, the focus is about economic growth and recessionary risks, so with that, that's putting a lid to how energy prices would be because the concerns about demand instead of supply, and the energy companies and their equities would be susceptible to having their multiples reduced. So there could be downside to as you go into a recession, but as you have a longer-term perspective and you think about this out for energy prices, of how supply is limited, etc., and how those energy company is listed in Canada, the Names have better balance sheets them before, nice leverage, paying dividends, they can be attractive but is just a matter where we are in the cycle and how right now the focus has been on macro and economic slowdown. > It's always about timeframe, right? What are you trying to achieve in over a period of time are you trying to achieve it? >> Totally. That's why I think, in Canada, energy companies have done well. Like typical economic shocks or concerns, like the first part of this year, they were strong because the focus has been how energy prices has been a driver, actually, of inflation. And right now, how it's different from what was before is that you have less money coming into different company is, and then you have a limited supply and CapEx, and so that's providing a nice set up for those companies longer-term. >> A nice perspective on the energy sector there. Let's take another question from the platform. GICs, or they worth looking at in this environment? >> It depends on the nature of your investment need. GICs, two-year, five-year our maybe four or 5% right now, so as the investor you have the certainty at this point but you lose flexibility, and if you have a component and you want to participate in the recovery of the markets,you would have significantly higher returns than that, so you would value flex ability. So that's the challenge with most GICs, you are locked up for a particular period and where we are right now with a fluid economic environment, if we do have inflation under control, you have more stability, we have more line of sight in terms of what our growth will look like, we have a tremendous opportunity to also by other assets and have quality assets that have sold off and you could have, looking back longer-term, better returns than that. >> You talked earlier in the show about the opportunity in bonds and yields that are there and of course you can sell out of a bond or investment. If someone is looking at GICs, should they be part of their homework? To say look, what am I trying to achieve, what is the GIC provide and what does the bond provide? > Exactly, and what is your cost benefit for that opportunity? Because you don't have unlimited money or capital. That you don't have unlimited money? I have so much of it, and falling on my desk drawers. >> I wish, but we don't. So you have to think about your incremental dollar and where you want to put it. But again, if you go back so what does the investor need, you might need a component of it. Do not look at the markets. But in general, when you focus on your plans, stay invested in look at the big picture with a long time horizon, it allows you to consider all possible scenarios. >> Let's get another question right now, this one about some of the rallies we have seen this year. Stocks have been up this week. Despite all the negativity, could there be more potentially short-lived rallies like this before he actually put it a bottom? This is a big question, have we hit the bottom or do we have a way to go? >> The bear market rally lasted two days. That's the question. The question of the viewer is about is it possible to have a bear market rally in the near term, the answer is yes. Especially where we are now, why do I think that? Equity positioning is very light. Sentiment is very negative and so when you have those extreme almost oppressed type of sentiments, it makes the set up very good in case you just have some sliver of hope or less to worry about for you to have a rally. The other reason why I think that's the cases there is a lot of Fed watching or central bank watching, so any indication that the Fed will pause or even lower or slow down the pace of hikes, you know, back to our old behaviour by the date, you had investors extrapolate and get excited. With inflation, everyone's hopeful, it could change that. The other thing to do is on earnings right now, it's too soon for it to be… It's okay. So earnings results right now are okay. It's too soon for companies to provide guidance. When people go through worry, with the Fed, inflation, earnings was just okay,we get through the elections, less things to worry about, you might have a good set up for a short-term rally. But if you are asking me that if I think it would persist, and we go back there permanently, the question goes back to the Fed. It always goes back to the Fed. >> Do they have to change direction or stop running in that direction for us to get more stable? >> I think we need proof that they can be credible because they relate before the issue here is they might say-- the risk here is that they pause to early. They don't have to pay the door cut rates, but that would be worse. If they don't actually have inflation under control. We are so focused on the short-term management of inflation but the Federal Reserve really needs to ensure price stability for the decade, so it's a different mandate than what we are focused on. >> Important points indeed. We will get back to questions for Anna Castro on asset allocation in a moment. As always, make sure you do your own research before you make any investment decisions and a reminder to get in touch with us anytime. You a question about investing or was driving the market? Our guests are eager to hear what's on your mind, so send us your questions. There are two ways you can get in touch with us: you can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just writing your question and hit send. We will see if one of our guests can get you your answer right here at MoneyTalk Live. So lumber has been trending downwards since the start of the year. Rising interest rates have begun to weigh on the real estate market. Prices have stabilized recently in some reasons, raising hopes that the sector may have bottomed. Anthony Okolie joins us now with more. Another question about what may or may not have bought up so far. >> Welcome support product equities, TD Security say they continued to decline even though commodity prices have settled based in their latest report. They point to sharp declines in the lumbar names and when they looked at the average sector shareprice for the coverage universe, it was down 2.6% for the week of October 16. That's in your 3% gain in the TSX and 4% gain in the S&P 500. When you look at the average drop for the 52 weeks highs, it's down more than 32% versus the peak declines of the broader market, which is down about 18.6%. While the crisis in Ukraine as well as tightening sanctions against Russia's ally, Belarus, which account for more than 10% of global export of lumber, while these sanctions have squeezed supplies, when you look at prices, prices are still down almost 70% since the March peak as the housing market in the United States is showing signs of cooling. In addition to that, we have seen the Federal Reserve push US 30 year mortgage rates to the highest level since 2002. Again, that is helping to cool the red-hot US housing market. However, after a collapse in longer markets, prices are starting to stabilized grade when you look at Western's Bruce Prine, prices are up 7% week over week and futures contract prices have raised 34% since the end of September. TD Securities contributes to this resilience to… As well as uninspected curtailments in the Pacific Northwest due to a labour pursuit. The question is can prices hold up given high interest rates, inflation and a slowing economy? Great. > Obviously some uncertainty around the outlook there. What does TD Securities think about the earnings outlook for the sector? >> TD Securities estimates that the average industry margins are approximately 12%, doesn't sound like a lot, it is down from the unsustainable North American in 2021 average of 61%, but that still impressive given the headwinds we mentioned earlier. >> Money talks Anthony Okolie. Let's check in on the market now and see how we are doing. The TSX Composite Index was positive the last time we checked and indeed is still positive. Hundred and 65 points to the upside, 19,084 we will call that. To the tune of almost a person. We are seeing a rally in some of the tech names, we saw Shopify earlier the show. Light speed up 2 3/4 of a percent, at 2548. And if I group came out with some warnings for investors about supply chain issues which has weighed on those stocks, they are 7% to the downside, a buxom $0.76. Let's check out the S&P 500, we are in the thick of earnings season and this is mega-cap tech week. It's really important when those earnings break after hours today and throughout the week as well. We've got the S&P 500 up to 1 1/3%. A bit of optimism there, a 50 point gain. The NASDAQ, the tech heavy index, it is strong, two points to the upside. And General Motors, demand is strong for its vehicles despite soaring inflation and how it's been affecting consumers, that stock up to the tune of almost 5% today, 37 bucks and $0.39 a share. We are back now with Anna Castro from TD Asset Management, we are talking asset allocation. Look at your questions. Why do large volumes of shares trade late in the day? This is a fascinating one in terms of when people get in and out of the market and the timing. >> So the main reason would be a lot of those ETFs are rebalancing at the end of the day. The second reason would be depending on the day, if it's the end of the week, and of the month or quarter, there could also be a lot of trading happening because of options all those ETFs, so that's the extra source of volume aside from the typical daily it, you know, ETFs are rebalanced and everything. And you also have those that are leveraged, their leveraged ETFs, that would be another source. >> A good insight to know when you are starting to get into the training headspace as it was. Actually going out there and what is going on. Are there risks to the financial system? Central-bank hikes. There has been the fear that they are going to break something. If you are asks, are there was to the financial system because of the central bank hikes? >> That's a good question. Financial and credit conditions seem to be okay. Unlike what we had before, we don't expect the global financial crisis when you have complete seizing up on credit. However, where we are right now because of not just what's happening in the US is you've also had volatility coming from overseas, etc. So a topic that is, the number of times is… US Sec. Janet Yellen has spoke about monitoring this and they will be on top of the situation. So that's positive that they are recognizing that there are some pockets of markets where there could be less liquidity than before. On a bigger topic in terms of financial risk, I'm more concerned about governments. And it's because of what happened with COVID, inflation, etc., you have a lot of governments concerned about social unrest and how popular they are. And so that could lead them to prioritize populist type of decisions, so when you need to suddenly just help their citizens come up with fiscal stimulus, and if it's not funded, that's a concern because now you have higher rates and you need to fund those spending because otherwise you would that have a concern on the functioning of your bond market. The other aspect to his if you are doing fiscal stimulus to address the pain of consumers and your citizens, by doing that, you might actually be were sitting the set up for inflation. >> That sounds like a movie we just saw in recent weeks, in Britain, starring Liz Truss. >> In that situation, what is concerning or something I monitoring is that is something you would expect more before from frontier markets and you are now seeing that from developed markets. So that's why that something our team is very much monitoring and obviously another topic is that you don't want your central banks to be politicized, but with all these insecurities and what inflation is doing in terms of social unrest and concerns etc., that is something that could make things even more volatile. To your point, you guessed the actor, right? More recently. >> Longer term, there is obviously fiscal policy risk. Monetary policy is trying to achieve one thing, fiscal policy it might run against that. >> Longer term, if I have to think about longer-term concerns that I monitor is a shift from, you know, we've had decades of benefits of globalization and peace. So again with what has COVID started out even before, trade war, etc. is the focus on localization of supply chains and focuses. . . That heightened caution between countries might mean protectionism and shifts to protectionist and it could be different ways, but again, that would be inflationary, going back to the point. Our goal is to get out of this inflationary environment and normalize. So that would add other tension, friction in the system. > Before you leave, I'm going to squeeze in one more question about earnings season so far. Heading into it, we were concerned about tension. What is the tone so far? >> Mix but I think it's generally okay. I think we have only had 25% of companies reporting, the next two weeks ago to have 50%. You're gonna be busy. Right now, you've had generally revenues are up around 8%. Some declined in earnings. It's really about how companies have managed their margins. The financials in the banks, what has been good is there is no credit concern, as I mentioned earlier, consumers are strong, labour is tight, people are getting paid. So it's not yet… You don't see the consumer credit concerns just yet. There are some misgivings in the consumer discretionary and freight rates, but generally, more important than this earnings season is guided said he won't get that in this earnings season but it will be the coming quarters that's more material because it's about 2023, how do we look at the year out and when you again, just to all these fed hikes and adjustments of consumers in the high inflationary environment, for higher demand and hiring, that's gonna be in the coming quarters. >> Full of great insights. It was a pleasure having you. >> Thank you. >> How are things to Anna Castro, senior portfolio manager at TD Asset Management. Stay tuned for tomorrow show, James Orlando Senior economist at TD Economics is going to be our guest. We are going to take your questions about the economy and we'll get his reaction to the Bank of Canada rate decision which will be landing at 10 AM Eastern time before we air the show. But you don't have to wait until we go to air to get your questions in. You can get a head start by emailing moneytalklive@td.com. That's all for today. We will see you tomorrow. [music]