Beata Caranci – 08/09/2022

[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing. Every day, I'll be joined by guests from across TD, many of whom you will only see here. We'll take you through what's moving the markets and answer your questions about investing. Coming up on today's show, we are going to hear from TD Bank's chief economist, Beata Caranci, on why she thinks this constant chatter about recession risk could become a self fulfilling prophecy. And in today's WebBroker education segment, Jason Hnatyk will show you how you can find economic reports and data on the platform. So here's how you can get in touch with us. Email moneytalklive@td.com. You can fill out that viewer response box right or to the video player here in WebBroker. Before we get to our guest for today, let's get you an update on the markets. Of course, we are still early in the earnings season. Big event on the schedule for tomorrow morning, that would be the latest read on US consumer prices. As for right now, the markets a little bit in negative territory. We will start here at home with the TSX Composite Index. Down about 77 points, a little bit more than 1/3 of a percent. Let's take a look at Martinrea, the auto parts maker coming out with a earnings beat with that stop getting rewarded today, up to a tune of a little more than 5%. Shopify, seeing some weakness in tech names on both sides of the border, right now in Toronto at 4769, down a little bit less than 7%. The S&P 500, the broader read of the American market, even though we are in the thick of earnings season, investors are reacting to case-by-case news, this seems to be a wait and see approach and a bit of caution in the markets ahead of tomorrow's inflation print out of the United States. Let's see if we can actually make an argument about peak inflation, of course, all the readers as to what the Fed might do in that, we will find out tomorrow morning. The S&P 500 down a little bit more than 1/3 of a percent. Let's check out the tech heavy NASDAQ, what's happening in that space. You can see a bit more pain in the tech trade today, down a little bit more than 1%. Norwegian Cruise Lines is shedding some value today. The stock right now a little shy of 12 bucks, down a little bit more than 12%, their revenue forecast for the current quarter is below the streets estimate. And that's your market update. Recession risk, a topic that's been increasingly in the headlines, but our next guest says this constant fretting about slowing growth could become a self filling prophecy. Joining us now is Beata Caranci, chief economist with TD Bank. Great to have you on the program. Let's dive right into it. I'm guilty of this kind of negative thinking too. Hey, this is going good, but what about this? What do we make of all this recession chatter? >> Well, markets are pretty much split, as our survey, so it's high. It it's roughly priced at 50% of the outcome for recession, not for this year, for next year. possibly even 2024, that's both Canada and the US. However, if you look at the data, there is nothing in the data at this point to suggestit's there. So these are true projections of based on concepts around a policy error by the central banks, tightening fast too fast, too high the general belief that to tap down inflation you need the unemployment rate needs to rise, it would be nice if it would rise only as high as you want it to rise but that's not how business operates. There is a lot of diversity of opinion on this front. 50% odds of recession is high. Normally in an expansion. You would see that sitting at around 20 to 30% so we are in a bit of an outlier move right now. In terms of the negative headlines, it's well advertised when companies are laying off individuals. We have seen headlines on Netflix, Shopify, Amazon, Walmart even. Very few companies advertise when they are hiring. Often for competitive reasons, especially when you're in a tight labour market, you don't advertise it. But the reality is is when you look at the data, especially in the case of US where we have metrics based on past patterns and the forecast going forward, it's not pervasive. Over 90% of industries are still in hiring mode. So when you had towards a recession, that Hestia below 60% as a leading indicator for several months out, and so we are nowhere near that mark, so this is the debate happening in the markets between the negative media headlines versus the reality of the data. >> So the 50-50, obviously, that's a coin flip. You're saying the data isn't really reflecting all that much in terms of recession. Let's get back to this idea of the self fulfilling prophecy because in the end, when we are talking about GDP and using big technical terms, it's only our activity as consumers and how the economy is progressing. If we fear the worst, sometimes the worst is going to show up, isn't it? >> Yes, and we are getting an inkling of this happening in the US, at least on the consumer side. We had always anticipated that consumer spending would slow towards one, 1 1/2%, but we thought it would be something that would transpire in the second half of this year. In fact, we saw come through in the first half. Now, higher inflation was partly a factor but it was in at the levels we see today. And interest rates weren't at the levels we see today. And savings were much higher than we see today. So what was happening? Well, it was probably an element of psychology that was coming into play where people start to get a bit more conservative on the anticipation of what they are hearing around the risk. Definitely we see some consumer caution happening in the US and that is actually elevating some of the chatter around recession because if the consumer capitulates, it's game over. They are 70% of the economy. Then, obviously, businesses would have to respond through layoffs to adjust their business models. We are not seeing the same in Canada. The consumers are extremely resilient or stubborn or however you want to put it. Still spending, still out there. One of the reasons that people site is because there is a delayed opening in Canada relative to what we saw in the US. I would say, you know, that would have been true initially, the fact that we continue to see a fair bit of resilience is probably less so and also what we are not seeing in Canada that we are seeing in the US is the drawdown and savings. So Canadian households are holding onto more of their savings than they are in the US, suggesting that they have a little bit more running speed still to go. So we do think that momentum is going to slow. It's inevitable with high interest rates and inflation, but it's taking longer to make its way into the psychology of the Canadian consumer. >> Since we are talking about the economy, GDP, you brought along some charts to look at. Let's show them to the audience and talk about what this is telling us. Every dollar that I spend in the economy becomes income for someone else. These two lines aren't on top of each other like they used to be. What is this telling us? >> So GDP is expenditures, the expenditure side measurement of the economy, GDI's gross domestic income, to your point, everything is been to someone else's income, so these are two ways of measuring the same concept. They are at a historic gap. We have never seen this degree of divergence in this metric. And so that significant in that one of them is not telling you us the right picture. This is US data by the way, GDP in the US contracted in the first half of this year. what the GDI indicators and telling us is that might be overstating the degree of weakness. during the pandemic, we have had a lot of measurement issues happening in data, whether it's jobs, GDP, trade, inventories. So it's likely we are getting some of that coming through here. This eventually will reconcile. Here's the history of what the difference looks like. >> Here we have TDI and GDP again but a bit of a different picture. >> Yeah, this is showing you the magnitude of the gaps along the long history, so you can see how much of an outlier is, it's a story. I would use this graph to basically say we know the US economy was slowing in the first half of the year. Was it as weak as it was portrayed statistically? Probably not, based on what the GDI is telling us and what typically forecasters do to get a better sense of where the data really sat, very simple average between the GDP and GDI. So we had to slow down, but nothing of the magnitude that we saw. So this will get self corrected over time as revisions come through the data, but it doesn't suggest a strong argument that the US was in recession in the first half of the year, but this is one of the other reinforcing factors. >> I like that approach. Here's this view, here's this view, the truth lies somewhere in the middle. This is about business confidence, especially a small business. You mentioned before, we talk about these big companies, they are real drivers of implement. Explain to me what we are seeing here. > This is a US indicator. We are always paying attention to the US indicators as a leading indicator about where Canada may end up being versus the other way around. This is from the NFIB which is a small business indicator. Obviously, small businesses make up the majority of corporations in the US, businesses, as well as in Canada. So this is a sentiment that tells you, are you looking to hire? Are you worried about labour supply? Are you worried about input prices? Things like that. And you can see is extremely, extremely low relative to its own history, which right away raises a flag that do we need to be worried that small businesses are going to start cutting back on hiring, which will actually become self-fulfilling in the evolution of the economy? What we've done here as we have highlighted in the cycle where you have Democrats versus rebellions. >>the line changes colour over here, doesn't it? > Yeah. The Republicans are in red and the Democrats are in blue. What we notice is that in small business sentiment, when there is Republican leadership, you have more optimistic view on the economy irrespective of the state of the economy. And that's because Republicans tend to be more favourable of the tax and regulatory side or the perception that they are. And in terms of Democrats, you can see during the Obama years, we had negative sentiment throughout, yet it was marked as one of the longest expansions we've had in history. So it's not the best indicator when you are looking to gauge what are the indicators telling us about recession odds. This one, which is called a soft indicator as sentiment, it's not in my go to playbook that we should be looking at, so I would downplay it. If I were to look at a soft indicator, I would instead focus on something like consumer confidence by the confidence board. There are two parts to that. One is that they let you know what the current expectations are versus current conditions are versus expectations, and I think your instinct would say, well, I'll look at the expectations because that tells me what they will do in the future as an indicator whether we are going to move towards recession. It's the opposite. It's their current sentiment that actually gives you the better indicator of how close you are getting to a recession. And that has actually been quite stable. People feel better about right now is and what they are hearing about the future so that has not yet given us a recession signal. It can give you a recession signal about six months in advance that we are not at that threshold. >> Fascinating stuff and a great start to the program. We will get your questions about the economy for Beata Caranci in just a moment's time. A reminder, you get in touch with us at any time. Email moneytalklive@td.com or bill of the viewer response box right under the video player here on my broker. Right now, let's get you updated on some of the top stories in the world of business and a look at how the markets are trading. Shares of Recipe Unlimited making big gains today, that when you sign Fairfax Financialhas made a proposal to take the restaurant chain private. One of the terms of the proposal, Fairfax would pay $20.73 in cash for the company. It owns such brands as Swiss Chalet and he same areas. The deal is valued at some $1.2 billion and the proposed deal is expected to close in the last quarter of this year. Micron, the latest chipmaker to feel the effects of slowing demand for computer memory. The company is warning investors that fourth-quarter salesMay come in below the lower end of their earlier forecasts. The industry has seen a continued slowdown in demand for chips used in smartphones and personal computers. Competitors Nvidia and AMD have also warned of soft demand for their semiconductors. Take a look at shares of Novavax, they are in the spotlight today, that after the drugmaker cut its annual sales forecast in half. That when weak demand for its COVID 19. The Novavax shot was developed using more traditional methods instead of that messenger RNA vaccine that we saw from Pfizer and Moderna. The company says that a man has been tepid for the shot in the United States. That vaccine is also part of the COVAX sharing program. Let's check in on the main benchmark. We will start here at home on Bay Street with the TSX Composite Index.Down a modest 87 points, a little less than half a percent. South of the border, the broader read of the American market, the S&P 500, we are seeing some weakness in tech spaces and other areas too. It's down just shy of half a percent. The big event of the week Lance tomorrow morning regarding price pressures in the United States. We are back with Beata Caranci, chief economist at TD Bank. We are taking your questions about the economy. Let's go right to them.We have been coming in on the platform. This one on the mind of a lot of Canadians actually solve this year. What is your outlook for the housing market? >> I feeling the outlook is already embedded in the data. You can see what direction it's headed in. It's quite negative in the near term. but I do wonder if we are probably past the worst of it in terms of the speed of correction because many sellers were caught flat footed with the speed at which the central bank was raising interest rates. We sell that hundred basis point hike. and so many people were caught on the sidelines, bought a home, needed to sell their home and so thereforewould likely take bigger discounts in cases of need of liquidity. It doesn't mean we are not going to continue to see declines, but I think some of those large step down, once we get into August, September, beyond, we should see some slowing there. The reason I say that is because we have some fundamentals that are still at play. One of them is we have strong population growth, so structurally, nothing has changed on that front. We have very tight rental markets. Again, nothing has changed so far. In fact, the interest rate shock and the decline in home sales is pushing household formation into the rental market, so that keeps pressure on an as well. So really, the cyclical aspect, which is this really rapid deterioration and affordability, very frontloaded, that should ease as we go forward. So overall, we have, from the top to the bottom, movement in prices, about a 19, 20% correction in prices that would still lead you up if you owned a home pre-pandemic, because we had such a run-up in prices. And then sales probably down somewhere between 35, 40%. So they are big numbers. They might jolt you a little bit. But much of that has already occurred or is in the pipeline of what we are seeing to the hope is that we get some stabilization. And Greg, one thing I would say we are seeing is that listings are now starting to not respond. So we've had very flat supply of homes being put on the market for the first half of this year and unless there is an emphasis to sell, probably most people would choose not to in this market. Usually, the big inventory bumps happen when you have job losses that are substantial, so we are not there in the cycle. So the inventory side, it's not just the demand side, it's the inventory side that we might see start to tighten up a little bit more as we head into the second half of this year as well. >> I'm always fascinated by the state of housing. So many Canadians are, but I cover that as a beet in a former life. At the same time, people are interested because if they own a home, they want to know what it's worth, where it's headed, or whether they are going to buy home. At the same time, it's been pretty key to the Canadian economy as well with the drawdown that we have seen so far, what kind of effect is that going to have on the broader economy? You start to think about your home is worth more, you feel good, does this start to drag on parts of the economy? >> Yeah, there are two concepts to think through because there is the wealth effect, how you and I feel about our home value and how we spend accordingly, and then there are factors that feed into the real economy and that's homebuilding, construction. That's actually going to recalibrate lower, speaking to the point that the supply might tighten up, builders themselves are moving product from the market, they are having harder times in presales, so we may end up with that unintended consequence of less supply coming in with strong population growth. So that is a real impact that hits the economy on measurement of GDP. And in the wealth effect, that tends to have long legs. So when you see your home price values go up in your neighbourhood, you know, one year, two year, it's not as if you go and tap into that paper equity and spend off your revolving credits or HELOCs or any those things like that, so that tends to be a more slow-moving factor. Like I said, even with. . . [video buffering] So that's was actually coming through more on a practical side that people may reassess some of those projects they had in mind. >> Renovation is on hold in my house, but for a different reason. My children have entere the University years so that is taking all the money that would've gone to a new master bathroom. This question is about the state of jobs. We had jobs data just last week. So how come Canada's jobs numbers came in so much lower than the Americans? >> Yeah. So going back to the earlier point I was making about potential data quirks and measurement issues, let's start with the US. So the US had over 500,000 jobs created. It was more than two times markets were expecting. And if you look at the pattern of what markets were expecting versus what the actual data keeps coming in month over month, we are getting the data beating the consensus almost every month. So there could be some measurement issues there because, you know, we thought we were in this cycle where you should have just slowing momentum off the economic dynamics. One of the measurement issues for the US could be that it is overstating the job market strain because we had a significant amount of firm creation happening last year. In fact, it was very opposite to how normal recessions happen and the pandemic was not normal in any way. So we had this big push in firm creation. And that may not have been captured in the survey and now it may be getting captured in the survey. So maybe that 500,000 in jobs, 200,000 of those could have been created last year that are now getting picked up and how the survey is kind of casting the net and including these firms. We will get a better idea about, and this all happens during benchmark revisions, they have been in January for the US, but we are going to get preliminary estimates of how these are unfolding later in the month of August. So the US numbers might be overstating, but let's say we cut the number in half that we got last week, it would still be a good number for where we are in the cycle. So I don't want to leave the impression that that's not happening. In terms of Canada, Canada led the job recovery cycle well ahead of what we were seeing in the US. Participation rates responded very quickly. We recovered jobs faster than what we were seeing in the US. And so we are almost at a later stage in the job recovery than they are in the US where you have some recalibration happening in industries that may be did over hiring in response to the pandemic that are now shaving that back a little bit. And so an area that's really curious is if you look at public sector hiring in the month of May, they added over 100,000 people in a single month. To give you a perspective of how big that is, the entire national economy on the month, again 20,000 is normal. So you had public-sector adding 108,000 this May. It is the second largest in history, and the other being during the pandemic. Then what we saw in the June, July data is some cleaving back of those public-sector jobs. So there's a lot of noise in the Canadian statistics and, you know, those June, July clawback, we had about 70,000 jobs combined, partly reflects that noise, partly reflects that recalibration, but just like the US, it also reflects the slowing nature. The US still has a strong market even if you take that 500 out to 200. For Canada, if you take that 70 down to -20, it would still say you have a slowing job market. It's not a concern for me at all. We actually need the job market to slow in Canada in order to take the pressure off of wages, in order to get inflation to normalize to where the Bank of Canada can cut some room to breathe on interest rates. So we are not worried about what we are seeing, especially because there are those data quirks. It's important that you focus on what the next 3 to 6 months tell us. But to be braced, I would say. In the case of Canada, that we should continue to see flat figures on the job market because we were so strong when hiringin the cycle. >> The whole point of the rising rate environment is to start to cool some of those parts of the economy. We are going to get back to your question for Beata Caranci on the economy in just a moment's time. A reminder, course, you can contact us at any time. Just email moneytalklive@td.com. Delegate to the educational segment of the day. If you are interested in doing more research on the state of the Canadian economy and beyond, WebBroker has tools and resources that can help you. Joining us now is Jason Hnatyk, client education instructor at TD Direct Investing. Jason, always good to have you here. Welcome back. Let's dive right in. How can you find these economic information report on the fly from? >> Great. Thanks very much for having me back. It's always a pleasure to be here. getting the information you need to make informed investment decision seems to be a constant struggle. Where do I look? What are the reports released? How will it impact my choices? These are all commonly expressed. In WebBroker, going to the research markets and then overview section is never a bad place to start, but in honour of Beata joining you here today, I want to highlight our clients can access the wealth of information published by TD Economics. Since we are already on the research page, the next step would be to select reports from the top of the page. Then, we can scroll down about half the way. On the right-hand side, you will see TD Economics. Make sure this can scroll for me. We will see TD Economics on the right-hand side. Once we go ahead and choose that, we will see that come up on my screen here and just a quick moment. These reports can be quite valuable and I believe they are underutilized. There is so much here, lots to unpack, more than we can export today. I would recommend viewers take time to explore this site. You can see here there is research and commentary on hot button global economic matters andvaluable data to help with your analysis. The report I would like to highly today is called the weekly bottom line. This report highlights and summarizes key events and figures being reported on the broader economy on both sides of the border, as well as gives you access to key fundamental data points that will hopefully help you add to your own research you are doing. Beyond that, as we scroll down through the weekly bottom line report, we take a bit of a deeper dive into other important timely issues such as inflation as well as potential recession concerns amongst other important information. >> Alright, let's treasure trove of information there. We know how to find it now in WebBroker. What about trying to get ahead of some of the big economic events? Sort of stay on top of one these big announcements are coming. Say US inflation. >> It's true, timing absently matters, especially when we are dealing with the economy and what couldn't be a fast-moving and potentially volatile market. It's not good enough to just have the information, you need to be prepared with that knowledge in time to make the right decisions and take action if necessary. I'm going to show you three quick places in my broker where you can go to ensure you are alerted to the upcoming events that affect your accounts, the markets and the economy as a whole. First off, I will take you to the WebBroker homepage which can always be accessed by clicking the TD Shield in the upper left hand corner of your screen. Now located on the bottom right-hand corner, there is a section labelled your events. Here, you will have a weekly listing of earnings, dividends as well as analyst rating changes that are impacting your position. You can scroll through the different weeks using the arrows that are above. Secondly, if you are looking for more of a broader market overview, that can be found by choosing research from the top of the page. And then, under the market section, choosing events. Here, investors get access to a detailed… It just looked like a popped up for me. Let me get that going again. Here, investors get access to a detailed calendar of events from earnings announcements to split so economic events. The calendar can be filtered for Canadian or US markets by choosing the flag in the top right. With the flavour of economic events in mind, I will send the dates going forward August 16. We can see there are four events listed here are related to the consumer price index. last but certainly not least I wanted to quickly show you how to find dates and results of key economic indicators provided by our friends at TD Economics. We will go back to the reports tab at the top of the page, once again choosing TD Economics and once again the weekly bottom-line report here from the next page. And then, on this page, there is a recent key economic indicators link. We will go through there. Here, we will see the most recent dates as well as how the economic indicators fared against our last reporting period. Lots of great information. >> thanks a lot, Jason. >> My pleasure. >> Jason Hnatyk, client education instructor at TD investing. A reminder of how you get in touch with us. You have a question about investing or was 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@moneytalklive@td.com, or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send. We will see if one of our guests can get you your answer right here at MoneyTalk Live. We are back now is Beata Caranci, Chief economist with TD Bank taking your questions about the economy. This one just came in. We keep hearing that rising commodity prices will help the Canadian economy, but the outlook is in as right now for commodities. does that put the economy at risk? >> Yeah, so I think higher commodity prices for the entire Canadian economy is generally a net negative. And that's because you see what happened on the inflation data. It may compel the Bank of Canada's have to raise interest rates higher. That is felt by every household. Regionally, obviously the higher oil prices are better for an economy like Alberta, Saskatchewan has been benefiting from wheat prices having been hired temporally. They have since come down about 35%. Oil prices are down about 25%. However, oil price, the WTI is at 90 bucks. That is still a firm and steady price and well above what is estimated for breakeven's in the industry on the production side and the investment side. So I think on net, we are better off in an environment as a country for economic growth, for inflation, with more stabilization on the commodity side. It does disproportionately mean that there is less revenue going into the government coffers and into the profits I've heard some of the provinces but on average across the country, it's a net negative. >>they might be happy with $120 barrel crude because when the stock soared. They are not happy when they go to the pumps and they fill up their car they say, so much of my disposable income is going into energy costs, heating our homes and everything else that goes into that. >> People are really price-sensitive to certain things that have highly observable prices, so grocery bills, they are doing it every week or more in terms of purchasing and filling up the car. And so when you have those two segments of the price basket rising, the negative sentiment to what we're talking about at the top can be greater than anything else, is car prices rise or any other segment of that consumer run. To me, it's important psychologically that households see, these prices some of these prices come off the boil. >> I remember a month ago filling up the car and doing the groceries the same night and my wife said you don't want to know. This is intriguing. How many more rate hikes you think you're going to get and will central banks have to start cutting right after? This has been a bit of a narrative thrown out there. There is going to be some pain in the next little while. Don't worry, they're going to be coming in short order. Is it too early to be optimistic? >> I think cutting is the optimistic aspect. Markets have been moving around their expectations based on the data side. More recently, after the jobs report in the US, any expectations that the Fed and maybe the Bank of Canada would open the window to cuts in the first half of next year, they subsequently got pushed into the second half of next year, to me that still optimistic. I think that they are going to have to leave rates higher for longer in part because those inflation metrics, you know, with energy and commodity prices coming down, that helps that headline CPI inflation metrics come down but the core metric, which includes a lot of services, anybody knows if you are buying airplane tickets or other factors, those are going to be much more sticky and there still supply-side issues happening on that side. Rental markets are tight, as you mentioned. so that's what the Bank of Canada has to think it through, not just what's happening on the headline is how long to take that to come through to the core metricsand then to get you back down to close to 2%, and we are well off that mark, so that's why don't think rate cuts are on the table for next year unless we see some significant movements in those metrics in the next six months or so that is convincing the Bank of Canada that it may be feasible. In terms of how high rates can go. . . . [video buffering] Markets are priced in about 3.6, so somewhere in between there. The one thing that anchors the expectation is that Tiff Macklem, who is the governor of the Bank of Canada, he mentioned that rates would have to go slightly above neutral, it's the word slightly, you know, we don't want to dissect their wording too much because it changes quite often, but their neutral ranges between two and 3%. So when he said it needs to go slightly above, does that mean 3 1/4, 3.5, 3 3/4? It doesn't mean 4 1/2, five, six, so we will probably be somewhere in that range. >> This next one is interesting. The rate debate. I hear some saying we are already in technically a recession. Is that right? Well, what we actually mean when we say recession? >> Yeah, this is getting cute off the US data with the two back-to-back quarterly contractions in GDP. And so that's what we were talking about how that may not be as weak when you look at other metrics on the economy, like the income side of the economy. But if you think through how a recession should feel, how would be measured, the contractions that we got in the first half of the year from the US came through a heavy contraction in net trade, net exports in the US, and in the next quarter it was by big inventory switch that shave two points off the GDP. GDP contracted .9, two percentage points from inventories, you take that out of the equation, flips that negative lips into a positive. You know these contractions are happening and you have two historical volatile components of the economy moving around related to supply chain and other factors, and that's throwing around the GDP more than we would like. It's making it more difficult to measure. But there is not the sense of universal pain being felt in the industrial sector, in the job sector, so when you go to recession market, what are the indicators we are looking for? The statistical agency will look at industrial production, how weak is it getting? Well, the Ford indicators are still showing expansion. The job side, well, we know the story there, quite strong. And in the income side. Income is the one that sort of on the bubble in the US. When you take off inflation, after-tax income in the US is actually negative, but a lot of that is coming because a lot of government transfers are underway. If you look at wages and compensation, is holding relatively flat as regards inflation. It's not signalling a recession. Here you have three broad indicators and none of them they are or being close to being there yet, on getting that little tick box. But the economy did contract in the first half of the year, so some people might qualify that as a technical recession but it doesn't mean that there is pain being universally fell. >> It's always good to look at the big picture, course. We will get back your questions for Beata Caranci on the economy in just a moment's time. As always, make sure you do your own research before making any investment decisions. a reminder, you can get in touch with us at any time. You have a question about investing or what's 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 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. With the markets well off the highs they put in earlier this year, TD Securities is cutting their view of the asset managers. Anthony Okolie joins us now with more. Anthony. > TD Securities arechanging their prices… Reflecting what they call material decline in assets under management or lower AUM in the second quarter of this year. Now TD Securities estimates the AUM declines in the second quarter 9% for the group that they cover. The reduction reflects some fee margin depression which will be offset by some of the market rebound in July of this year. The lower earnings. . . [audio cut] We have seen markets off to the were start in 50 years. The lower AUM, the lower… According to IFIC, mutual funds recorded net redemptions of just over 10 billion in June 2022and the assets… Over the near term, TD Securities expects large pressuresto let up. If AUM levels stay depressed, TD Securities expects that expense levels will be adjusted to defend their margins. Great. >> Great stuff as always, Anthony. Thanks for that. >> Are welcome. >> Anthony Okolie of MoneyTalk. Let's do a quick check in on the markets now and see what's happening on Bay Street and Wall Street. The TSX down about half a percent. It hasn't moved all that much during the show. We are seeing some weakness and some key names and let's take a look at some and visual names. Bausch Health is down to a tune of almost 10% now. They are lowering their full-year sales forecast. We are still in the thick of earnings season and that's driving the trade in a lot of names, but we do have US inflation on deck for tomorrow morning. Let's check in on the S&P 500. Right now, it's just sitting near its lows of the session, down about half a percent or 22 points. The NASDAQ seems to be more pressure to the downside, it's the tech heavy index. Right now it is down to a tune of 1 1/2% ahead of inflation day. Let's take a look at Micron. We've been getting a lot of warnings out of the semiconductor industry about slowing demand and the gaming industry, that means slowing demand for multiple industries. It Micron down to a tune of about 5 1/2%. What is your view on the Canadian dollar? >> Interestingly, usually the dollars very hard to predict as a significant amount of volatility to it. However, over the last several years, we've had an incredibly stable Canadian dollar ranging between anywhere from $0.76-$0.80 on the top which sounds like a broad range but in terms of currencies, it's not. >> Not to remember parity. >> I know! So this is a very stable range for currency a given the context of a pandemic, given the context of volatile data, commodity surges, typically when you have 120 bucks on WTI, you would think that you would have a Canadian dollar near parity. With that in mind, at the range I just described, it's probably worth going to be in a couple of years. There are three typical drivers that you want to pay attention to. One is the spread, interest rate spread to the US, will the Bank of Canada and the Fed are moving in lockstep, so that's not having a big impact. Commodity prices is the other side of it and yes they have come down and put some downward pressure, but they are not low. So that put some floor underneath it. And the other is a risk sentiment. So if we do hit a recession and it's very clear that it's going to be prolonged or it's going to be a difficult one, that should weaken off the Canadian dollar because when trouble hits, everybody runs to the bank of mom and dad, which is the US dollar. And so that would be a likely near-term move if we had that area. Outside of that, we have very contained push and pull forces happening with the Canadian dollar and we expect that to continue. >> Do you subscribe to the idea that the weaker Canadian dollars benefits of the economy in the sense that our goods become more attractive to trading partners? I've heard we should be competitive on her own terms and not just wait for a lower loonie. >> Most businesses, when you could hatch the currency, you take that risk it all together and two, we are in the opposite world. We are in reverse currency wars because high inflation, you import inflation through a lower currency. We are hearing about more countries preferring a higher currency in this environment because the priority is to control inflation, take the pressure off the central banks and the degree of tightening they have to do as the better of the two rather than try to stoke exports. >> Okay, we have time for one more question. We will squeeze it in. This goes back to the beginning of our chat about economic indicators. What economic indicators do you look at the most and what are they telling you? > Jobs, jobs, jobs. For Hieronymus, on a Friday, the first Friday of the month, we are always paying attention to those figures. Again, like I mentioned, there's a lot of volatility in the data. So we try to do is smooth out some of the noise. We want to pay attention to things like what our hours doing. Before companies fire people, they scale back hours. It could be a leading indicator of where you're going to be in the next 3 to 6 months. That's one attention to as well. Wage growth is very sensitive these days relative to inflation, we are paying attention to that. as opposed to that headline with commodity prices coming off, so that's a big driver and in the financial market indicators, we've had an inversion of the 10 and two year yield curve, very deep, 40 basis points. The other financial indicators are not sending the recession indicators but these can move quickly. So we are always paying attention to what the financial markets, like, let them speak and hear what they are saying. >> Great having you. Appreciate you joining us. >> My pleasure. >> Our thanks to Beata Caranci, chief economist of TD Bank. And stay tuned, tomorrow is the CPI print. We are going to have Hafiz Noordin, portfolio manager at global fixed income, TD Asset Management. He will take your questions about fixed income. We are going to have a chat off the top the consumer prices in the state and what they are telling us about the future path. Pre-much everything. A reminder that you get a head start on getting your questions and for the program. Email moneytalklive@td.com. That's all the time we have for the show today. Thanks for watching and we will see you tomorrow. [music]