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[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'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, we are going to discuss whether them recent market performance in the state has only been driven by seven stocks, the Magnificent Seven you may have heard them called. TD Asset Management Ben Gossack breaks it down for us.
MoneyTalk Anthony Okolie is going to have a look at the big takeaways from yesterday's fall economic statement out of Ottawa.
In today's WebBroker education segment, Bryan Rogers will show us how you can stay up-to-date on the market news using the WebBroker platform.
So here's how you get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we had to our guest of the day, let's get you an update on the markets.
The Americans, of course, are heading into the Thanksgiving holiday. We will start here at home on Bay Street with the TSX Composite Index.
We have some modest screen on the screen, a bit of a reversal from this morning.
41 points, about 1/5 of a percent. I want to take a look at some of the most traded names.
OPEC discussions has a downward effect on energy space. 4463, got Suncor down about 1.7%.
Crude oil itself was down about 4% at this hour. We are seeing that way on some of the big energy names.
Not a lot of pockets of strength. Saw some of the grocers to the upside, some of the gold miners to the upside. Not anymore. So it's not Barrett going into positive territory, it has lost some modest gains.
At 2012, it's down about 1/3 of a percent.
I saw Manulife crack into positive territory and some grocery names, putting some points on the table. South of the border, let's check in on the S&P 500. Of course, the Americans have the Thanksgiving holiday tomorrow. Half day on Friday. Right now we are up 22 points are about half percent.
Not too bad. Tech heavy NASDAQ, let's see how it's sharing against the broader market. A little bit stronger, a little more than 1/2% to the upside. Nvidia reporting after the closing bell yesterday tripling their sales for the quarter.
But at the same time morning that Washington's restrictions on exports to China could become an issue for them going forward.
The stock is been trading your all-time highs recently. Obviously some money coming off the table today. At 483, it's down about 3%.
And that's your market update.
Some market pundits have put the performance we've seen from the S&P 500 this year down to a small concentration of big tech stocks, the so-called Magnificent Seven. The our guest today says if you dig a bit deeper, a different story emerges.
Joining us and with more is Ben Gossack, managing director and portfolio manager with TD Asset Management. Always great to have you here, always great to have your analysis.
I know this has been a bit of a bee in your bonnet, thorn in his side this year, the Magnificent Seven, it's all about the seven. You have done some digging here.
Tell me what you found.
>> I appreciate our chats. I look forward to it.
I would say several of the episodes I've been on where we've chatted about stuff, that's been something that I keep scratching at.
We talked about market breaths, we talked about areas of the market that have been performing, and yet I still look in my inbox and I see it, SNP seven verses S and P4 93 and I still don't understand what's happening other than narratives can be very strong, we are all very busy people and when someone says if the SNP is up 90% and it's driven by seven stocks and they see the seven stocks are up, I might stop my analysis there because I have more important things to do in my life.
>> But you like to dig deep.
You like to do analysis. You've done some analysis right now and I from what you are sharing with us before, we can definitely see some gains in the S&P 500 that go just be on the seven names.
>> Yes, so I decided to count all the stocks in the S&P 500 that have delivered performance better than 19.3%.
>> Soap beat the broader index.
>> Right. I did my analysis as of last Friday. To the S&P 500 was up 19.3% year to date which is amazing, which is more than what people had expected, and I was expecting that I'd start counting the stocks that beat the market and I would stop at seven. But Greg it, I stopped at 132.
>> 132!
>> There are 132 stocks here today that have outperformed the S&P 500. What's also interesting to me is that I did the composition by sector.
We have talked in other shows about the strengths we have seen in the industrial sector even though we are supposed to be in a recession and how that is odd.
We have talked about the strength of homebuilders and that's consumer discretionary. We thought, well, that's quite odd. I thought rates were so high and no one was buying houses.
So why are those stocks are performing?
Of those 132 stocks, it should come as no surprise that a good proportion of those winners came from technology.
>> Yeah. We have a chart now we can show the audience. The big bars are information technology, the big seven are in there, but even then it's more than seven in that realm.
>> It would be Microsoft and Apple and Nvidia. There are 64 stocks that make up the tax sector in the S&P 500. 36 stocks are outperforming the S&P 500.
You had 50-50 odds on January 1 that if you took a stock from the tech sector that would have outperformed the S&P 500. I would say those are pretty good odds.
It's not just a select group of stocks. We see a performance coming from hardware stocks, services, software and the semis, so it's been broad-based in technology.
And the next set of winners, there are 27 stocks that are in the industrial sector that are also performing the S&P 500 and we've talked about themes such as the CHIPS act, the inflation reduction act, and the other big bucket came from consumer discretionary.
Again, not the typical sectors that you would think would outperform the market when we have been talking about recessional year.
>> Let's get that conversation continuing.
The idea of a recession has been hanging over us. Parts of the market have been performing they wouldn't expect in a recessionary environment. Other parts, if you look to that part again, that you would expect to be safe havens if we actually thought we were in or heading into a recession, have not been performing.
What is with this recession story? Let's start there. What are we supposed to be thinking as this year's almost behind us?
>> Full disclosure, I don't challenge the recession thesis or the recession fear and there are many leading indicators that are telling us we are approaching a recession, in a recession, still recession a calm but it's kind of like when we were living in caves and we saw an enemy and we would run and that's how we as a society lived.
Typically, the game plan has been when someone says, hey, there is a recession around the corner, we run and we hired Edward we hide? We hide in fixed income, and we hide in consumer staples, and we hide in utilities and we hide in REITs.
And we avoid it a certain sort of cyclical dangerous areas.
>> Technology stocks were discretionary, may be industrial.
>> Right.
And so there was nothing wrong with the thesis of, hey, let's hide it.
There is an issue when everyone shares the same thesis. So the question I keep raising is, what do you win when you are the most bearish person in a room of bears? And the only answer I get is, if you are an economist, you go on a book tour. But in investing, I hear be contrarian. I am not saying be contrarian to be contrarian, it's more like looking at the areas that are of performing and starting to ask more questions, likewise this happening? And it goes back to another episode that I know we did where we started talking about the market making a bottom last year in the summer, but if you look at everything on the market Perspective, that was getting distorted and you had to look at things more in an equal way perspective to see that. So it just, again, I don't think we can fight narratives.
But I think we as investors, as stewards of capital, it is our job to question narratives and then look to the facts and the data to back it up and a lot of times, that creates an opportunity.
>> Let's talk about that. I know also that sometimes you have a problem with this arbitrary definition of what we should be gauging our successes as investors, we made another trip around the sun, but with January 1, some of us think that way.
The year is drawing to a close, we are almost into December. With everything that has happened so far this year, defying expectations, do we take any of that into 2024?
>> Yes, do not forecast.
I know we are getting to the end of the year. I'm already starting to see people's projections, this financial institution against the S and P is going to be at 5000 at the end of next year. I just encourage people, that's interesting, that's kind of what we want to hear, but if you follow the forecast for last year, which was earnings cratering, which they did in, equities falling and cratering, which they didn't, yield collapsing which they didn't, the most important thing is that you follow your process and for us, it's always been about secular trends. These trends can last three years, five years, and then we can avoid the sort of demands in terms of tell me what's going to happen in three months or six months.
I'm trying to learn how to play golf, grade, and what I've learned is you can't start thinking of the next holes until you finish the first hole that you are on.
And that's what I like to do when I apply that to investing.
>> Okay.
Interesting stuff, as always, from Ben Gossack. We are going to get to your questions about global stocks for been in just a moment time.
And a reminder the union has us at any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
Shares of Nvidia in the spotlight today.
The semiconductor giant tripling its revenue for its most recent quarter. This of course on booming demand for its artificial intelligence chips. However, Nvidia did sound a note of caution about the plot going forward. It says Washington's export restrictions will affect semi conductor sales to China. You put it all together and the fact that Nvidia has been trading at all-time highs in recent sessions, 484 bucks, you are singable back today, some money coming off the table, down to the tune of about 3%.
Let's stick with the AI theme. There is another plot twist in that OpenAI drama.
Sam Altman now returning as CEO of the firm less than a week after being ousted by the board. Hundreds of OpenAI staff threaten to leave unless Altman was reinstated. Now his return also comes with a shakeup of that board that ousted him last Friday. We are not even getting into the Microsoft stuff over the past couple of days as well. Pretty fascinating story if you want to dig deeper into it. The CEO of computer and printer maker HP says AI will be a growth driver for the PC industry. Chief Executive Enrique Lores says HP personal computers optimized for additional intelligence will start shipping out next year. He anticipates growing demand in that category through 2025 and 2026 as well.
HPF about 3%.
Okay, a quick check in on the main benchmark indices. We will from Bay Street with the TSX Composite Index. We started that a modestly negative and we are now modestly positive. 51 points on the board or about 1/4 of a percent.
South of the border, let's check in on the S&P 500 before the Americans go on the thanks giving back tomorrow. 24 points to the upside, you're up a little more than half a percent.
We are back now with Ben Gossack from TD Asset Management, taking your questions about global stocks. Let's get to them.
First off about the insurance company. Is there any advantage to investing in Canadian insurance companies versus US?
>> I'm glad we did a show on insurance.
First question is on insurance which shows we waste awareness. That was the whole point.
I think there is an opportunity for insurance globally. We see performers in Canada, the US, I've seen it in Australia, Japan and Europe. It's not as if certain banks work in certain jurisdictions were typically fine.
I think for most people, what they are going to have to do is know you have to do the homework.
So there are opportunities. You have to understand what they own on their investment portfolio. You can have to understand the pricing cycle. So they have inflation pressures just like we have inflation pressures individually on our wallet.
So if there is a claim, are they paying out more than they've had to in the past because labour is hard to find, material is more expensive?
So you have to factor that in the end if they are able to raise people's premiums, that's typically when stocks are rewarded.
But then that cycle at some point will Peter out and the prices for those stock prices will adjust.
So I say the answer is there are opportunities globally which makes insurance exciting.
And then it's the job of the individual investor to figure out what are those opportunity sets and what's the risk reward and how long did they think those trends can last for.
>> Talking about trends in insurance.
Thinking about economic cycles. Even if the economy did actually find that recession that we've been warned about next year, I can't cancel my car insurance or my home insurance. They have a certain ability to ride out economic cycles or do they get hit to a certain degree?
>> So yes, they can ride out economic cycles. What you now have to think about climate catastrophes.
Our people repaired for that in terms of the risk model? The other thing would be is you have to worry about the interest rate.
Property and casualty may have short duration portfolios.
Some movements in interest rates, because the central bank is adjusting for the economy, it can have an effect. effect.
effect. effect. because insurance companies have different liabilities in the economy.
>> That follows nicely into the next question. Someone was listening to your last appearance about insurance. They sent us this question.
We are still talking about insurance, which group, life, PNC, reinsurance and insurance brokers within the industry has positive outlook in today's economy?
>> The answer is yes.
[laughing] You know, we have found opportunities in insurance brokers and life insurers, in PNC and even in reinsurers so this is insurance for insurance companies.
But again, you have to go through and do your analysis to figure out which insurance brokers and water, one of the trends, not every life insurer is the same. They have different liabilities given the different policies that they sold to people and then each management team has a different we will call it sort of risk tolerance and how they want to set up their investment portfolio.
So you may have a view on rates and you think that helps a life insurer but what if their investment portfolio is predominantly property and predominantly office?
You might have a different view on the outlook for that insurance company.
And then the same for the reinsurers.
Are they properly set up in diversified?
Do they have exposure to certain areas? We think there is opportunity across the entire let's say subcategories which is exciting, but it also means you have to do your work and you can't own everything.
That's another thing I think is very important for people just because you see a bunch of stocks in a certain sector that are all ticking up , that's amazing on the way out, and just know that at some point things calm down or moderate or normalize and then you don't want to have that now compounded within your portfolio. So that you are too exposed to a certain area.
>> It sounds like there's a lot of homework to do.
This is what you do for work. What about the investor, are they looking at the annual report or what are they looking at to try to get a sense of the true story behind any of these names?
>> I think a really good place to start is the investor relations website for any of these companies.
Read their quarterly, read their annual report.
You look at where they operate geographically. A bay area for us is understanding their combined ratios. So what that means is you look at the ratio of their expenses and their claims and you compare that to the premiums they received and if someone plots that over time, they will see that that can mean revert.
Usually for insurance companies, when we are at the high end of the payout ratio, the combined ratio there is an opportunity because it should mean revert. If it's at the low end, so it's over earning, if it mean revert, then the stock and moderate.
That's a bit of a rule of thumb.
That's an opportunity for the individual investor. I start at the investor relations website, read the newspaper, and then see how stocks are reacting to new headlines.
>> Interesting discussion about the insurance face. You have a viewer now wants to talk about luxury because you talk lecture quite a bit to on the program.
What's your view on luxury companies like LVMH?
Can they keep raising prices for their goods to boost their operating margins?
>> So the answer to can they keep raising prices is yes. Historically, luxury is compounded high single digits and companies can easily raise 5 to 10% and we want more of it because now it's more expensive.
The industry has gone through a period of normalization.
And I also find that people confuse luxury and premium.
Like we say just because it's expensive, we're like, that's luxury, but it might just be premium. There are people that can spend $20,000 a week on ready-to-wear clothes because they had to events or they are going away for the weekend and that's normal for them.
I don't think that's normal for most people.
>> That's not normal for me.
>> But that might be that luxury category, the category you wouldn't even have thought of because like how, wouldn't you just pay down your mortgage? They're like, no, I don't worry about that stuff because we are well off or we have intergenerational wealth.
And there are some people then that save an entire year's, set aside their paycheck week after week to buy one nice item, a nice handbag, maybe a nice pair of shoes, and that's their luxury item. But they are only going to do that once and then we might not see them again for five years.
So yes, they both felt the same thing but there's a frequency difference and there is also an issue of is it attainable or is it aspirational?
We start to see that in terms of how the stock prices have performed.
So we have seen luxury stocks run up last year we seen a lot of them moderate but I do find it interesting, to companies in particular I'd say it's like a Ferrari or may be an Hermes, they manage a waitlist.
They look very different the nurse the category in that they are still near their highs are pushing into high.
It always goes back to research.
But luxury is one of those things where I do have confidence they can compound high single digits. It doesn't mean that your stock will compound high single digits but the industry itself is going to this normalization because people were given a lot of cash during the pandemic and people spread that cash on stuff and a lot of it was on nicer luxury stuff.
>> Okay. As always, make sure you do your own research before making any investment decisions.
will get back to questions for Ben Gossack on global stocks are just moments time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get our educational segment of the day.
If you are looking to stay up-to-date on news that might move the markets, WebBroker has tools which can help.
Joining us as we discussed, Bryan Rogers, senior client education instructor with TD Direct Investing. Always great to see you.
Walk me through these tools.
>> Yeah, so aside from getting your news on MoneyTalk Live when you have a lot of great headlines every day, we do have a lot of a huge database of information that is fed into WebBroker on a daily basis and a news and commentary section.
See you get briefs and other news headlines in a number of MoneyTalk stories additional ones if you miss those. I want to show you a couple of tips on there. I'd say it's usually pretty self-explanatory.
When you're looking at news, we're looking at this kind of stuff every day online, but it's specific to the investment industry which is nice. If we jump over to WebBroker quickly, you're gonna want to go to, we start on this research tab, you go into research and then news and commentary.
That's going to take you to the page but I'm in on the background.
You will notice here that one of the little tips that I want to identify is the little flags on the top of each section.
This on the very top right hand side, that's for this entire page, for the whole news tab. If I click on there and see that it's not the Canadian flag, I know most of the news coming through is being filtered from a Canadian perspective. So if you are doing a lot of Canadian investing on the TSX, it's going to automatically show you some of the top stories. It will show you yesterday there was something related to inflation, we have a few others from previous days. That's in the global news and commentary. Then you can also go to live briefs and if you want to change from the Canadian to the US perspective, you can then click the flag and is going to change. You can do it up at the top here as well.
It's gonna change some of these on the right-hand side, some of the videos that will be relevant in the headlines that will come up automatically.
Then if you want to search, you mentioned today, Nvidia has had its earnings, you type in the symbol and you will notice all of the headlines. This is cool. Sometimes you a lot of stuff because a name is mentioned in like every article that includes any mention of Nvidia. But oftentimes you will get the more important ones up at the top are going to show you can see right here you click on the tab if you want to go directly just under the Nvidia stock but all of the headlines here will include information specifically about Nvidia.
You will see people even on MoneyTalk Live, there are guests here. Other ones from the industry that have videos, things about stocks that are seeing some trends or things they have opinions on.
So a number of great elements available there Greg for all of your news needs.
>> Obviously, the new sometimes hits before the open, after the open, during the trading day. How could you stay updated through WebBroker on the market reaction to all this major news?
>> Yeah, that's a nice thing because we always want to make things as easy as possible, have them come into our inboxes for example, we get emails, alerts, notifications, all kinds of things that we get all the time.
But if it specifically towards investing, you can set that up in WebBroker. If you have a stock that you want to hear what's going on all the time like getting updated frequently or even just general news, I think that's what a lot of people are not aware of, we have news. news. that you may not know intuitively. If you jump into WebBroker here, you can see again that if I'm on the new section, one of the easiest ways to do this is there is another alerts tab.
You can see on the top right hand side you can set alerts. That will take you to the exact same place. To save you some clicks, just go there. You can set up market analysis, news and research.
There is one specifically for stocks but you would have to go to the alerts tab for that.
Here, you go to market gainers and losers.
You can click on here if you want to get updated by specific index, maybe just the TSX or if you want to look at the NASDAQ, you're into technology stocks, it may be price caps up and down, you want to know from an index are there certain stocks, these are the ones that you don't know yet see you don't know what you don't know.
They are going to be sending you information as it's happening. In this other tab is really great as well under the news and research, you can highlight this one. If you want to look at technology your real estate or something like that, you can put in keywords that is gonna send you emails or maybe articles that have those keywords and then lastly down at the bottom and even in this category section, you can filter by categories right here, sectors, economics, etc. One of my favourites is if you know about the reports in WebBroker, we talked with them often times, I would say research and reports.
But if there is one that you like such as TDSI action notes or first call most recommended, they have recommended stocks every day, you can get the report sent to your inbox automatically seek and set up your favourite one and get it set up just like your favourite TV show, great.
>> Great stuff as always. Thanks that.
>> Thank you.
>> Bryan Rogers, senior client education instructor at TD Direct Investing.
And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
Before we get back to questions about global stocks for Ben Gossack, a reminder of how you can get in touch with us.
Do 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 on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
Okay, we are back with Ben Gossack, take your questions about global stocks. This one coming in in the past couple of minutes. I would like your guests thoughts on specific sectors, regions or stocks in the industrial space?
You talked about industrial earlier and their performance in the S&P 500. Let's dig in a little bit.
>> Yeah, I think a big take away for us in industrials was the effect of the market.
So I think in a previous episode, we talked about there is about 75, 77 stocks that make up the industrial sector in the S&P 500, but if you had up the weight of the first 10, you get about 45% of the index.
And if you look at it on a market Basis relative to SNP, it's been directionless.
You can't tell if it's going to outperform, underperform. It could lead you to interpretation that the market is still debating a soft landing or a hard landing or another narrative that took up the oxygen for this year. But if you do drill down, we have seen a lot of sectors tied to let's say clean energy or tied to sort of big megaprojects, these are projects that are billion dollars or more in size.
So again, think of we are building, we are replicating Taiwan Semiconductor in Arizona or in Japan or in Europe, is a lot of concrete. I think concrete stocks in Europe, in the end, our materials but they are tied to industrials and those are still at highest.
We have companies tied to HVAC, so for a building as big as the missions comes from the HVAC system, so just a simple modernization of your HVAC system can lead you to gains and get you to your goals in terms of your carbon emissions.
There are companies that do professional services, a lot of them will end up in the industrial sector.
There is one that does employee uniform rentals.
Also pushing to new highs. It was in our list of 132 a performers.
So industrials have a bunch of stuff that doesn't typically fit in other sectors.
>> It's more than just planes or trains.
>> Yeah, bored. When you're thinking of it, you thinking of multi-industrial, aerospace, suppliers for some of those commercial aerospace companies, may be an engine, maybe aftermarket services, also doing quite well.
And that's what's exciting. There are areas of the market that do well and go beyond the seven stocks.
>> Interesting stuff. Someone wants to ask how is the upcoming US election impacting your investing thesis?
>> Yeah, so look, it's a question that always gets asked.
I think the underlying question always ends up being timing and our belief that if we understand the outcome of a certain election, that somehow we will know what it means for the next four years. I think that's hard.
Again, I built portfolios, I have a philosophy that runs along secular trends.
Now if those people in place. Policies that accelerate, decelerate, change the secular trends, then I care.
But if someone were to say, let's say, Trump or someone like Trump were to win the presidency, is that so bad for the stock market? I mean, the last time, it seemed to have worked out quite well even though people beforehand would have said that that's a disaster. So I would caution people to not try to time massive portfolio decisions based on an outcome that we can't predict.
Nor can we understand the implications for the next four years. This presidency under Biden was supposed to be return to normalcy but it feels like nothing is normal now.
It is interesting, it's going to consume your TV, is going to create narrative. I think the theme of what I'm trying to get at is don't let narratives make you make decisions your portfolio that are suboptimal.
>> Things to think about heading into 2024 into the next election cycle.
We have a question specific to a name here. What is your guests opinion on Brookfield renewable?
>> I will talk about renewable stocks in general and a lot of them have been underperforming.
Many of the contracts that were put in place was at a time when interest rates were low and it's now that we are in a higher interest rate world, some of those contracts that look great and a lot of the stocks of underperform.
A lot of those companies have to spend and so if you have been building up your leverage and now we are in a scenario where the marginal debt that you take output to a situation where your credit rating to get downgraded, the market is not happy about that. Conversely, if you then need to fund the project, your next solution is to dilute existing shareholders.
The market is not happy about that. So I think companies in the renewable space, we have seen in the telco space, we have seen in the pipeline space, we have seen it in the utility space, they are all kind of doing the same thing because they are caught in the same financing situation and so the market is worried about their credit rating. Conversely, the equity market is not so happy at the prospect of being diluted and so they are all caught in a bit of a pickle.
But that's the situation that we are sort of seeing. It doesn't mean that they are bad companies. They are not doing great for the economy or the world or you see the world and say, hey, the world needs more renewable, therefore stock should go up or down, they don't have to do that.
But that's a situation that they are in right now.
>> What could turn that story around?
>> We could see lower rates, let's say the macroenvironment, we bring down lower rates, that could help the situation may be, but the problem is we know they need to spend. We know there's a ton of financing that's gonna be tied into this green energy transition. So yes, I think the answer is we probably need a lower rate situation and that would relieve some of the pressure, but we definitely see that equity owners do not want to be indebted.
>> Will get back to your questions for Ben Gossack on global stocks in just a moment.
As always, make sure you do your own research before making any investment decisions.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Do 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 on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
We of course got an update on the state of finances from the federal government yesterday, the economic statement being released, a fresh look at those finances.
Well, Anthony Okolie has been taking a fresh look at a TD Economics report highlighting some of the key takeaways.
What are we seeing?
>> Thanks very much. We will start with the government's growing fiscal deficit which came in slightly lower than what was expected in the March budget. It came in at about 40 billion but the projected shortfalls for the next four fiscal years are all higher as the index chart shows.
Yesterday, the minister also announced a new fiscal anchor, which he argued will preserve Canada's AAA credit rating and the fiscal anchor now aims to keep the deficit to GDP ratio to be no greater than 1%.
Meanwhile, normal GDP growth expectations were upgraded to 2% in 2023 while the 2024 was revised down from 3.6% to 2.4% as higher interest costs are said to be a significant headwind on government's medium-term fiscal plan. Now, as a result, no surprise in terms of new government initiatives, with a total of about $16 billion of new spending measures announced and we will start with housing where the number of actions were initiated to help jumpstart the housing supply in Canada.
The big one of course was the $15 billion in new loan funding to build more than 30,000 new homes here in Canada.
There is also funding for nonprofit, co-op and public housing buildings of about 7000 homes by 2028.
Now keep in mind, much of the spending is deferred in the budget until after the fiscal 2024, 2025 year period there is also funding support for growth of the clean economy, so the clean economic sector. The item was industrial supports for clean technology investments. That's going to cost the government to the tune of $8.5 billion over the 20 2320 2014 through two to any 2829 fiscal year. Those deals include the Stellantis LG energy solutions EV battery plant as well as the Volkswagen EV battery cell plant.
Those two plants have a combined subsidy of about $20 billion.
In addition to that, we sought $9 billion to expand the clean investment related tax credits. This is kind of an extension of what we saw in the large budget where the government already provided about $21 billion in net new spending to support the clean energy transition over five years with most of the key initiatives providing billions of dollars more beyond the budgets 2028 forecast horizon.
That includes funding for investment tax credits for things like clean electricity, clean technology and clean hydrogen, just to name a few. Overall, the new commitments in the budget coupled with a lower-than-expected price paid by TD Economics is warned that even a modest budget means a somewhat less dry powder for the government to combat potential economic slowdown in the future.
>> We have seen aggressive rate hikes trying to tame inflation and slow the economy. The economy is slowing.
If it slows even more next year, what happens to the fiscal picture?
>> TD Economics notes that the government's economic forecast is reflect a soft landing where the economy does avoid a recession. But there are signs you mentioned that the Canadian economy has slowed significantly since the release of the 2023 budget and this trend looks set to continue as the elevated household debt limits consumer spending going forward.
Now TD Economics anticipates this will result in job losses in early 2024 with the economy flirting with a recession.
From this standpoint, TD Economics believes that there is a risk that the government's finances could be in for another head and showed the economy falter more than expected, the government's fiscal position could be tested.
>> Great breakdown. Thanks for that.
>> My pleasure.
>> MoneyTalk Anthony and he. We will be discussing with those changes mean for personal finances of Canadians with Nicole Ewing tonight. You can tune in on BNN Bloomberg tonight.
Now for an update on the markets.
We are having a look at TD's Advanced Dashboard, platform designed for active traders available through TD Direct Investing. This is the heat map. Let's green through the TSX 60 and see what's happening out there. Not a big surprise with crude oil pulling back to the tune of about 3% right now.
OPEC delaying its weekend meeting, was going on there? A bit of intrigue weighing on energy names. CNQ, Suncor, Cenovus as well. But we flipped into positive territory modestly on the TSX so something must be doing some lifting force. Maybe it's Shopify are some of the financials there, notably Manulife insurance or maybe even some of the groceries. Now south of the border, the Americans are getting ready to go on the Thanksgiving holiday tomorrow. Right now, we've got some movement. Interestingly, Nvidia pulling back, warning about export curbs to China but some other chipmakers like AMD and Intel putting points on the table. You can get more information about Advanced Dashboard by visiting TD.com/Advanced Dashboard.
We are back now with Ben Gossack from TD Asset Management. More questions coming in fast and furious. I've owned Diageo for a couple of decades with very little to show for it. Our top and alcohol brands the same kinds of stocks is the high-end autos and other price you're exposed to companies? Is consolation a better choice?
We can give specific advice on the program but where does alcohol fit on the spectrum of luxury?
>> Typically alcohol fits in consumer staples but when you do attend conferences, you talk to analysts. It's very possible that the luxury analyst will cover a company like a Diageo. The issue that many of these brands are facing right now has nothing to do with whether they make good whiskey or good champagne.
What we are seeing right now is we have seen, people have seen companies like Eli Lilly and Novo Nordisk with their drugs that have been able to… >> They are getting caught up on this not only with the snacks and chips but the alcohol.
>> Yeah, so some of the side effects of more and more people in these drugs we are learning more about the side effects but some of the side effects have been exactly to your point, we want less salty snacks, less fizzy drinks, but we've also noted a reduction in alcohol.
Now, you could say, nothing has actually happened because the penetration of the population for people on these obesity drugs might be 1%.
But the markets love to look forward and have these debates and so we are seeing medical device companies in a sort of existential crisis. So much of it was dependent on let's say people's weight or chronic issues tied to obesity, and so we have seen the stock prices challenged. We have seen consumer Staples socks, again, anything tied to sugar, carbohydrates, and we see discretionary stocks also casual restaurants and also alcohol socks, so it could be a Brown horn in the US, could be a constellation, could be Diageo, they are all being impacted. It's very possible that these stocks have overreacted to the fear. The problem is we need more time to tell us but we know there is a sensational demand for Nvidia and GPU chips right now, it like that there is a sensational demand for these obesity drugs and so the market is trying to figure out what does the world look like? Sometimes the market overreacts, which it typically does, but that is the new crisis that anyone investing in let's call it alcohol type stocks is going to face regardless of which one you own. There is a broader macro issue affecting everybody.
>> Always love the conversation, always fascinating insights. Look forward to the next one.
>> Absolutely. Can't wait to be back.
>> Our thanks to Ben Gossack, managing director and portfolio manager at TD Asset Management. As always, make sure you do your own research before making any investment decisions. stay tuned for tomorrow show. Yes, the US markets will be closed for the thanks giving holiday but we will be back with highlights from some of our recent personal finance coverage including insights on the tax implications of charitable giving, new trust reporting rules and how you can help your elderly parents without risking your own financial security. That's all the time we have to show today. Thanks for watching and we will see you tomorrow.
[music]
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, we are going to discuss whether them recent market performance in the state has only been driven by seven stocks, the Magnificent Seven you may have heard them called. TD Asset Management Ben Gossack breaks it down for us.
MoneyTalk Anthony Okolie is going to have a look at the big takeaways from yesterday's fall economic statement out of Ottawa.
In today's WebBroker education segment, Bryan Rogers will show us how you can stay up-to-date on the market news using the WebBroker platform.
So here's how you get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we had to our guest of the day, let's get you an update on the markets.
The Americans, of course, are heading into the Thanksgiving holiday. We will start here at home on Bay Street with the TSX Composite Index.
We have some modest screen on the screen, a bit of a reversal from this morning.
41 points, about 1/5 of a percent. I want to take a look at some of the most traded names.
OPEC discussions has a downward effect on energy space. 4463, got Suncor down about 1.7%.
Crude oil itself was down about 4% at this hour. We are seeing that way on some of the big energy names.
Not a lot of pockets of strength. Saw some of the grocers to the upside, some of the gold miners to the upside. Not anymore. So it's not Barrett going into positive territory, it has lost some modest gains.
At 2012, it's down about 1/3 of a percent.
I saw Manulife crack into positive territory and some grocery names, putting some points on the table. South of the border, let's check in on the S&P 500. Of course, the Americans have the Thanksgiving holiday tomorrow. Half day on Friday. Right now we are up 22 points are about half percent.
Not too bad. Tech heavy NASDAQ, let's see how it's sharing against the broader market. A little bit stronger, a little more than 1/2% to the upside. Nvidia reporting after the closing bell yesterday tripling their sales for the quarter.
But at the same time morning that Washington's restrictions on exports to China could become an issue for them going forward.
The stock is been trading your all-time highs recently. Obviously some money coming off the table today. At 483, it's down about 3%.
And that's your market update.
Some market pundits have put the performance we've seen from the S&P 500 this year down to a small concentration of big tech stocks, the so-called Magnificent Seven. The our guest today says if you dig a bit deeper, a different story emerges.
Joining us and with more is Ben Gossack, managing director and portfolio manager with TD Asset Management. Always great to have you here, always great to have your analysis.
I know this has been a bit of a bee in your bonnet, thorn in his side this year, the Magnificent Seven, it's all about the seven. You have done some digging here.
Tell me what you found.
>> I appreciate our chats. I look forward to it.
I would say several of the episodes I've been on where we've chatted about stuff, that's been something that I keep scratching at.
We talked about market breaths, we talked about areas of the market that have been performing, and yet I still look in my inbox and I see it, SNP seven verses S and P4 93 and I still don't understand what's happening other than narratives can be very strong, we are all very busy people and when someone says if the SNP is up 90% and it's driven by seven stocks and they see the seven stocks are up, I might stop my analysis there because I have more important things to do in my life.
>> But you like to dig deep.
You like to do analysis. You've done some analysis right now and I from what you are sharing with us before, we can definitely see some gains in the S&P 500 that go just be on the seven names.
>> Yes, so I decided to count all the stocks in the S&P 500 that have delivered performance better than 19.3%.
>> Soap beat the broader index.
>> Right. I did my analysis as of last Friday. To the S&P 500 was up 19.3% year to date which is amazing, which is more than what people had expected, and I was expecting that I'd start counting the stocks that beat the market and I would stop at seven. But Greg it, I stopped at 132.
>> 132!
>> There are 132 stocks here today that have outperformed the S&P 500. What's also interesting to me is that I did the composition by sector.
We have talked in other shows about the strengths we have seen in the industrial sector even though we are supposed to be in a recession and how that is odd.
We have talked about the strength of homebuilders and that's consumer discretionary. We thought, well, that's quite odd. I thought rates were so high and no one was buying houses.
So why are those stocks are performing?
Of those 132 stocks, it should come as no surprise that a good proportion of those winners came from technology.
>> Yeah. We have a chart now we can show the audience. The big bars are information technology, the big seven are in there, but even then it's more than seven in that realm.
>> It would be Microsoft and Apple and Nvidia. There are 64 stocks that make up the tax sector in the S&P 500. 36 stocks are outperforming the S&P 500.
You had 50-50 odds on January 1 that if you took a stock from the tech sector that would have outperformed the S&P 500. I would say those are pretty good odds.
It's not just a select group of stocks. We see a performance coming from hardware stocks, services, software and the semis, so it's been broad-based in technology.
And the next set of winners, there are 27 stocks that are in the industrial sector that are also performing the S&P 500 and we've talked about themes such as the CHIPS act, the inflation reduction act, and the other big bucket came from consumer discretionary.
Again, not the typical sectors that you would think would outperform the market when we have been talking about recessional year.
>> Let's get that conversation continuing.
The idea of a recession has been hanging over us. Parts of the market have been performing they wouldn't expect in a recessionary environment. Other parts, if you look to that part again, that you would expect to be safe havens if we actually thought we were in or heading into a recession, have not been performing.
What is with this recession story? Let's start there. What are we supposed to be thinking as this year's almost behind us?
>> Full disclosure, I don't challenge the recession thesis or the recession fear and there are many leading indicators that are telling us we are approaching a recession, in a recession, still recession a calm but it's kind of like when we were living in caves and we saw an enemy and we would run and that's how we as a society lived.
Typically, the game plan has been when someone says, hey, there is a recession around the corner, we run and we hired Edward we hide? We hide in fixed income, and we hide in consumer staples, and we hide in utilities and we hide in REITs.
And we avoid it a certain sort of cyclical dangerous areas.
>> Technology stocks were discretionary, may be industrial.
>> Right.
And so there was nothing wrong with the thesis of, hey, let's hide it.
There is an issue when everyone shares the same thesis. So the question I keep raising is, what do you win when you are the most bearish person in a room of bears? And the only answer I get is, if you are an economist, you go on a book tour. But in investing, I hear be contrarian. I am not saying be contrarian to be contrarian, it's more like looking at the areas that are of performing and starting to ask more questions, likewise this happening? And it goes back to another episode that I know we did where we started talking about the market making a bottom last year in the summer, but if you look at everything on the market Perspective, that was getting distorted and you had to look at things more in an equal way perspective to see that. So it just, again, I don't think we can fight narratives.
But I think we as investors, as stewards of capital, it is our job to question narratives and then look to the facts and the data to back it up and a lot of times, that creates an opportunity.
>> Let's talk about that. I know also that sometimes you have a problem with this arbitrary definition of what we should be gauging our successes as investors, we made another trip around the sun, but with January 1, some of us think that way.
The year is drawing to a close, we are almost into December. With everything that has happened so far this year, defying expectations, do we take any of that into 2024?
>> Yes, do not forecast.
I know we are getting to the end of the year. I'm already starting to see people's projections, this financial institution against the S and P is going to be at 5000 at the end of next year. I just encourage people, that's interesting, that's kind of what we want to hear, but if you follow the forecast for last year, which was earnings cratering, which they did in, equities falling and cratering, which they didn't, yield collapsing which they didn't, the most important thing is that you follow your process and for us, it's always been about secular trends. These trends can last three years, five years, and then we can avoid the sort of demands in terms of tell me what's going to happen in three months or six months.
I'm trying to learn how to play golf, grade, and what I've learned is you can't start thinking of the next holes until you finish the first hole that you are on.
And that's what I like to do when I apply that to investing.
>> Okay.
Interesting stuff, as always, from Ben Gossack. We are going to get to your questions about global stocks for been in just a moment time.
And a reminder the union has us at any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
Shares of Nvidia in the spotlight today.
The semiconductor giant tripling its revenue for its most recent quarter. This of course on booming demand for its artificial intelligence chips. However, Nvidia did sound a note of caution about the plot going forward. It says Washington's export restrictions will affect semi conductor sales to China. You put it all together and the fact that Nvidia has been trading at all-time highs in recent sessions, 484 bucks, you are singable back today, some money coming off the table, down to the tune of about 3%.
Let's stick with the AI theme. There is another plot twist in that OpenAI drama.
Sam Altman now returning as CEO of the firm less than a week after being ousted by the board. Hundreds of OpenAI staff threaten to leave unless Altman was reinstated. Now his return also comes with a shakeup of that board that ousted him last Friday. We are not even getting into the Microsoft stuff over the past couple of days as well. Pretty fascinating story if you want to dig deeper into it. The CEO of computer and printer maker HP says AI will be a growth driver for the PC industry. Chief Executive Enrique Lores says HP personal computers optimized for additional intelligence will start shipping out next year. He anticipates growing demand in that category through 2025 and 2026 as well.
HPF about 3%.
Okay, a quick check in on the main benchmark indices. We will from Bay Street with the TSX Composite Index. We started that a modestly negative and we are now modestly positive. 51 points on the board or about 1/4 of a percent.
South of the border, let's check in on the S&P 500 before the Americans go on the thanks giving back tomorrow. 24 points to the upside, you're up a little more than half a percent.
We are back now with Ben Gossack from TD Asset Management, taking your questions about global stocks. Let's get to them.
First off about the insurance company. Is there any advantage to investing in Canadian insurance companies versus US?
>> I'm glad we did a show on insurance.
First question is on insurance which shows we waste awareness. That was the whole point.
I think there is an opportunity for insurance globally. We see performers in Canada, the US, I've seen it in Australia, Japan and Europe. It's not as if certain banks work in certain jurisdictions were typically fine.
I think for most people, what they are going to have to do is know you have to do the homework.
So there are opportunities. You have to understand what they own on their investment portfolio. You can have to understand the pricing cycle. So they have inflation pressures just like we have inflation pressures individually on our wallet.
So if there is a claim, are they paying out more than they've had to in the past because labour is hard to find, material is more expensive?
So you have to factor that in the end if they are able to raise people's premiums, that's typically when stocks are rewarded.
But then that cycle at some point will Peter out and the prices for those stock prices will adjust.
So I say the answer is there are opportunities globally which makes insurance exciting.
And then it's the job of the individual investor to figure out what are those opportunity sets and what's the risk reward and how long did they think those trends can last for.
>> Talking about trends in insurance.
Thinking about economic cycles. Even if the economy did actually find that recession that we've been warned about next year, I can't cancel my car insurance or my home insurance. They have a certain ability to ride out economic cycles or do they get hit to a certain degree?
>> So yes, they can ride out economic cycles. What you now have to think about climate catastrophes.
Our people repaired for that in terms of the risk model? The other thing would be is you have to worry about the interest rate.
Property and casualty may have short duration portfolios.
Some movements in interest rates, because the central bank is adjusting for the economy, it can have an effect. effect.
effect. effect. because insurance companies have different liabilities in the economy.
>> That follows nicely into the next question. Someone was listening to your last appearance about insurance. They sent us this question.
We are still talking about insurance, which group, life, PNC, reinsurance and insurance brokers within the industry has positive outlook in today's economy?
>> The answer is yes.
[laughing] You know, we have found opportunities in insurance brokers and life insurers, in PNC and even in reinsurers so this is insurance for insurance companies.
But again, you have to go through and do your analysis to figure out which insurance brokers and water, one of the trends, not every life insurer is the same. They have different liabilities given the different policies that they sold to people and then each management team has a different we will call it sort of risk tolerance and how they want to set up their investment portfolio.
So you may have a view on rates and you think that helps a life insurer but what if their investment portfolio is predominantly property and predominantly office?
You might have a different view on the outlook for that insurance company.
And then the same for the reinsurers.
Are they properly set up in diversified?
Do they have exposure to certain areas? We think there is opportunity across the entire let's say subcategories which is exciting, but it also means you have to do your work and you can't own everything.
That's another thing I think is very important for people just because you see a bunch of stocks in a certain sector that are all ticking up , that's amazing on the way out, and just know that at some point things calm down or moderate or normalize and then you don't want to have that now compounded within your portfolio. So that you are too exposed to a certain area.
>> It sounds like there's a lot of homework to do.
This is what you do for work. What about the investor, are they looking at the annual report or what are they looking at to try to get a sense of the true story behind any of these names?
>> I think a really good place to start is the investor relations website for any of these companies.
Read their quarterly, read their annual report.
You look at where they operate geographically. A bay area for us is understanding their combined ratios. So what that means is you look at the ratio of their expenses and their claims and you compare that to the premiums they received and if someone plots that over time, they will see that that can mean revert.
Usually for insurance companies, when we are at the high end of the payout ratio, the combined ratio there is an opportunity because it should mean revert. If it's at the low end, so it's over earning, if it mean revert, then the stock and moderate.
That's a bit of a rule of thumb.
That's an opportunity for the individual investor. I start at the investor relations website, read the newspaper, and then see how stocks are reacting to new headlines.
>> Interesting discussion about the insurance face. You have a viewer now wants to talk about luxury because you talk lecture quite a bit to on the program.
What's your view on luxury companies like LVMH?
Can they keep raising prices for their goods to boost their operating margins?
>> So the answer to can they keep raising prices is yes. Historically, luxury is compounded high single digits and companies can easily raise 5 to 10% and we want more of it because now it's more expensive.
The industry has gone through a period of normalization.
And I also find that people confuse luxury and premium.
Like we say just because it's expensive, we're like, that's luxury, but it might just be premium. There are people that can spend $20,000 a week on ready-to-wear clothes because they had to events or they are going away for the weekend and that's normal for them.
I don't think that's normal for most people.
>> That's not normal for me.
>> But that might be that luxury category, the category you wouldn't even have thought of because like how, wouldn't you just pay down your mortgage? They're like, no, I don't worry about that stuff because we are well off or we have intergenerational wealth.
And there are some people then that save an entire year's, set aside their paycheck week after week to buy one nice item, a nice handbag, maybe a nice pair of shoes, and that's their luxury item. But they are only going to do that once and then we might not see them again for five years.
So yes, they both felt the same thing but there's a frequency difference and there is also an issue of is it attainable or is it aspirational?
We start to see that in terms of how the stock prices have performed.
So we have seen luxury stocks run up last year we seen a lot of them moderate but I do find it interesting, to companies in particular I'd say it's like a Ferrari or may be an Hermes, they manage a waitlist.
They look very different the nurse the category in that they are still near their highs are pushing into high.
It always goes back to research.
But luxury is one of those things where I do have confidence they can compound high single digits. It doesn't mean that your stock will compound high single digits but the industry itself is going to this normalization because people were given a lot of cash during the pandemic and people spread that cash on stuff and a lot of it was on nicer luxury stuff.
>> Okay. As always, make sure you do your own research before making any investment decisions.
will get back to questions for Ben Gossack on global stocks are just moments time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get our educational segment of the day.
If you are looking to stay up-to-date on news that might move the markets, WebBroker has tools which can help.
Joining us as we discussed, Bryan Rogers, senior client education instructor with TD Direct Investing. Always great to see you.
Walk me through these tools.
>> Yeah, so aside from getting your news on MoneyTalk Live when you have a lot of great headlines every day, we do have a lot of a huge database of information that is fed into WebBroker on a daily basis and a news and commentary section.
See you get briefs and other news headlines in a number of MoneyTalk stories additional ones if you miss those. I want to show you a couple of tips on there. I'd say it's usually pretty self-explanatory.
When you're looking at news, we're looking at this kind of stuff every day online, but it's specific to the investment industry which is nice. If we jump over to WebBroker quickly, you're gonna want to go to, we start on this research tab, you go into research and then news and commentary.
That's going to take you to the page but I'm in on the background.
You will notice here that one of the little tips that I want to identify is the little flags on the top of each section.
This on the very top right hand side, that's for this entire page, for the whole news tab. If I click on there and see that it's not the Canadian flag, I know most of the news coming through is being filtered from a Canadian perspective. So if you are doing a lot of Canadian investing on the TSX, it's going to automatically show you some of the top stories. It will show you yesterday there was something related to inflation, we have a few others from previous days. That's in the global news and commentary. Then you can also go to live briefs and if you want to change from the Canadian to the US perspective, you can then click the flag and is going to change. You can do it up at the top here as well.
It's gonna change some of these on the right-hand side, some of the videos that will be relevant in the headlines that will come up automatically.
Then if you want to search, you mentioned today, Nvidia has had its earnings, you type in the symbol and you will notice all of the headlines. This is cool. Sometimes you a lot of stuff because a name is mentioned in like every article that includes any mention of Nvidia. But oftentimes you will get the more important ones up at the top are going to show you can see right here you click on the tab if you want to go directly just under the Nvidia stock but all of the headlines here will include information specifically about Nvidia.
You will see people even on MoneyTalk Live, there are guests here. Other ones from the industry that have videos, things about stocks that are seeing some trends or things they have opinions on.
So a number of great elements available there Greg for all of your news needs.
>> Obviously, the new sometimes hits before the open, after the open, during the trading day. How could you stay updated through WebBroker on the market reaction to all this major news?
>> Yeah, that's a nice thing because we always want to make things as easy as possible, have them come into our inboxes for example, we get emails, alerts, notifications, all kinds of things that we get all the time.
But if it specifically towards investing, you can set that up in WebBroker. If you have a stock that you want to hear what's going on all the time like getting updated frequently or even just general news, I think that's what a lot of people are not aware of, we have news. news. that you may not know intuitively. If you jump into WebBroker here, you can see again that if I'm on the new section, one of the easiest ways to do this is there is another alerts tab.
You can see on the top right hand side you can set alerts. That will take you to the exact same place. To save you some clicks, just go there. You can set up market analysis, news and research.
There is one specifically for stocks but you would have to go to the alerts tab for that.
Here, you go to market gainers and losers.
You can click on here if you want to get updated by specific index, maybe just the TSX or if you want to look at the NASDAQ, you're into technology stocks, it may be price caps up and down, you want to know from an index are there certain stocks, these are the ones that you don't know yet see you don't know what you don't know.
They are going to be sending you information as it's happening. In this other tab is really great as well under the news and research, you can highlight this one. If you want to look at technology your real estate or something like that, you can put in keywords that is gonna send you emails or maybe articles that have those keywords and then lastly down at the bottom and even in this category section, you can filter by categories right here, sectors, economics, etc. One of my favourites is if you know about the reports in WebBroker, we talked with them often times, I would say research and reports.
But if there is one that you like such as TDSI action notes or first call most recommended, they have recommended stocks every day, you can get the report sent to your inbox automatically seek and set up your favourite one and get it set up just like your favourite TV show, great.
>> Great stuff as always. Thanks that.
>> Thank you.
>> Bryan Rogers, senior client education instructor at TD Direct Investing.
And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
Before we get back to questions about global stocks for Ben Gossack, a reminder of how you can get in touch with us.
Do 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 on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
Okay, we are back with Ben Gossack, take your questions about global stocks. This one coming in in the past couple of minutes. I would like your guests thoughts on specific sectors, regions or stocks in the industrial space?
You talked about industrial earlier and their performance in the S&P 500. Let's dig in a little bit.
>> Yeah, I think a big take away for us in industrials was the effect of the market.
So I think in a previous episode, we talked about there is about 75, 77 stocks that make up the industrial sector in the S&P 500, but if you had up the weight of the first 10, you get about 45% of the index.
And if you look at it on a market Basis relative to SNP, it's been directionless.
You can't tell if it's going to outperform, underperform. It could lead you to interpretation that the market is still debating a soft landing or a hard landing or another narrative that took up the oxygen for this year. But if you do drill down, we have seen a lot of sectors tied to let's say clean energy or tied to sort of big megaprojects, these are projects that are billion dollars or more in size.
So again, think of we are building, we are replicating Taiwan Semiconductor in Arizona or in Japan or in Europe, is a lot of concrete. I think concrete stocks in Europe, in the end, our materials but they are tied to industrials and those are still at highest.
We have companies tied to HVAC, so for a building as big as the missions comes from the HVAC system, so just a simple modernization of your HVAC system can lead you to gains and get you to your goals in terms of your carbon emissions.
There are companies that do professional services, a lot of them will end up in the industrial sector.
There is one that does employee uniform rentals.
Also pushing to new highs. It was in our list of 132 a performers.
So industrials have a bunch of stuff that doesn't typically fit in other sectors.
>> It's more than just planes or trains.
>> Yeah, bored. When you're thinking of it, you thinking of multi-industrial, aerospace, suppliers for some of those commercial aerospace companies, may be an engine, maybe aftermarket services, also doing quite well.
And that's what's exciting. There are areas of the market that do well and go beyond the seven stocks.
>> Interesting stuff. Someone wants to ask how is the upcoming US election impacting your investing thesis?
>> Yeah, so look, it's a question that always gets asked.
I think the underlying question always ends up being timing and our belief that if we understand the outcome of a certain election, that somehow we will know what it means for the next four years. I think that's hard.
Again, I built portfolios, I have a philosophy that runs along secular trends.
Now if those people in place. Policies that accelerate, decelerate, change the secular trends, then I care.
But if someone were to say, let's say, Trump or someone like Trump were to win the presidency, is that so bad for the stock market? I mean, the last time, it seemed to have worked out quite well even though people beforehand would have said that that's a disaster. So I would caution people to not try to time massive portfolio decisions based on an outcome that we can't predict.
Nor can we understand the implications for the next four years. This presidency under Biden was supposed to be return to normalcy but it feels like nothing is normal now.
It is interesting, it's going to consume your TV, is going to create narrative. I think the theme of what I'm trying to get at is don't let narratives make you make decisions your portfolio that are suboptimal.
>> Things to think about heading into 2024 into the next election cycle.
We have a question specific to a name here. What is your guests opinion on Brookfield renewable?
>> I will talk about renewable stocks in general and a lot of them have been underperforming.
Many of the contracts that were put in place was at a time when interest rates were low and it's now that we are in a higher interest rate world, some of those contracts that look great and a lot of the stocks of underperform.
A lot of those companies have to spend and so if you have been building up your leverage and now we are in a scenario where the marginal debt that you take output to a situation where your credit rating to get downgraded, the market is not happy about that. Conversely, if you then need to fund the project, your next solution is to dilute existing shareholders.
The market is not happy about that. So I think companies in the renewable space, we have seen in the telco space, we have seen in the pipeline space, we have seen it in the utility space, they are all kind of doing the same thing because they are caught in the same financing situation and so the market is worried about their credit rating. Conversely, the equity market is not so happy at the prospect of being diluted and so they are all caught in a bit of a pickle.
But that's the situation that we are sort of seeing. It doesn't mean that they are bad companies. They are not doing great for the economy or the world or you see the world and say, hey, the world needs more renewable, therefore stock should go up or down, they don't have to do that.
But that's a situation that they are in right now.
>> What could turn that story around?
>> We could see lower rates, let's say the macroenvironment, we bring down lower rates, that could help the situation may be, but the problem is we know they need to spend. We know there's a ton of financing that's gonna be tied into this green energy transition. So yes, I think the answer is we probably need a lower rate situation and that would relieve some of the pressure, but we definitely see that equity owners do not want to be indebted.
>> Will get back to your questions for Ben Gossack on global stocks in just a moment.
As always, make sure you do your own research before making any investment decisions.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
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We of course got an update on the state of finances from the federal government yesterday, the economic statement being released, a fresh look at those finances.
Well, Anthony Okolie has been taking a fresh look at a TD Economics report highlighting some of the key takeaways.
What are we seeing?
>> Thanks very much. We will start with the government's growing fiscal deficit which came in slightly lower than what was expected in the March budget. It came in at about 40 billion but the projected shortfalls for the next four fiscal years are all higher as the index chart shows.
Yesterday, the minister also announced a new fiscal anchor, which he argued will preserve Canada's AAA credit rating and the fiscal anchor now aims to keep the deficit to GDP ratio to be no greater than 1%.
Meanwhile, normal GDP growth expectations were upgraded to 2% in 2023 while the 2024 was revised down from 3.6% to 2.4% as higher interest costs are said to be a significant headwind on government's medium-term fiscal plan. Now, as a result, no surprise in terms of new government initiatives, with a total of about $16 billion of new spending measures announced and we will start with housing where the number of actions were initiated to help jumpstart the housing supply in Canada.
The big one of course was the $15 billion in new loan funding to build more than 30,000 new homes here in Canada.
There is also funding for nonprofit, co-op and public housing buildings of about 7000 homes by 2028.
Now keep in mind, much of the spending is deferred in the budget until after the fiscal 2024, 2025 year period there is also funding support for growth of the clean economy, so the clean economic sector. The item was industrial supports for clean technology investments. That's going to cost the government to the tune of $8.5 billion over the 20 2320 2014 through two to any 2829 fiscal year. Those deals include the Stellantis LG energy solutions EV battery plant as well as the Volkswagen EV battery cell plant.
Those two plants have a combined subsidy of about $20 billion.
In addition to that, we sought $9 billion to expand the clean investment related tax credits. This is kind of an extension of what we saw in the large budget where the government already provided about $21 billion in net new spending to support the clean energy transition over five years with most of the key initiatives providing billions of dollars more beyond the budgets 2028 forecast horizon.
That includes funding for investment tax credits for things like clean electricity, clean technology and clean hydrogen, just to name a few. Overall, the new commitments in the budget coupled with a lower-than-expected price paid by TD Economics is warned that even a modest budget means a somewhat less dry powder for the government to combat potential economic slowdown in the future.
>> We have seen aggressive rate hikes trying to tame inflation and slow the economy. The economy is slowing.
If it slows even more next year, what happens to the fiscal picture?
>> TD Economics notes that the government's economic forecast is reflect a soft landing where the economy does avoid a recession. But there are signs you mentioned that the Canadian economy has slowed significantly since the release of the 2023 budget and this trend looks set to continue as the elevated household debt limits consumer spending going forward.
Now TD Economics anticipates this will result in job losses in early 2024 with the economy flirting with a recession.
From this standpoint, TD Economics believes that there is a risk that the government's finances could be in for another head and showed the economy falter more than expected, the government's fiscal position could be tested.
>> Great breakdown. Thanks for that.
>> My pleasure.
>> MoneyTalk Anthony and he. We will be discussing with those changes mean for personal finances of Canadians with Nicole Ewing tonight. You can tune in on BNN Bloomberg tonight.
Now for an update on the markets.
We are having a look at TD's Advanced Dashboard, platform designed for active traders available through TD Direct Investing. This is the heat map. Let's green through the TSX 60 and see what's happening out there. Not a big surprise with crude oil pulling back to the tune of about 3% right now.
OPEC delaying its weekend meeting, was going on there? A bit of intrigue weighing on energy names. CNQ, Suncor, Cenovus as well. But we flipped into positive territory modestly on the TSX so something must be doing some lifting force. Maybe it's Shopify are some of the financials there, notably Manulife insurance or maybe even some of the groceries. Now south of the border, the Americans are getting ready to go on the Thanksgiving holiday tomorrow. Right now, we've got some movement. Interestingly, Nvidia pulling back, warning about export curbs to China but some other chipmakers like AMD and Intel putting points on the table. You can get more information about Advanced Dashboard by visiting TD.com/Advanced Dashboard.
We are back now with Ben Gossack from TD Asset Management. More questions coming in fast and furious. I've owned Diageo for a couple of decades with very little to show for it. Our top and alcohol brands the same kinds of stocks is the high-end autos and other price you're exposed to companies? Is consolation a better choice?
We can give specific advice on the program but where does alcohol fit on the spectrum of luxury?
>> Typically alcohol fits in consumer staples but when you do attend conferences, you talk to analysts. It's very possible that the luxury analyst will cover a company like a Diageo. The issue that many of these brands are facing right now has nothing to do with whether they make good whiskey or good champagne.
What we are seeing right now is we have seen, people have seen companies like Eli Lilly and Novo Nordisk with their drugs that have been able to… >> They are getting caught up on this not only with the snacks and chips but the alcohol.
>> Yeah, so some of the side effects of more and more people in these drugs we are learning more about the side effects but some of the side effects have been exactly to your point, we want less salty snacks, less fizzy drinks, but we've also noted a reduction in alcohol.
Now, you could say, nothing has actually happened because the penetration of the population for people on these obesity drugs might be 1%.
But the markets love to look forward and have these debates and so we are seeing medical device companies in a sort of existential crisis. So much of it was dependent on let's say people's weight or chronic issues tied to obesity, and so we have seen the stock prices challenged. We have seen consumer Staples socks, again, anything tied to sugar, carbohydrates, and we see discretionary stocks also casual restaurants and also alcohol socks, so it could be a Brown horn in the US, could be a constellation, could be Diageo, they are all being impacted. It's very possible that these stocks have overreacted to the fear. The problem is we need more time to tell us but we know there is a sensational demand for Nvidia and GPU chips right now, it like that there is a sensational demand for these obesity drugs and so the market is trying to figure out what does the world look like? Sometimes the market overreacts, which it typically does, but that is the new crisis that anyone investing in let's call it alcohol type stocks is going to face regardless of which one you own. There is a broader macro issue affecting everybody.
>> Always love the conversation, always fascinating insights. Look forward to the next one.
>> Absolutely. Can't wait to be back.
>> Our thanks to Ben Gossack, managing director and portfolio manager at TD Asset Management. As always, make sure you do your own research before making any investment decisions. stay tuned for tomorrow show. Yes, the US markets will be closed for the thanks giving holiday but we will be back with highlights from some of our recent personal finance coverage including insights on the tax implications of charitable giving, new trust reporting rules and how you can help your elderly parents without risking your own financial security. That's all the time we have to show today. Thanks for watching and we will see you tomorrow.
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