Ben Gossack – 07/27/2022

[music] >> Hello, I'm Greg Bonnell, and welcome to MoneyTalk Livewhich is brought to you by TD Direct Investing. It's a new program broadcast daily on WebBroker. Every day I'll be joined by guests 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. Email us@moneytalklive@td.com or fill out the viewer response box here on WebBroker. A robust start to the session on Bay Street and Wall Street. The big news of the day still to come. That would be the US Federal Reserve at 10 PM Eastern time today coming out of that two day meeting with a rate decision. Right now, the momentum is to the upside. 19,175, a 202 point gain on the TSX Composite Index. Good for a full percent. We are in the thick of earnings season on both sides of the border. Let's check in on Cameco. Those shares are to the tune of 8 1/2, almost 9% of the upside right now. Higher uranium prices powering an earnings increase at Cameco. Check in on Interfor, it's an ounce a $100 million share buyback after the close of markets yesterday, that stock at $31.90 per share, a gain of about 12%. South of the border, it's been a busy earnings season was intact but he missed giving us their latest results. Right now the S&P 500 heading into this afternoon up a solid one and 1/2% at 3979. Let's check in on the tech heavy NASDAQ. Perhaps fearing a little bit better considering we are in the midst of tag earnings season. We are getting some positive news out of the space. 2.7% to the upside. It's interesting. We're gonna talk about Microsoft now, Alphabet the parent company of Google later on the show. At first blush, should we be disappointed as investors? And then you sift through the details and investors might be honing in on some more forward-looking aspects including Microsoft season growth and its cloud services. More on that later in the show. That's your market update. iF THERE IS A RECESSION ON THE HORIZON, IT APPEARS THAT MARKETS ARE HOPING FOR A SHORT SHARP PULLBACK THAT PULLS IN LIKE A HURRICANE, is a bit of damage and then blows out. Our next guest says we may be in for more of a grind. Joining us now is Ben Gossack, portfolio manager at TD Asset Management. Then, great to have you here. This topic fascinates me in that it seems to be across the market. If we are to get sharp, hard interest rates like we have from the central bank, we'll be getting cuts in no time. If we get a recession, it will go away. dO YOU THINK THAT'S A LITTLE TOO OPTIMISTIC? >> gREG, THANKS FOR HAVING ME. Yeah, recession is the topic du jour and it's affecting all asset classes and prices. And I think when people think about recession, we get that classic definition of two quarters of contraction. The first quarter of this year, the US all contraction and we got the update for the second quarter GDP tomorrow and there is a mix. I think economists show there will be 1/4 over quarter growth, but if you use the Federal Reserve's own models, chose there is contraction. Tomorrow, we could see a tactical recession. Having said that, what we are looking at today, it definitely is a slowdown. We see companies holding back from hiring. We saw Shopify's cutting 10% of its workforce. And that initial jobless claims, people lining up for employment insurance, it's a small base but the rate of the increase is consistent with other slowdowns in other recessions, so there definitely is a slowdown and I think your point about this hurricane, I think people think recession, hurricane blows its way in, causes a bunch of damage, that damage could be jobs, could be companies and then sort of blows its way out and then eventually we recover. And so what I'm putting into our models, our expectations is what if we slow down but the recovery is slow and sluggish and what does that mean for companies going forward? >> We have been accustomed, as investors over the past decade of the central banks riding to the rescue at the first sign of trouble. Don't worry, they are going to make money cheap and the party will rage on. Obviously, they have different problem on their hands now. After the great financial crisis,they made money cheap. But now we have the full force in front of us. That setting up a scenario where the central banks will not ride to our rescue at the first sign of trouble? >> Arguably, people are going to watch for the press conference today at 2 PM and see how Chairman Powell reacts to we are assuming it a 75 basis point increase, but how many more increases are coming? Arguably, the Fed has said at this point, given the rate of inflation and the impact that it's had on the consumer, they want to fight inflation, even if it means the cost of jobs. And so if we take them at their word, then it feels like that put that the market has sort of talked about since even maybe 1987, coming in and supporting the market, that strike price might be a lot lower than people's expectations. And so yes, could it mean that central banks continue to raise interest rates even though everything is flowing? I think I was remarking before, people said they used to be a rule of thumb that one the yield curve inverts, so the short end is higher than the low end, the central bank would never hike interest rates, and yet today, the yield curve is as inverted as it was back in 2000 and we are probably going to see a 75 basis point increase. >> Is that part of the grind that we are going to have those investors, that everything that we thought logically follows, the Fed would never do this, inverted yield curve, is that all sort of torn apart by the pandemic? >>I always put it down so they are rules of thumb and heuristics, and that helps us get through life on a day-to-day basis. And it helps us get through markets. then again, it's just a rule of thumb,soy always believe there is a playbook and yes, arguably with COVID, we've had to throughout the playbooks and everything is brand-new. My bigger concern about the sluggishness coming out is that the issues that we faced prior to the pandemic, people talked about rising debts, demographics or population aging, this inflationary forces, whether that happen in technology or banks not extending loans at the rates they were doing before, would hold us down in terms of our long-term growth potential. And so as we are working our way out of COVID, yes, geopolitical tensions and noise but those forces that were holding us down, that kept interest rates low, never disappeared. It just that COVID took over our lives for the past couple of years and is that abates, those tensions, we are three years older, the debt got bigger because we had to get ourselves through this healthcare crisis. And we may not see good returns on the debt that we took out. Again, that's borrowing from the future. So that would bring about slower growth. And there are still this inflationary forces about, even though people would say that's crazy when I go to the gas station, when I go pay for food, it's going I have, but there still monetary forces at play. >>these themes are reflected in the earnings season. We are in the thick of it right now on both sides of the border. We are getting a lot of forecasts, some revisions. Do you think that corporate America, corporate Canada is fully reflected in the challenges ahead? >> We were talking about how prices were adjusted and earnings forecasts were slow to come down. We are starting to see that rollover in terms of earnings excitations for 2022, 2023. We are seeing the earnings expectations, faster in Europe. I think it's easy for people to look at Europe and say, yes, there are lots of challenging issues. Companies are asked to ration production because there's not enough energy to be shared amongst everyone. So it's very easy for people to take down their numbers in Europe. But numbers you have to come down more in the US and Canada, and so the reactions that we are seeing from earnings this week is a bit more about relief and, in some cases, disappointed. And you talked about Microsoft, he talked about Google. For all intents and purposes, Microsoft missed expectations, and they had already come out and told analysts that the dollar was going to be a headwind and to start taking down numbers and they still came out below. It's just that they are Outlook for 2023 was a lot better than what people had expected. they obviously have to deliver on those expectations. But as an investor, it was a relief, hence the stock price goes up. Google also missed the bottom line, but after snapshot reported that they are having so much trouble in terms of revenue growth, can't provide guidance, the fact that Google search and the cloud came in line is a relief and hence that's why the stocks rallied. >> Even though we are going to be in for this grind if we did fall into a recessionary environment, it seems that investors are desperately looking for the bright spot in it it. Give us some hope in the sense that after the rough first half of the year we've had, maybe we will get beat up as bad as I can have? I think a lot of people are trying to figure out where we are headed. >> I think it goes back to this idea of well, if someone says there is a recession, it must be a sudden drop in activity and a recovery. I think what we might be saying is that the slowdown is going to be long and a bit of a grind. And that's why you get this relief rally where, yeah, Microsoft was lower. We will get growth. Not at the same pace at what it was, but it's not that bad because I was expecting things to be dire. So especially when it comes to stock prices, something that less dire, less bad, it lowers the boundary of the expected outcome and the price is higher which is why the stock would rally. but it doesn't mean that we are not out of the woods in terms of slower growth for the future. >> Great start to the show. Interesting stuff as always. We will get to your questions about income growth for Ben Gossack in a moment. A reminder, you can get in touch with us anytime. Email moneytalklive@td.com. You can fill out that viewer response box right under the player here on WebBroker. Now let's get you updated on the top stories in the world of business and take a look at how markets are trading. Shopify's posting a surprise loss in its most recent quarterAn warning of challenges ahead. The e-commerce company says higher costs and expenses will result in an operating loss for the second half of this year. The cost of integrating its two billion-dollar perches of fulfilment company at Delivrr is front and centre in these results. Shopify is also seeing all line shopping lowering after the pandemic surge. Shopify CEO yesterday said he made the wrong bed on how strong e-commerce sales would remain post-pandemic and the company cut 10% of its workforce. Despite all this news, Shopify was under quite a bit of selling pressure yesterday Ray, there's a bit of a rebound today, she is currently up 6%. We've got strong freight volume, saw Canadian National Railway delivers solid earnings beat in its most recent quarter. While the railway is not immune to inflationary pressures, was able to pass those costs on to customers through higher freight rates and fuel charges. There was also solid demand from customers looking to ship coal and grain during the quarter. The new CEO is tasked with increasing efficiency at Siena after following an activist push for change. Latest earnings from Alphabet appear to be easing concerns for a weakness in digital advertising demand. While the parent company of Google did Ms. profit excitations in the latest quarter, sales from Google search were stronger than anticipated. That said, executives at Alphabet are warning andinvestors that there are still challenges. The strength of the US dollar is also pressuring revenue for the quarter. More than half of Alphabet's sales coming from outside the United States. Let's check in on the main benchmark indexes. We will start here in Bay Street Right at home with the TSX Composite Index. Of 185 points right now, almost a full percent to the upside. Their strength across the board. In the United States, we've got an hour and 47 minutes on the countdown clock for the US Federal Reserve coming out withtheir decision from a two day meeting. we are interested to see the market reaction at 2 PM research time. One and 1/2% to the upside for the S&P 500. We are back in with Ben Gossack, portfolio manager with TD Asset Management. Let's get to review her question. We will start with this one. Suncor has come down significant lead with the decline in the price of oil as well as the change of CEO. Is there still more downside risk for this name? What do we think, Ben? >> So definitely energystocks have come down across the board, we've seen oil come down. It's a reflection of… It's a very tough market to gauge, so I think the supply challenges are well understood, really hard with production, we've seen Pres. biting go to Saudi Arabia to try to get the Saudi Arabians to bring extra barrels, they were talking to Aranda and Venezuela, countries the US wouldn't typically go to. I think most investors understand supply challenge. The part that adds a lot of noise for any energy company including Suncor is on the demand side. We've seen the consumer's very challenge, especially with companies reporting that customers are stressed with the price of oil, gasoline, food cost. What is that due to demand? We talked about slow down. And so anyone's forecast comments in the range of possibility that we could get a dollar 10 per barrel. I think right now we are at 96, 97, or we could be at $60. So if we are going to go to $60, Suncor and all other energy companies, they would probably see their stock prices fall more. The bottom is already there, I never say that about any stock, people have to understand, you could see a $60 barrel of oil and it's just the demand-side function, even though they're going to say, but they can't bring that extra barrel. They will be right, but they will be wrong on the demand-side. So it's important to keep your eye on, in terms of where demand is coming. One thing specific about Suncor in general, activist investors, Elliot Investment Management, made a play. Pushed out the CEO. Going to add to more independent board members, directors. And so there is discussion about them selling their Petro Canada retail units. That could create an event for shareholders, be it a buyback or dividend. So there is still opportunity for some type of shareholder yield in the future. But having said that, again, taking into context of the economic situation, there still could be a lot of noise. Even if they do sell Petro Canada, create a liquidity event, the oil goes to 60, it doesn't mean that Suncor is immune from falling more. > Interesting stuff. Another question off the platform about what to do with ourselves in these sort of confusing times. Would you deploy new money here or ways in this rising rate environment? >> Yeah, so at any point in the market, you always get this question. When the market is up 20%, someone says, I have cash, what do I do with it? Market falls 50%, I've cash, which I do with it? It's a very difficult question to tell people what to do with their cash. I don't know what their timelines are. I always tell people what we do with cash. So there are times we might raise some cash, maybe it's because we want to be a bit more defensive. Cash provides optimality, but cash has a cost. So if the market wants to rally two, three, 4% in cash, well, you're not participating. Also, cash doesn't to earn a yield. Or if it does, it's a very minimal yield. So in our portfolios, we like to get paid on our cash. And so typically what we will do is we will write a put, and all that means is we become an insurance company. And so someone on the other side has a stock that we like. We've done the fundamental work on. They want to protect that asset, so their stock is no different than their house, their car, their life insurance policy. So they come to us and they are worried about maybe their stock is up 10% and they want to protect it, so if the stock falls three, four, 5%, we are happy to take it off their hands if they pay us a premium. so that's how we put our cash to work such that we are ready know what we want to buy and if we can buy it cheaper and get paid to do it, that sounds like a win-win situation from our perspective. So that's typically what we do with our cash. But in terms of telling people what to do with their cash, that's always a very difficult call. You always put someone in a very difficult situation to give a good answer. But I can only tell you what I would do with the cash. >> Interesting stuff. At home, if you're going to get into options, make sure you do your own homework in that space. Another question coming off the platform. What is the best utility stock to hold for growth and income? We can't give you best or worst on the show, but we can definitely talk about the utility space. What you see in there? >> Utilities have actually done quite well and it's got a rising interest rate market soyou would think they would be negatively correlated but they've held up. there's an interesting future for utilities and you almost have to, they are modelled differently versus other sectors. So you think about companies that go through an investment cycle and as investors, we want to make sure that we get paid on an investment cycle. But as they go through that cycle, that reduces your free cash flow and then stocks tend to rally when we get through the cap ex cycle and that means cash flow is expanding and hopefully we see the returns of the investment. when it comes to utilities, you always want to see cap ex. they are regulated entities and they have a prescribed return on equity and so it makes sense for them to always build because that means future regulated returns going forward. So definitely, if you are looking at a utility company, you want to make sure that they are investing. So cap ex is increasing every year and that's where you're going to get future growth white utility stock will go higher. and then where they have been investing is in renewables, wind or solar,that's what you're looking for. In general for the US, utilities, there has been some noise in terms of where they can source some of the solar panels. There are certain restrictions in terms of where the solar panels are coming. >> China is a big manufacture, right? > Yes, geopolitics are involved here. Whether it's European, US or Canadian utilities, that's where the future growth will be, so if you are going to own a utility company, be mindful of the investments they are making and make sure that they are making continuous investments. If the utility starting to wind down investments, that means a lower future growth potential. > We had Marisa Jones on the program last week. She studies the utilities from the debt side. She was talking about it being an interesting space when you talk with the elective vacation of everything. If everyone's going to have an electric car, were nowhere near there yet, and they have to plug it into their house, there must be investments into the utility space in the longer term to make sure that we can deliver on that promise in the future. That yes, there are a couple of industrial companies that we've invested that provide those components for those utilities. >> Six and shall kind of argument? >> The Linux uses I don't like to pick winners, I like to take companies that always win. That's the pick and shovel. A couple of ideas especially in the electrification space where, yeah, you need bigger power transformers. So not everyone on your street can plug in their hybrid vehicle or their electric vehicle. There is massive upgrades that are needed. >> Interesting stuff as always. Always make sure you do your own research before making investment decisions. We will get back your question for Ben Gossack from TD Asset Management in a moment time. A reminder, even in touch with us anytime. Email moneytalklive@td.com. Now let's get to today's educational segment. A rough ride in the markets this year, some investors are becoming more interested in guaranteed investment certificates. WebBroker has tools which can help you explore the world of GICs. Joining us now is Bryan Rogers, client education instructor at TD Direct Investing. Ryan, great to have you with us. Give us a rundown here of what WebBroker can do in the GIC space. >> Okay, glad to. GICs have been… For the loss in a while because the markets being so high in the interest rates have been so low. I think things have changed a little bit and the big appeal to GICs is the fact that your investment is completely secure, so the guaranteed investment certificates are a guaranteed investment with low risk. the appeal to the investor is you are going to get your principal back plus some interest. Especially appealing for those if you've reached a goal or close to retirement and you want to maintain that the investment. it similar to a savings account in a way that is going to offer a smaller return, but they offer a little bit more than a savings account from a return perspective because they are a little bit less flexible, you have a Walkman. They are locked in for a certain period of time. They have an expiry date. You might get a higher return than a savings account. Most GICs are locked in for the timeframe and they may include a penalty if they are cash in early, but one big benefit is that unlike stocks and mutual funds, CDIC insurance does apply to GICs just like a lot of savings accounts and things like cash. So many brokers allow GICs to be held next to their socks and mutual funds and so that's what I want to share with everyone in WebBroker. So if you are a WebBroker client and you go into WebBroker, you can go under research, click on the research tab. I'm already there right now, but it will be under research and the GIC Rate Sheet and you will see a lot of the GICs here that are listed, shorter-term ones that come up first, anything under a year if you are looking for a short-term timeframe. You can see the annual rates here for different time frames. And then you can have short-term tabs, long term, if you will look at things individually. As I scroll down here, I can see all GICs. There are about 20 different issuers that you can utilize. And this is where you are going to get the separate CDIC insurance. You can see there is monthly, semiannual and annual rate. As you get into the longer term GICs, you can see like two years, three years, you get a compounding rate as well, they'll be where you can have that money after the first year reinvested and take advantage of the power of compound as well. So if you are looking in WebBroker, you are going to the GIC Rate Sheet, look at all the short-term, long-term and then there are some cashable GICs as well if you do want to have the flexibly. You may have a lower rate, but you have the flex ability to cash it out and take the money at any time. >> So WebBroker gives us a lot of resources. Bryan, I'm on the same page that you're showing the audience right now. I've been checking out this page lately out of curiosity about these rates being a lot higher than they been in a long time. You got these different categories. If you're new to the GICs, he talked about cashable, longer-term, shorter-term and there is one called market links. What's the difference here between some of the GICs and the market links GIC? >> Great question. If we look on this page right now with all GICs, we have clicked on market links yet, I can pick a three year, I can pick a random GIC issuer, fair stone or home equity bank. If I go to the right hand side, at fair stone it's about 4 1/2% for a three year GIC. As the annual rate over three years. On your investment of $10,000, you get about $450 a year, you're gonna get a little bit more than 1350, you're gonna get bit of compounding and have the total amount at the end of three years. if you get a better rate on the market but I'm leery and don't want to take a risk, I want to guarantee my principal, there is a vehicle we have available called market link to GICs. So they are linked to the actual index. They would be an index like the S&P 500 of the TSX. What this is showing on the right-hand side is minimum guaranteed rate, for example 6.3 or 1.2. Some of them can be fairly low but some of them can be okay still. Remember, this is a cross that a whole three year time period. You'll get your principal back, your $10,000 back, plus that 6.3% and a minimum guaranteed where you may be able to get up to 15% over that time. Or for some others it could be 30% or 25%. So assuming that benchmark index GIC is linked to, if it does well, you have the potential to make more on your guaranteed investment. >> Interesting stuff, Bryan. Thanks for joining us. >> Thanks, Greg. >> Thanks to Bryan Rogers, client education instructor at TD Direct Investing. Make sure to check out the learning centre on WebBroker for more free educational videos, live interactive master classes and upcoming webinars. Before we get back your questions about income growth for Ben Gossack from TD Asset Management, reminder of how you get in touch with us. Give a question about investing or what's driving the markets? Our guests are eager to hear what's on your mind. 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 guestscan get you your answer right here at MoneyTalk Live. We are back now at TD Asset Management's Ben Gossack. We are taking your questions here aboutThe stated markets, where we might be headed. Here's one coming off the platform. Can you discuss strategies for building a dividend base portfolio now that yields are appealing on quality stocks? Looking for yield, what do you think? >> Regardless of the environment, market up, down, yields, interest-rate environment, we've had a pretty consistent philosophy when building dividend portfolios, and we've particularly focused on growth versus yield. So many times when people think about an income equity fund, they are expecting a lot of utilities, a lot of telcos and Canada especially having the Canadian banks, you expect that type of mix. For us, it's not that we wouldn't have some of those companies, but for us, it's all about the dividend growth. We have this philosophy that if we can find a company that can consistently grow its dividend year after year after year after year, we may not be an expert on where the stock price is going to be at any given moment, but at some point, the price has to be a magnet to that growth because you have a company with let's say an 8% dividend yield, but again, if it's fundamentally strong, the price has to adjust to the price has to go higher. Versus, let's say, a company where you did a screen and found a company with a 10% yield… >> You can get blinded by the big yield number on its own, right? >> Most likely it means that the market has sniffed out that there is a problem and the yield is not sustainable. For today, Rio Tinto Alcan, a big Materials company, had a very big dividend yield and just got cut by more than half today. So when you are chasing the big yield, you are taking on a lot of risk because at the end of the day, there is no free lunch. So the basic building blocks about how we assemble these portfolios is growth strategy and that could be as simple as a new product, innovation, entering some new geography. So there has to be a thesis for Wyatt cash flows can grow. You need a very solid balance sheet because you have to go through market cycles and the magic, when it comes to dividend growth, is you need to be consistently compound. And if there is going to be a cut, then the magic all of a sudden disappears and goes proof. And then lastly, there has to be this history of growth. And so all day long, we are looking at companies and do all those ingredients hold? So it's really hard to… Hold a sustainable, competitive advantage. Things change. The government changes the rules, new competitors, technologies, obsolescence. And then, were they just increasing their payout ratio as opposed to growing? So all these things are in place. It's not easy. It sounds easy on paper, but you are looking for the growth and the growth will lead to price returns as well and you get a total return formula. But we always tell people to shy away just for chasing yield for the sake of yield. > I admit there are times when my eyes go wide when I see things and I try to remember the discipline. Those are great points of discipline for our audience as they do their own homework on this. In terms of the entire strategy, it sounds longer-term. You're not jumping in and out of high-quality dividend places. You want to build something over time. >> When you go to parties and you want to talk to people about stocks,you're gonna be the most boring person at the party. This is going to be about compounding, so you're talking about trying to get companies to grow their dividends, say, 10% a year, that means in seven years, your money doubles. But again, think about your check doubling every seven years, to do that seven years on seven years on seven years, over a 20 year period, and that sounds like a lifetime,especially two years ago when people were making 100 X returns on stocks, but it's just that consistency that leads to some big checks coming in later on that you look back and be like wow, yeah, that was worth it. >> To the younger members of our audience watching now, not to scare you, but 20 years will go by faster than you think. Trust us. He is another question coming out the platform. With rates rising, our US homebuilders risky in this environment? I guess there is a lot of concern and we have seen a housing slowdown on both sides of the border with these cost moving higher. >> Yes, housing has slowed down, new activity has slowed down, we've seen that housing builders, so I tracked the housing builder ETF in the US, definitely was one of the early movers that has fallen. Even today, Sherwin-Williams, so if anyone's painted their house, that's a big name. They are down over 10% today. And they indicated weakness in consumer DIY. So we are not out of the woods in terms of activity. Having said that, in the last week or so, we've seen, it looked like there was an interim bottom. It doesn't mean, again, that they can't go lower, but I think it's a reflection, and you would highlighted this to you, that we see interest rate expectations increasing, but then they peek out and sort of February, March 2023 and then all of a sudden the market expects the central banks will have to lower interest rate. And that peak and the fact that it's moving in and getting closer I think is providing some optimism, hope that the stress on the housing market will abate at some point. So doesn't mean that we are out of the woods. It doesn't mean that someone's trying to sell house, all of a sudden, there will be buyers. It doesn't mean that new buyers aren't stressed by the high interest rates. So yes, activity has slowed down. But if at some point next year or early next year interest rates are coming down, it does open things up. Again, was the state of the consumer, the economy? We don't know. But definitely, there is pressure. >> Alright. Interesting stuff. We'll get back to your questions for Ben Gossack on income growth in just a moment. As always, make sure you do your own research before you make any investment decision. Our minor, of course, you can get in touch with us with those questions at any time. Give a question about investing or what's driving the markets? Our guests are eager to hear what's on your mind, so send us your questions. There are two ways you can get in touch with us. You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just writing your question and hit send. We'll see if one of our guests can get you the answer right here at MoneyTalk Live. not to be too dramatic, but in a one hour and 24 minutes time, we will get the US Federal Reserve coming out of that two day meeting with the rate announcement. Iit is coming close. Anthony Okolie joins us now with a preview of what the markets and what TD is expecting. >> That's right, the countdown begins. The Fed is expected to lift its benchmark interest rate 75 basis points, but there is some predicting 100 basis point increase could happen as well, and we recently spoke with Justin Flowerday, head of public equities at TD Asset Management about his use about the possibility of a 1% hike by the Federal Reserve. >> I think what we seen this week from companies and some of the announcements around some hiring freezes and data points that they have, as well as some of the leading indicators that may support the fact that peak inflation is either here or behind us, I think that gives them the right to do 75 200. >> And that's pretty much the TD contentious view. TD Securities of course expect the Fed to hike interest rate 75 basis points after a similar move in June. Of course, that would lift the target range of the Fed funds rate from two and 1:45 and 1/2%. TD Economics also believe the Fed will keep up its light against inflation with another 75 point basis hike. >> The Federal Reserve trying to bring inflation under control, the economy is cooling down. We are seeing some data points rolling, whether about factory activities of the border, business growth, possibly none more dramatic in terms of a very quick response to the raising mortgage rates in the market, with the view here? We take a look at what's happening in housing? >> TD Economics police of the softening US housing market is not going to deter the Fed from hiking interest rates, and they believe that a strong labour market and a tightening supply, particularly of existing homes in the US, which is still below a balance market, will continue to support housing construction and limit downside risk. And just a quick reminder as well that we will have a reaction to the Fed announcement and I will be speaking with James Marple who is a senior economist at TD Bank shortly after the decision comes out, and you can watch that interview on MoneyTalk go. com and the TD broker platform. >> We will note a little more than an hour's time. Thanks. >> My pleasure. >> MoneyTalk Anthony Okolie. Let's check in all the markets as we quickly approach the market decision out of the Fed. We will start here at home on Bay Street, the TSX hanging in there where it's been forthe session, about 1%. Shopify, yesterday the stock pulled back pretty significantly on news that they were cutting 10% of their workforce. CEO Tobias Lutke basically saying they had made a bet and they made the wrong bet that all of that e-commerce activity that pulled forward during the pandemic would stay. They think now maybe were moderating, more balanced shopping experience out there between what I buy online and what we buy in bricks and mortar stores. Today, even though earnings rates came out disappointing, rates are up. Shopify's up about 7 1/2%. CN Rail did well on its quarterly release. Was able to pass on inflationary pressures with customers and that stock being rewarded as well, hundred and $56 and change, CN Rail of almost 4%. South of the border, as we await the Fed, let's check at the S&P 500, it seems to be gaining some momentum or hanging in there. I get the numbers confused in my head. So many numbers. That's where you're at the top of the show I think, up 1 1/2%. NASDAQ was a little firmer the last time we checked in and indeed, quite a nice rally in the tech names. Up almost 3%. Alphabet, parent company of Google, as Ben and I were discussing earlier in the show, at first blush, these are Mrs. from some of the big tech names. we see some optimism that Alphabet's add business may hold up better than some of its smaller rivals. We've got Alphabet up more than 7% at this hour. We are back now with Ben Gossack from TD Asset Management to take your questions and off the platform. Here's another one. Is this a good time to take a look at the US banks? >> It's never a bad time. > It's never bad time to look around? >> E. I used to cover US banks in a prior life as well. I think what we saw from the US banks in terms of their earnings, the Federal Reserve has raised interest rates. A good portion of the income or earnings that banks receive is about extending loans and then earning a yield on them. And so with higher interest rates, we saw a positive surprise in that interest. So that was the good. Because of growth expectations have been lowered, macroeconomic situations, geopolitics, commercial activity, corporate activity, so the stuff you would expect from the investment banks, all of that sort of fee generating business has slowed, so that weighed on the banks, it will weigh on the Canadian banks when they report. And then the other issue is credit provisioning. So we know the consumer is stressed. Certain corporations are stressed. So now it's about provisioning for those loans and so someone that's been a surprise in terms of the pace. And then for me, the biggest take away and a bit of a negative let's say knock on the US banks is for the longest time, the banks had created a lot of excess capital. So after the great financial crisis, there was all this regulatory headwind. They had to clean up their act. They were also prevented from returning capital to shareholders. They weren't allowed to do buybacks, their dividends were sort of. And all of a sudden, it was opened up and they could easily return one year's worth of earnings back to us, the shareholders. So effectively, you're getting between the buyback and the dividend about a 10% shareholder yield. Amazing. And then this quarter, J.P. Morgan says there's going to be a pause on the growth of the dividend, and they were going to pull back on the share buybacks. Some of it is they treat each bank in the US differently now, so J.P. Morgan, you do this many activities, you are this important to the economy, you need to reserve more than some of your peers and so they try to sort of tailor how much capital banks have to set aside. So it's not consistent like in Canada, every bank has a minimum requirement that they have to retain. So that has impaired certain banks from delivering on that shareholder yield. so for us, we still own our US banks, but we've reduced our weights in them. So some of that is just our views on where the economy is going in the slow down and then also there are better places where we can get a better shareholder yield while the banks are sort of being captain the yield they can return to us the shareholder. >> Interesting take on the banks there. we run out of time for questions. Any final thoughts for the audience about where we might be headed in the fall? I can forgive some people for being at the cottage and not paying attention at this time of year, but soon everybody's eyes are going to be back on this in the fall. >> First of all, they should've invited us to their cottage. >> we should be doing this from the dock. >> That would be my first comment. Second, enjoy the summer. as I always remind people, there's always going to be something that we're going to stress about, so prior to COVID, we were worried about a manufacturing recession, a US China trade war, and we had to deal with COVID, and now we havea crisis in Europe, a crisis in terms of the consumer wallet, and so there will always be something that we stress about and even the stuff we talked about today will be replaced by stuff in the future. The most important thing is that you stick your strategy. And for us again, it's about quality companies and those companies growing their cash flows and returning back to us in terms of dividends and dividend growth. So whatever your strategy is, it's a confusing time. Lots of things to worry about. Just be consistent with your strategy, and that should help you deal with all the variables. >> Ben Gossack, our thanks to him, portfolio manager at TD Asset Management. You want to make sure to stay tuned. Tomorrow, we are going to have Alex…, Portfolio manager at TD Asset Management, gonna take your questions on fixed income. That's going to be the day after the US Federal Reserve, which is only about an hour and 15 minutes away. As all the time we have to the show today. I need to get back to my desk and anxiously await the Fed decision. Thanks for watching and see you tomorrow. [music]