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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 have a look at what has been outperforming on the market and it's not Magnificent Seven. TD Asset Management's Benjamin Gossack will join us. It MoneyTalk's Anthony Okolie will have a look at a TD economics quarterly outlook for the Canadian economy.
And in today's WebBroker education segment, Hiren Amin is going to walk through how Bollinger Bands technical indicators work.
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 get to all that and our guest of the day, let's get you an update on the markets.
We've got some green on the screen on the shortened trading week. 69 points to the upside for the TSX Composite Index, that's good for one third of a percent.
Among the most actively traded names at this hour include a copper plate, Capstone Copper. Let's check in on that one.
It's up about 2% at $8.12 per share.
Athabasca Oil pulling back a little bit today. You have crude sitting around $82 per barrel. Athabasca at $5.33, it sound a little bit more than 2%. South of the border, let's check in on the S&P 500.
Trying to get his mojo back after setting new all-time highs last week.
At 5233, we are of 15 points were about one third of a percent. The tech heavy NASDAQ, what's happening?
It's pretty much tracking the broader market, it's up one third of a percent. Of course read it, it hit the public markets last week, we been keeping an eye on it recent days, up another almost 15% today and that is your market update.
While some investors have been focused on the performance of tech stocks like Nvidia, our future guest today's says if you are looking for a pocket of strength in the markets, one sectors really standing out and it's not technology.
Joining is that with more than Gossack, Managing Director and Portfolio manager with TD Asset Management.
Always a pleasure having you here and having your insights.
>> I appreciate you having me. I even brought another new tie. I've only got one more new time. It so only one more episode for the rest of the year. As we will have you back for more than that to get you more ties if we need to.
The markets that you highs last week.
I know this is a sore point for you. If people keep saying it has to be the Magnificent Seven and tech. Let's talk about how you see as the driver of this rally.
>> We've been talking about homebuilders and trucking stocks and the companies that make the trucks for the trucking stocks move been talking a lot about industrials, and yet, it's still all about the Magnificent Seven.
But I just want to again the hammer down the point, reemphasize that I do think industrials are sort of the real generals within this bull market cycle that we are in right now.
>> All right, you brought charts to illustrate your points. Let's start going through them. Tell us what we are seeing.
>> The first chart we are looking at is when we have looked at before.
This would be the S&P 500 industrials.
We put that over the S&P 500.
Again, you are not looking at a price chart, you are looking at a ratio chart.
I really like it, I am addicted to ratio charts. They really tell you where the pockets of strength and weakness are in a market and I would liken it to a tug-of-war.
If our chart is going up into the right, it just means that our numerators outperforming our denominator. What we have done with this particular chart is equal weight numerator and equal weight denominator. The reason I did that is because the top 10 stocks on the S&P 500 industrials make up most of the index and most of them have been under performing.
We had to make a small tweak to show that there is massive strength and industrials.
We are in an industrial supercycle led by construction activity. We have reshoring and onshoring. There is the infrastructure act, the CHIPS Act. You name it, there's a boom in industrials.
>> That's interesting when you talk about sort of getting equal weight going in this. If you talk about some of the big industrial names that are capturing attention, the Magnificent Seven are capturing attention. A Boeing is capturing a lot of attention but not for the right reasons. As is the key here, to look below the headline said the other industrial stocks?
>> The Magnificent Seven has been this be in my bonnet because I understand the stocks have big market cap so when they move, that moves the index. I get it. But it has hated the fact that we've had many stocks work in this market. The other thing I would argue to you is that three out of the four Magnificent Seven stocks are underperforming, yet you just said the market has been making new highs.
>> They are supposed to be doing some lifting.
>> Right. So we have the same feature when we had them make seven at the top of the market is the same issue we are having in the industrial sector where, yes, companies like a Boeing or UPS or Raytheon or Honeywell are large in comparison to many industrial companies and their performances distorting people's views about how strong industrials are performing.
>> If we talk about some of the smaller companies in this space, I think you have a chart there to show us.
>> The reason why I pick on the Russell 2000 is because people keep saying this is an unhealthy market, look at how the S&P 500 has been performing and the Russell 2000 can't keep up, and we are talking about Russell 2000 being small, medium capitalized companies.
This is where it's like, do you want the Russell 2000 or do you want the parts that are really working in the Russell 2000?
And here we are again with industrials.
This is the same set up. We put it over the Russell 2000. What's interesting to me about this chart is that the SNP 500 industrials I think take off around spring, summer of 2022 which is roughly where we say the market made its new bull market.
What's really interesting about looking at Russell industrials over 2000, they start getting lift off in 2021, will head of the S&P 500. I would say the real headline is not S&P 500 is doing this, Russell 2000 and is doing this, therefore we have an unhealthy market.
It's that the industrials are crushing it and they are crushing it for the same reasons. Some of the best stocks would be construction stocks, engineering stocks.
Again, we have the building materials, aerospace, defence. All the same names we are seeing in the large-cap index we are seeing in the small-cap index.
And it's just again nothing talked about.
>> We showed an example about the S&P 500, we got to the Russell 2000. You did your work there. Let's bring it closer to home.
We have engineering and construction companies in this country.
>> Yes, and great real companies.
This is not just a US phenomenon, large-cap and small-cap, you take the SNP TSX industrials and put it over the SNP TSX and lo and behold, we have another bull market.
This is a global phenomenon. We could look at Canada and we could spend all our time talking about bags and energy companies and gold companies and meanwhile, again, our industrial companies are also outperforming.
All driven by the same secular trends.
>> A global phenomenon.
>> Why stop in North America when we could travel the world? The world is a pretty exciting place.
People talk about Germany being in a recession. This issue here, this issue there. European industrials are crushing it.
Industrials would include Japan as well.
Take that and put it over the MSCI EAFE, think developed world in North America, we are seeing the same trend.
A really big marginal mover in all of this would be the data centres.
So yes, we have talked about infrastructure and CHIPS Act. There is reshoring, onshoring. I think a big slow-moving train is data centres.
Data centres are, you need utilities, powerlines, machinery, equipment, all this build out which is creating industrial activity and we are seeing that in the stocks today.
>> We are up and to the right. What challenges this trend?
>> The big risk that I am focused on right now, right now it's a benefit, I was talking about how the data centre is marginally adding to everyone's books in terms of orders and so, fine, let's build these out of that screen and at some point, we have to do just that.
We are not there yet, but when we digest it, those orders are going to be counted so that's sort of what I'm looking at right now is just monitoring the flow of the data centre, monitoring the flow of those orders and then when we get to that second derivative and slow down, we could see some derailment.
People talk about the election cycle and maybe one candidate is Pro this and pro-that. I will say in terms of the key bill here would be the inflation reduction act. That was approved by Congress, signed by the Pres., I've been-- there are many times people come in and say there is a new administration, parties can't agree with themselves and this creates a lot of jobs so there is going to be a lot of talk. I don't know of anyone would ever repeal that kind of thing.
That would be a low probability, high-impact risk but that is one that gets talked about.
>> Always fascinating stuff with Ben Gossack. We will get your questions about global stocks for him and just a moment.
And a reminder that you can get in touch with us 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.
Let's check in on shares of Krispy Kreme doughnuts. Last time I looked, they were getting quite a boost. Indeed, for almost 30%. So what's going on with the doughnut chain? Their offerings are going to be available in McDonald's restaurants across the United States by the end of 2026, that announcement today is an extension of an existing pilot program in several states that was launched in late 22. This will more than double Krispy Kreme's distribution network and investors like the sound of what came out this morning.
Krispy Kreme is up almost 30%.
Global delivery giant UPS is forecasting a rebound in revenue and shipping volumes following a pretty tough 2023. The company is also touting cost-cutting measures to cope with CEO post-pandemic lowdown and e-commerce demand. They held an investor conference today.
The shares were initially up modestly but right now the market is a bit underwhelmed winning for some more from that investor conference. They are down 5 1/2%.
The stock ticker DJ T has returned to the public markets. Former President Donald Trump's social media company began trading after merging with a shell company. Those with longer memories, the ticker DJ T was attached to tubs publicly traded hotel and casino company in the 90s but was delisted among trump hotels filing for bankruptcy in the early 2000's. At $64.77, you're a little more than 30%.
Let's check on the markets with Bay Street and the TSX Composite Index.
Right now we are up 65 points were about one third of a percent. South of the border, we are tracking roughly about the same.
It is currently at about 1/4 of a percent to the upside.
We are take your questions about global stocks. Can you give me your thoughts on uranium stocks?
>> Nothing specific on uranium.
But there is a lot of talk about nuclear and obviously uranium feeds into that.
So if people were actually to look at let's say a major newspaper today, there was an article about how there is a buildout of data centres. We just talked about the buildout of data centres, and many of these new data centres that are going to support AI, they require a lot of energy and so especially if you are going to run a data centre, you may want that tied to nuclear power, you may want that off or behind the grid. There is a tremendous amount of movement right now and building a nuclear. The other thing that's not talked about. We talked about the inflation reduction act.
We talked about all the benefits to clean energy. But there was a lot of provisions to help keep current nuclear facilities open. They will be building you stop but they don't want the existing nuclear facilities to close and so they basically put in enough credits to keep going. You can look at sort of nuclear power type utility companies. Utility companies themselves have been struggling but not the ones that have nuclear power, those have been going the other way.
So there has been where nuclear was kind of looked down upon… >> Following Fukushima particularly, right? That was a long stretch with uranium prices depression.
>> We saw Germany shatter their last nuclear plant. That has all changed so there is a wave coming their way.
Always difficult to play the commodity versus the actual stocks. We can see that right now with gold. Gold is breaking out to new highs. I look at the gold producers, especially the ones on the TSX, and they are struggling. That is something people should keep in mind. But the definitely is a wave in terms of nuclear that people should do.
As you say, people should do their research on how to best play it.
>> Someone wants to get your take on Apple.
>> Yeah.
We talked about the Magnificent Seven.
That was the darling last year. Struggling this year.
All of a sudden it gets kicked out of this club according to some people. I would say for me, Apple, I think what people forget is it is a cyclical stock. It used to be more apparent when the iPhone drove most of the revenue and earnings and there was a very fun way to kind of play the cycle because we would go from a four to a five and a six and some cycles had a physical change and some only had a software change. Depending if they added a big new camera or there was a big one where we went to a bigger size screen format and that drove a massive adoption wave. It is becoming less apparent because services have caught up to a whole bunch of other products out there but I still think that to its core, it is a cyclical stock and every time it's on the down cycle, you name it, that's when everyone comes out of the woodwork and there are things to be worried about for this company.
Is it the same company posting jobs? Have they lost innovation? We have a whole bunch of regulatory stuff.
>> I was going to ask you about the political risk because every day, there seems to be a new regulatory issue with the new tech companies.
>> Yeah, every time we go through these down cycles, we have to question ourselves. Is this different?
We are in the wait-and-see kind of mode.
I wouldn't count this company out. They spent was it 10 years working on an EV car and I think they made the right decision not to go forward with it because we are seeing China take the lead in trying to flood the market with their EVs so this is one of those companies where they have a great platform and so we are in that down cycle part and then yeah, we are just waiting for the cycle to come out again on the other side.
>> Have we gotten any photos of what that EV would have looked like? I would've been disappointed if it didn't look like them is on my back.
>> Was it the one where you had to plug in the USB key… >> No, new school. I feel the partial look exactly like that. I think they were trying to go for something that was probably autonomous but again, because we are on the down cycle, the reports that Ira, it was almost like, well, that was a waste of money but I think I was very shrewd of the company to say we are going to correct the market, we want to have a certain margin, we wanted to have a certain client experience. But 10 years ago, versus now, it's not about Tesla. You and I talked about this. It's about China.
>> And their emergence. Often there are 300 other companies and their technology in their capability and it's not even about the car now with the infotainment within the car, that is surpassing many of the leaders.
And they have flooded the market.
Maybe there were economics, Apple car could charge this much. But if everyone is able to offer incredible features at $20,000 and profitable, that might've been difficult now to do that with an Apple car in this day and age so why not just reallocate those resources?
If we have time, again, we are on a down part of the cycle with Apple and then there is an article, headlined the comes out and says that they are going to use Google's AI, and that was opportunity for people to say, that means Apple's AI must not be up to in comparison to OpenAI or Google and then all of a sudden, there was for other articles where they are going to allow OpenAI on their platform, they are going to allow another Chinese providers be on the popper. Maybe what they are setting up, again, given the regulatory environment, is offer their AI and then give users the opportunity to choose their AI. So all of a sudden the narratives are changing.
My recommendation for everyone is to watch the narratives. I have never seen things go from darling to hated to darling to hated so fast but I'm seeing it with a lot of stocks these days.
>> Interesting stuff and breakdown of Apple.
Next question. I have heard analysts referred to a stock move on earnings based on the option prices. Is there a simple way to calculate this?
I think the viewer might be speaking to zero day expiry's.
>> Zero day expiries can moves stocks options. If you think of a call option you pay a small premium but you can take on a large economic exposure. I liken them sometimes to lottery ticket.
You can do a little bit and you can move markets.
If you buy a bunch of calls, he forced the marketmakers, say it's J.P. Morgan, TD Securities, Royal Bank, they have to hedge themselves and so to hedge themselves, they buy a little bit of those shares.
You do enough of that collectivity, well, they are buying more and more shares and the closer we get to the strike price, that's where you are going to get your assignment, they have to buy more shares.
Then, people start to see activity in the stock and they think, oh, there must be something going on, somebody must know something, and then you get the momentum followers sort of tracking on and it builds upon itself.
I would say if someone really wants to watch what's going on in the option market, I have this theory that lots of people no information and if they want to act on that information, they typically do it in the options market.
So you are looking at volume versus open interest and then what you want to see is you could have five times the volume of the open interest out there and you say, that's a lot of activity. But they may just be turning through the existing contract. You want to see a big step change in the open interest on the following business day and that would tell you that someone's making a move. You can never really tell if they are buying the calls or shorting the calls but I would like to is there a Capital Market stay coming up board earnings event coming up or is somebody going to be presenting at a conference?
And watch to see if open interest is moving and that could be telling you that someone is setting up that there could be an event. What I would also argue is just because you can see it doesn't mean that's how the stock is going to act as well. So I think that's why options are interesting but also they are lottery tickets.
Sometimes they work in your favour and sometimes you're right and you make no money.
So that's something that people should be aware of what they are playing with options.
>> A lot of homework to do on options there. As always, make sure you do your own research before making any investment decisions.
we will get back to your questions on global stocks for Ben Gossack in just a moment's 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.
Technical analysis is one method investors can use to help size up a potential investment and in today's education segment, we are having a look at a specific technical tool: Bollinger Bands.
Hiren Amin, Senior client education sector with TD Direct Investing has more.
>> Hello, fellow investors, and welcome to today's education hit. Today we are going to be focusing on technical analysis. We are going to be opening our technical analysis toolbox and giving you a new tool to add to it.
Specifically, we are going to be looking at Bollinger Bands today. Bollinger Bands is a technical indicator developed by the namesake, John Bollinger, and is used to measure market volatility and identify overbought and oversold conditions. This little tool tells us when the market is quiet or when the market gets loud.
Bollinger Bands help determine whether prices are high or low on a relative basis. There are a number of different uses for Bollinger Bands such as a trend indicator and for breakouts.
Let's step into a broker and show you how to set up the Bollinger Bands and what strategies they can be used with.
When we go into a book over here, I have the triple cues loaded up. This is the ETF that follows the NASDAQ index interaction.
We are going to use this as our example for today.
Let's pull up the charts and look at how to get the setup done. I got a candlestick chart. To add the Bollinger band, it is the lower indicators will be found in this category and will be found right at the top.
Let's select this.
Once you add the Bollinger band, what you will notice is that it has bands, course.
Now we can adjust some of the settings on it. Let's click over here to adjust it.
Typically, it's gone on a 20 day simple moving average and two standard deviations. I will get into that in a moment. What you can see on this band that we are looking at is we are looking at a middle band, which is our 20 day simple moving average and an upper band and the lower band.
Now let's move it to just a bit of a higher timeframe. We will go out to one year and visually be able to see it better.
Now, we mentioned that it measures volatility which is essentially the price variance of a stock over time. When traders are looking at this and thinking to ourselves, standard deviation, I don't really know what that is, fear not.
Standard deviation is that 95% of the prices that have occurred are going to be contained within these two bands so it is a measure of telling us the range at which a stock price typically stays within. By that same token, if you one standard deviation, it just means 60% of the time, the prices are within those band. The rain of the default is two standard deviations.
Two common strategies that traders use Bollinger Bands with, the first is known as a Bollinger Bands.
The Bollinger Bands is based on the mean reversion theory that simply means that prices will revert or go back towards the mean. In this case, we are talking about the simple moving average. This is best to use when markets are range bound, they are saying with influx, they are not really moving in a trend, and when you do see markets range bound within these areas as you can see over here, Bollinger Bands essentially means that once it bounces off either the upper limit, the upper band, this is known as when the conditions are oversold, or when it gets to this bottom band… Sorry, when it goes to the upper band, it's overbought and it's due to bounce back toward its mean and when it bounces off the lower band it is oversold and it will be pushed back to the mean simple moving average.
In a nutshell that's what a Bollinger bounces. The last thing we will talk about is the Bollinger squeeze. In the Bollinger squeeze, this is when prices are usually trending, that's when traders would use it and we can see with the Bollinger squeeze, their periods of contraction when the bands narrowing together and that's usually followed by the band's expanding out and that usually causes an increase in volatility. Usually, when this happens, we are seeing these big squeezing and expansions happen and the prices break out of those bands and that really indicates to a traitor that the prices are going to continue in that direction and the trader would use that as a strategy for an entry or exit signal. These are some ways you can use Bollinger Bands. Go ahead and added to your charts and look at how they interacted the different bands there.
>> Our thanks to Hiren Amin, Senior client education instructor with 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.
We are back with Ben Gossack, take your questions about global stocks. This one just came in. What is your guest think of Japan and what he add new money?
This is from our regular viewer, Jeff.
Jeff, thanks to the question. On the platform, we cannot give specific investing advice but we can talk about what's going on in Japan.
>> When people look at Japan, it seems like a superhot market. I think it's been unique and interesting that Japan per se is that the Japan stock exchange went after a bunch of companies and said your book values are not strong enough, we don't like the fact that you have a lot of cross holdings. It's not uncommon… Imagine like in the US that Microsoft owned shares in Apple and Apple own shares in Tesla, so that's not uncommon in Japan where they have cross holders and so they've been divesting these cross holdings and what they've been doing with their caches buying back their own stock. We like that.
So there has been sort of another wave within Japan. There are Japan industrials that are doing well.
Japan is really good at semiconductors and semiconductor equipment to make the semiconductors so that has been doing really well.
I know we have talked about insurance.
Insurance companies have been doing well and we also have a country that is exiting negative interest rates. As a whole bunch of stuff, the big secular trends that we talk about, there are some idiosyncratic trends happening there and then Korea has been watching Japan and the Korean stock exchange has been going after companies and saying, hey, wake up, shake up your book values, buybacks and stocks, do some more shareholder friendly activities and so that gets people excited and so we have seen Japan and Japan stocks catch away.
>> What is the risk here, that excitement fades?
>> Yeah, that would be the issue.
Secular trends, digesting them. Like all things, I really like Europe.
That doesn't mean I don't want to buy the entire index. I really like Japan, but I like to pick off certain parts about Japan that I like, so I think that's the part that people often go about. You can buy the whole thing or you can pick and choose and also watch how that overlaps with your existing portfolio so you might just be buying along semiconductor exposure by buying into Japan but maybe you already had that and I think that's always a risk that people have to watches watch the compounding of your exposures.
>> Let's get to another question from the audience. This one based off the opening chat we had. How do we find a list of the industrials that you mentioned?
>> Their websites where you can screen companies. They are publicly out there and free. I have used them before.
You can break them down by sector and see that there industrials. There are many stocks that follow let's say the SNP TSX industrials or the S&P 500 industrials or the Russell 2000 industrials.
So you can go and look at their holdings.
It's all there.
You just have to do one or two extra steps.
But all of that information is out there.
And then you can check their performance and then you can check that performance relative to the market. And then look at their subsectors and you'll see a lot of companies that do construction and building materials and HVAC companies doing quite well and starting to ask ourselves why is that happening and then tied back to the fundamentals.
>> I think we need to do so that research on WebBroker as well with the TSX industrials. Some good places to do some homework.
We showed you brought it earlier. With your opinion on the Reddit IPO?
>> Nothing specific about the Reddit IPO.
I would say IPOs in general.
We are 21 months into a bull market.
We are at new highs.
We basically had an IPO market that has been shut down for two years. Usually, people like to take risks in this environment. IPO window is opening. Reddit obviously getting a lot of attention but at the same time this week or last week, we had another AI driven type company called Sierra labs that also had a very successful IPO. There was an aesthetics business, again, good secular trend in Europe, Gail derma opened up quite well.
Amherst sports, which has Wilson and our Turks, was a decent IPO. So everyone that has been hanging around this window waiting for it to open, we will see more IPOs. That is a feature of a bull market.
That is healthy.
We have had a lot of companies struggle in terms of managing their finances. Now, they have another avenue to tap into which is the capital markets.
>> We will get back to questions for Benjamin Gossack on global stocks and just moments time.
As always, make sure you do your own research before making any investment decisions.
and a reminder that you get in touch with us at any time.
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 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.
Let's talk about the Canadian economy.
Growth was better than expected in the last three months of last year but if you look under the hood, every component of demand in the domestic economy was weaker.
Our Anthony Okolie joins us now to take a look at a TD economics report on their latest courtly forecast.
>> TD Economics does not predict that the economy will fall into a recession but they are forecasting growth in 2024 to reflect a small upgrade of roughly 1%. As you mentioned, Canada's economy bounced back in the last quarter of 2023 with real GDP edging up slightly after the slight drop in the fourth quarter. Despite that rebound in the fourth quarter, TD Economics says that the narrative remains the same that high interest rates and borrowing costs are continuing to hurt economic growth. Especially if used about international drivers, the economy in the fourth quarter contracted while GDP per capita has fallen in five of the last 6/4.
While consumer spending growth is looking better in the first quarter of this year, which has been boosted by auto sales, considering that the population is expected to grow to +3% pace in the first quarter of 2024, consumer spending is still projected to underperform on a per capita basis. TD Economics says that this will extend the economic downtrend and will feel similar to the weakness that we have seen in past recessions. Turning to the job markets, here in Canada, the job market is expected to tip into a net loss in the second half of this year according to TD economics.
Along with healthy labour force growth, this will push up the unemployment rate to 6.7% by year end. The downward trend in bond yields we have seen since the fall has taken mortgage rates lower and this has reignited Canada's housing market. TD Economics expects that residential investment to post a decent performance this year as it rebound off last year's lows.
Meanwhile, business investment in Canada is also looking a little bit brighter according to TD Economics this year, led by significant new investments in support of the clean energy transition.
This, TD Economics police, should help Canada's growth pickup back to its trend pace by the end of 2025.
On the inflation front, consumer prices have made headway in terms of cooling across most categories except shelter inflation as the chart shows.
In February, shelter inflation continue to move higher, it was of 6 1/2% year-over-year in February.
While CPI inflation excluding shelter… The Bank of Canada's preferred core measure… TD Economics notes that the Bank of Canada has a shelter problem which they will likely need to look past when it eventually decides to cut its interest rate.
>> Thanks for that, Anthony. Money talks Anthony Okolie.
Now, for an update on the markets.
We are having a look at TD's Advanced Dashboard, a platform designed for active traders available through TD Direct Investing.
This is the heat map function, we are take a look at the market movers, we are looking at the TSX 60 by Price and volume.
Where is the green? It is among some financial names. Some big banks are modestly to the upside. Bit of a mixed picture as you move across the space.
Energy, Cenovus is up modestly and Suncor down modestly and Kinross and materials space up almost a full percent.
Nutrien, we will give it its due, it is up one and 1/2% in the bottom of your screen.
Let's check in on the S&P 100 and see what's happening south of the border.
Tesla getting a bit today, up almost 5%.
EPS down there, United Parcel Service, their investor data came out this morning.
They see stronger volumes this year. Stock has been fading through the session, down almost 7% now.
You can find more information on TD Advanced Dashboard by visiting TD.com/advanceddashboard.
We are back with Ben Gossack from TD Asset Management. Let's get back to your questions.
Someone once your Outlook for small and mid-cap equities in emerging markets.
Do you see them following the US small and mid-cap stocks which are also underperforming so far? Way to set you off.
>> Yes! I mean, look.
I've been out marketing, which means visiting clients across the country and something I got this year that I never got before was what is our mid-cap exposure? I started to ask people what their definition of a mid-cap is, we have trillion dollar market Companies so maybe we need to change what mid-cap is but people, again, people lead busy lives and they've been told that it's only been seven stocks driving this market and so they are like, okay, that must be it.
Hopefully, maybe I will just keep coming back again, showing different parts of the market that are working. People now think, I don't want to chase the large-cap companies so let's look at the medium companies, the small companies.
We also know that emerging markets have not really participated. This is at the index level and so hopefully at the beginning of this year we talked about, yes, Russell 2000 and is not performing as well as the S&P 500.
But the Russell 2000 industrials are performing at the same pace as the S&P 500 if not better. So again, it's about what parts of the market do you want? I also, even in emerging markets, I think what's been holding back emerging markets has been China exposure.
You have, rightfully so, China has been weak, it has been reflected in the socks but there are great stocks I have seen let's say in Brazil, in India, Indonesia, so it's kind of… This is the challenge sometimes when you invest in a broad index, you get everything with it and sometimes you need to be a bit more specific, a little bit more surgical in the exposures that you want.
>> We will squeeze in one more question before the end of the show. This one a broad one. How do you hedge your risk assets?
>> Typically, people think about risk and managing risk, they are thinking about insurance. That is fine.
I think I would go back to what I was saying before when we talked about Japan, I think a risk that is really important and sometimes gets overlooked, he will think, well, if I invest in every industry and there's 11 of them that have been defined, maybe I spread my risk out. Maybe if I invested 200 companies, I spread my risk out. What I'm really worried about is that compounded risk exposure and that is where if you own a bunch of stocks, you could even have 50 stocks are 30 stocks in 20 stocks, but they all play along the same theme and you feel like an incredible genius on the way up. You have two stocks into different value chains, two different sectors, maybe two different countries and you're like, this is incredible, I'm an incredible Stock picker, nothing could stop me!
And then that seem may be in for a pause, maybe it has run out, maybe new competition has come, technology, it doesn't matter. But now, those two stocks are basically the same stock working against you and that is what we call compounded risk.
It's one that I stress all the time, it's the stuff that keeps me up at night.
Especially in a world right now where a lot of it is institutional investing, institutions don't really care about, we talked about an apple or industrials, the Khirbet factors. The way that we talk about socks, they talk about investing in a quality factor, a value factor. Stocks are getting lumped in with each other and so there are many stocks that you may think are completely diversified from each other but are very correlated and it's all great on the way up, it can be very challenging on the way down and that's why always stress, watch your compounded risk.
>> Always a pleasure to have a VO, always enjoy. Look forward to the next time.
>> Absolutely.
>> If you are limited by tie selection, we will hook you up with some ties.
>> Appreciate that.
>> How are things 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. if we didn't get time to get your question today, we will try to do so on future shows. Tomorrow, Benjamin Chim, VP, Dir. and lead of the high-yield fixed income team of TD Asset Management will be our guest tomorrow.
You can get a head start with your questions by emailing moneytalklive@td.com. As all the time we have the show today. Thanks for watching.
We will see 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 have a look at what has been outperforming on the market and it's not Magnificent Seven. TD Asset Management's Benjamin Gossack will join us. It MoneyTalk's Anthony Okolie will have a look at a TD economics quarterly outlook for the Canadian economy.
And in today's WebBroker education segment, Hiren Amin is going to walk through how Bollinger Bands technical indicators work.
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 get to all that and our guest of the day, let's get you an update on the markets.
We've got some green on the screen on the shortened trading week. 69 points to the upside for the TSX Composite Index, that's good for one third of a percent.
Among the most actively traded names at this hour include a copper plate, Capstone Copper. Let's check in on that one.
It's up about 2% at $8.12 per share.
Athabasca Oil pulling back a little bit today. You have crude sitting around $82 per barrel. Athabasca at $5.33, it sound a little bit more than 2%. South of the border, let's check in on the S&P 500.
Trying to get his mojo back after setting new all-time highs last week.
At 5233, we are of 15 points were about one third of a percent. The tech heavy NASDAQ, what's happening?
It's pretty much tracking the broader market, it's up one third of a percent. Of course read it, it hit the public markets last week, we been keeping an eye on it recent days, up another almost 15% today and that is your market update.
While some investors have been focused on the performance of tech stocks like Nvidia, our future guest today's says if you are looking for a pocket of strength in the markets, one sectors really standing out and it's not technology.
Joining is that with more than Gossack, Managing Director and Portfolio manager with TD Asset Management.
Always a pleasure having you here and having your insights.
>> I appreciate you having me. I even brought another new tie. I've only got one more new time. It so only one more episode for the rest of the year. As we will have you back for more than that to get you more ties if we need to.
The markets that you highs last week.
I know this is a sore point for you. If people keep saying it has to be the Magnificent Seven and tech. Let's talk about how you see as the driver of this rally.
>> We've been talking about homebuilders and trucking stocks and the companies that make the trucks for the trucking stocks move been talking a lot about industrials, and yet, it's still all about the Magnificent Seven.
But I just want to again the hammer down the point, reemphasize that I do think industrials are sort of the real generals within this bull market cycle that we are in right now.
>> All right, you brought charts to illustrate your points. Let's start going through them. Tell us what we are seeing.
>> The first chart we are looking at is when we have looked at before.
This would be the S&P 500 industrials.
We put that over the S&P 500.
Again, you are not looking at a price chart, you are looking at a ratio chart.
I really like it, I am addicted to ratio charts. They really tell you where the pockets of strength and weakness are in a market and I would liken it to a tug-of-war.
If our chart is going up into the right, it just means that our numerators outperforming our denominator. What we have done with this particular chart is equal weight numerator and equal weight denominator. The reason I did that is because the top 10 stocks on the S&P 500 industrials make up most of the index and most of them have been under performing.
We had to make a small tweak to show that there is massive strength and industrials.
We are in an industrial supercycle led by construction activity. We have reshoring and onshoring. There is the infrastructure act, the CHIPS Act. You name it, there's a boom in industrials.
>> That's interesting when you talk about sort of getting equal weight going in this. If you talk about some of the big industrial names that are capturing attention, the Magnificent Seven are capturing attention. A Boeing is capturing a lot of attention but not for the right reasons. As is the key here, to look below the headline said the other industrial stocks?
>> The Magnificent Seven has been this be in my bonnet because I understand the stocks have big market cap so when they move, that moves the index. I get it. But it has hated the fact that we've had many stocks work in this market. The other thing I would argue to you is that three out of the four Magnificent Seven stocks are underperforming, yet you just said the market has been making new highs.
>> They are supposed to be doing some lifting.
>> Right. So we have the same feature when we had them make seven at the top of the market is the same issue we are having in the industrial sector where, yes, companies like a Boeing or UPS or Raytheon or Honeywell are large in comparison to many industrial companies and their performances distorting people's views about how strong industrials are performing.
>> If we talk about some of the smaller companies in this space, I think you have a chart there to show us.
>> The reason why I pick on the Russell 2000 is because people keep saying this is an unhealthy market, look at how the S&P 500 has been performing and the Russell 2000 can't keep up, and we are talking about Russell 2000 being small, medium capitalized companies.
This is where it's like, do you want the Russell 2000 or do you want the parts that are really working in the Russell 2000?
And here we are again with industrials.
This is the same set up. We put it over the Russell 2000. What's interesting to me about this chart is that the SNP 500 industrials I think take off around spring, summer of 2022 which is roughly where we say the market made its new bull market.
What's really interesting about looking at Russell industrials over 2000, they start getting lift off in 2021, will head of the S&P 500. I would say the real headline is not S&P 500 is doing this, Russell 2000 and is doing this, therefore we have an unhealthy market.
It's that the industrials are crushing it and they are crushing it for the same reasons. Some of the best stocks would be construction stocks, engineering stocks.
Again, we have the building materials, aerospace, defence. All the same names we are seeing in the large-cap index we are seeing in the small-cap index.
And it's just again nothing talked about.
>> We showed an example about the S&P 500, we got to the Russell 2000. You did your work there. Let's bring it closer to home.
We have engineering and construction companies in this country.
>> Yes, and great real companies.
This is not just a US phenomenon, large-cap and small-cap, you take the SNP TSX industrials and put it over the SNP TSX and lo and behold, we have another bull market.
This is a global phenomenon. We could look at Canada and we could spend all our time talking about bags and energy companies and gold companies and meanwhile, again, our industrial companies are also outperforming.
All driven by the same secular trends.
>> A global phenomenon.
>> Why stop in North America when we could travel the world? The world is a pretty exciting place.
People talk about Germany being in a recession. This issue here, this issue there. European industrials are crushing it.
Industrials would include Japan as well.
Take that and put it over the MSCI EAFE, think developed world in North America, we are seeing the same trend.
A really big marginal mover in all of this would be the data centres.
So yes, we have talked about infrastructure and CHIPS Act. There is reshoring, onshoring. I think a big slow-moving train is data centres.
Data centres are, you need utilities, powerlines, machinery, equipment, all this build out which is creating industrial activity and we are seeing that in the stocks today.
>> We are up and to the right. What challenges this trend?
>> The big risk that I am focused on right now, right now it's a benefit, I was talking about how the data centre is marginally adding to everyone's books in terms of orders and so, fine, let's build these out of that screen and at some point, we have to do just that.
We are not there yet, but when we digest it, those orders are going to be counted so that's sort of what I'm looking at right now is just monitoring the flow of the data centre, monitoring the flow of those orders and then when we get to that second derivative and slow down, we could see some derailment.
People talk about the election cycle and maybe one candidate is Pro this and pro-that. I will say in terms of the key bill here would be the inflation reduction act. That was approved by Congress, signed by the Pres., I've been-- there are many times people come in and say there is a new administration, parties can't agree with themselves and this creates a lot of jobs so there is going to be a lot of talk. I don't know of anyone would ever repeal that kind of thing.
That would be a low probability, high-impact risk but that is one that gets talked about.
>> Always fascinating stuff with Ben Gossack. We will get your questions about global stocks for him and just a moment.
And a reminder that you can get in touch with us 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.
Let's check in on shares of Krispy Kreme doughnuts. Last time I looked, they were getting quite a boost. Indeed, for almost 30%. So what's going on with the doughnut chain? Their offerings are going to be available in McDonald's restaurants across the United States by the end of 2026, that announcement today is an extension of an existing pilot program in several states that was launched in late 22. This will more than double Krispy Kreme's distribution network and investors like the sound of what came out this morning.
Krispy Kreme is up almost 30%.
Global delivery giant UPS is forecasting a rebound in revenue and shipping volumes following a pretty tough 2023. The company is also touting cost-cutting measures to cope with CEO post-pandemic lowdown and e-commerce demand. They held an investor conference today.
The shares were initially up modestly but right now the market is a bit underwhelmed winning for some more from that investor conference. They are down 5 1/2%.
The stock ticker DJ T has returned to the public markets. Former President Donald Trump's social media company began trading after merging with a shell company. Those with longer memories, the ticker DJ T was attached to tubs publicly traded hotel and casino company in the 90s but was delisted among trump hotels filing for bankruptcy in the early 2000's. At $64.77, you're a little more than 30%.
Let's check on the markets with Bay Street and the TSX Composite Index.
Right now we are up 65 points were about one third of a percent. South of the border, we are tracking roughly about the same.
It is currently at about 1/4 of a percent to the upside.
We are take your questions about global stocks. Can you give me your thoughts on uranium stocks?
>> Nothing specific on uranium.
But there is a lot of talk about nuclear and obviously uranium feeds into that.
So if people were actually to look at let's say a major newspaper today, there was an article about how there is a buildout of data centres. We just talked about the buildout of data centres, and many of these new data centres that are going to support AI, they require a lot of energy and so especially if you are going to run a data centre, you may want that tied to nuclear power, you may want that off or behind the grid. There is a tremendous amount of movement right now and building a nuclear. The other thing that's not talked about. We talked about the inflation reduction act.
We talked about all the benefits to clean energy. But there was a lot of provisions to help keep current nuclear facilities open. They will be building you stop but they don't want the existing nuclear facilities to close and so they basically put in enough credits to keep going. You can look at sort of nuclear power type utility companies. Utility companies themselves have been struggling but not the ones that have nuclear power, those have been going the other way.
So there has been where nuclear was kind of looked down upon… >> Following Fukushima particularly, right? That was a long stretch with uranium prices depression.
>> We saw Germany shatter their last nuclear plant. That has all changed so there is a wave coming their way.
Always difficult to play the commodity versus the actual stocks. We can see that right now with gold. Gold is breaking out to new highs. I look at the gold producers, especially the ones on the TSX, and they are struggling. That is something people should keep in mind. But the definitely is a wave in terms of nuclear that people should do.
As you say, people should do their research on how to best play it.
>> Someone wants to get your take on Apple.
>> Yeah.
We talked about the Magnificent Seven.
That was the darling last year. Struggling this year.
All of a sudden it gets kicked out of this club according to some people. I would say for me, Apple, I think what people forget is it is a cyclical stock. It used to be more apparent when the iPhone drove most of the revenue and earnings and there was a very fun way to kind of play the cycle because we would go from a four to a five and a six and some cycles had a physical change and some only had a software change. Depending if they added a big new camera or there was a big one where we went to a bigger size screen format and that drove a massive adoption wave. It is becoming less apparent because services have caught up to a whole bunch of other products out there but I still think that to its core, it is a cyclical stock and every time it's on the down cycle, you name it, that's when everyone comes out of the woodwork and there are things to be worried about for this company.
Is it the same company posting jobs? Have they lost innovation? We have a whole bunch of regulatory stuff.
>> I was going to ask you about the political risk because every day, there seems to be a new regulatory issue with the new tech companies.
>> Yeah, every time we go through these down cycles, we have to question ourselves. Is this different?
We are in the wait-and-see kind of mode.
I wouldn't count this company out. They spent was it 10 years working on an EV car and I think they made the right decision not to go forward with it because we are seeing China take the lead in trying to flood the market with their EVs so this is one of those companies where they have a great platform and so we are in that down cycle part and then yeah, we are just waiting for the cycle to come out again on the other side.
>> Have we gotten any photos of what that EV would have looked like? I would've been disappointed if it didn't look like them is on my back.
>> Was it the one where you had to plug in the USB key… >> No, new school. I feel the partial look exactly like that. I think they were trying to go for something that was probably autonomous but again, because we are on the down cycle, the reports that Ira, it was almost like, well, that was a waste of money but I think I was very shrewd of the company to say we are going to correct the market, we want to have a certain margin, we wanted to have a certain client experience. But 10 years ago, versus now, it's not about Tesla. You and I talked about this. It's about China.
>> And their emergence. Often there are 300 other companies and their technology in their capability and it's not even about the car now with the infotainment within the car, that is surpassing many of the leaders.
And they have flooded the market.
Maybe there were economics, Apple car could charge this much. But if everyone is able to offer incredible features at $20,000 and profitable, that might've been difficult now to do that with an Apple car in this day and age so why not just reallocate those resources?
If we have time, again, we are on a down part of the cycle with Apple and then there is an article, headlined the comes out and says that they are going to use Google's AI, and that was opportunity for people to say, that means Apple's AI must not be up to in comparison to OpenAI or Google and then all of a sudden, there was for other articles where they are going to allow OpenAI on their platform, they are going to allow another Chinese providers be on the popper. Maybe what they are setting up, again, given the regulatory environment, is offer their AI and then give users the opportunity to choose their AI. So all of a sudden the narratives are changing.
My recommendation for everyone is to watch the narratives. I have never seen things go from darling to hated to darling to hated so fast but I'm seeing it with a lot of stocks these days.
>> Interesting stuff and breakdown of Apple.
Next question. I have heard analysts referred to a stock move on earnings based on the option prices. Is there a simple way to calculate this?
I think the viewer might be speaking to zero day expiry's.
>> Zero day expiries can moves stocks options. If you think of a call option you pay a small premium but you can take on a large economic exposure. I liken them sometimes to lottery ticket.
You can do a little bit and you can move markets.
If you buy a bunch of calls, he forced the marketmakers, say it's J.P. Morgan, TD Securities, Royal Bank, they have to hedge themselves and so to hedge themselves, they buy a little bit of those shares.
You do enough of that collectivity, well, they are buying more and more shares and the closer we get to the strike price, that's where you are going to get your assignment, they have to buy more shares.
Then, people start to see activity in the stock and they think, oh, there must be something going on, somebody must know something, and then you get the momentum followers sort of tracking on and it builds upon itself.
I would say if someone really wants to watch what's going on in the option market, I have this theory that lots of people no information and if they want to act on that information, they typically do it in the options market.
So you are looking at volume versus open interest and then what you want to see is you could have five times the volume of the open interest out there and you say, that's a lot of activity. But they may just be turning through the existing contract. You want to see a big step change in the open interest on the following business day and that would tell you that someone's making a move. You can never really tell if they are buying the calls or shorting the calls but I would like to is there a Capital Market stay coming up board earnings event coming up or is somebody going to be presenting at a conference?
And watch to see if open interest is moving and that could be telling you that someone is setting up that there could be an event. What I would also argue is just because you can see it doesn't mean that's how the stock is going to act as well. So I think that's why options are interesting but also they are lottery tickets.
Sometimes they work in your favour and sometimes you're right and you make no money.
So that's something that people should be aware of what they are playing with options.
>> A lot of homework to do on options there. As always, make sure you do your own research before making any investment decisions.
we will get back to your questions on global stocks for Ben Gossack in just a moment's 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.
Technical analysis is one method investors can use to help size up a potential investment and in today's education segment, we are having a look at a specific technical tool: Bollinger Bands.
Hiren Amin, Senior client education sector with TD Direct Investing has more.
>> Hello, fellow investors, and welcome to today's education hit. Today we are going to be focusing on technical analysis. We are going to be opening our technical analysis toolbox and giving you a new tool to add to it.
Specifically, we are going to be looking at Bollinger Bands today. Bollinger Bands is a technical indicator developed by the namesake, John Bollinger, and is used to measure market volatility and identify overbought and oversold conditions. This little tool tells us when the market is quiet or when the market gets loud.
Bollinger Bands help determine whether prices are high or low on a relative basis. There are a number of different uses for Bollinger Bands such as a trend indicator and for breakouts.
Let's step into a broker and show you how to set up the Bollinger Bands and what strategies they can be used with.
When we go into a book over here, I have the triple cues loaded up. This is the ETF that follows the NASDAQ index interaction.
We are going to use this as our example for today.
Let's pull up the charts and look at how to get the setup done. I got a candlestick chart. To add the Bollinger band, it is the lower indicators will be found in this category and will be found right at the top.
Let's select this.
Once you add the Bollinger band, what you will notice is that it has bands, course.
Now we can adjust some of the settings on it. Let's click over here to adjust it.
Typically, it's gone on a 20 day simple moving average and two standard deviations. I will get into that in a moment. What you can see on this band that we are looking at is we are looking at a middle band, which is our 20 day simple moving average and an upper band and the lower band.
Now let's move it to just a bit of a higher timeframe. We will go out to one year and visually be able to see it better.
Now, we mentioned that it measures volatility which is essentially the price variance of a stock over time. When traders are looking at this and thinking to ourselves, standard deviation, I don't really know what that is, fear not.
Standard deviation is that 95% of the prices that have occurred are going to be contained within these two bands so it is a measure of telling us the range at which a stock price typically stays within. By that same token, if you one standard deviation, it just means 60% of the time, the prices are within those band. The rain of the default is two standard deviations.
Two common strategies that traders use Bollinger Bands with, the first is known as a Bollinger Bands.
The Bollinger Bands is based on the mean reversion theory that simply means that prices will revert or go back towards the mean. In this case, we are talking about the simple moving average. This is best to use when markets are range bound, they are saying with influx, they are not really moving in a trend, and when you do see markets range bound within these areas as you can see over here, Bollinger Bands essentially means that once it bounces off either the upper limit, the upper band, this is known as when the conditions are oversold, or when it gets to this bottom band… Sorry, when it goes to the upper band, it's overbought and it's due to bounce back toward its mean and when it bounces off the lower band it is oversold and it will be pushed back to the mean simple moving average.
In a nutshell that's what a Bollinger bounces. The last thing we will talk about is the Bollinger squeeze. In the Bollinger squeeze, this is when prices are usually trending, that's when traders would use it and we can see with the Bollinger squeeze, their periods of contraction when the bands narrowing together and that's usually followed by the band's expanding out and that usually causes an increase in volatility. Usually, when this happens, we are seeing these big squeezing and expansions happen and the prices break out of those bands and that really indicates to a traitor that the prices are going to continue in that direction and the trader would use that as a strategy for an entry or exit signal. These are some ways you can use Bollinger Bands. Go ahead and added to your charts and look at how they interacted the different bands there.
>> Our thanks to Hiren Amin, Senior client education instructor with 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.
We are back with Ben Gossack, take your questions about global stocks. This one just came in. What is your guest think of Japan and what he add new money?
This is from our regular viewer, Jeff.
Jeff, thanks to the question. On the platform, we cannot give specific investing advice but we can talk about what's going on in Japan.
>> When people look at Japan, it seems like a superhot market. I think it's been unique and interesting that Japan per se is that the Japan stock exchange went after a bunch of companies and said your book values are not strong enough, we don't like the fact that you have a lot of cross holdings. It's not uncommon… Imagine like in the US that Microsoft owned shares in Apple and Apple own shares in Tesla, so that's not uncommon in Japan where they have cross holders and so they've been divesting these cross holdings and what they've been doing with their caches buying back their own stock. We like that.
So there has been sort of another wave within Japan. There are Japan industrials that are doing well.
Japan is really good at semiconductors and semiconductor equipment to make the semiconductors so that has been doing really well.
I know we have talked about insurance.
Insurance companies have been doing well and we also have a country that is exiting negative interest rates. As a whole bunch of stuff, the big secular trends that we talk about, there are some idiosyncratic trends happening there and then Korea has been watching Japan and the Korean stock exchange has been going after companies and saying, hey, wake up, shake up your book values, buybacks and stocks, do some more shareholder friendly activities and so that gets people excited and so we have seen Japan and Japan stocks catch away.
>> What is the risk here, that excitement fades?
>> Yeah, that would be the issue.
Secular trends, digesting them. Like all things, I really like Europe.
That doesn't mean I don't want to buy the entire index. I really like Japan, but I like to pick off certain parts about Japan that I like, so I think that's the part that people often go about. You can buy the whole thing or you can pick and choose and also watch how that overlaps with your existing portfolio so you might just be buying along semiconductor exposure by buying into Japan but maybe you already had that and I think that's always a risk that people have to watches watch the compounding of your exposures.
>> Let's get to another question from the audience. This one based off the opening chat we had. How do we find a list of the industrials that you mentioned?
>> Their websites where you can screen companies. They are publicly out there and free. I have used them before.
You can break them down by sector and see that there industrials. There are many stocks that follow let's say the SNP TSX industrials or the S&P 500 industrials or the Russell 2000 industrials.
So you can go and look at their holdings.
It's all there.
You just have to do one or two extra steps.
But all of that information is out there.
And then you can check their performance and then you can check that performance relative to the market. And then look at their subsectors and you'll see a lot of companies that do construction and building materials and HVAC companies doing quite well and starting to ask ourselves why is that happening and then tied back to the fundamentals.
>> I think we need to do so that research on WebBroker as well with the TSX industrials. Some good places to do some homework.
We showed you brought it earlier. With your opinion on the Reddit IPO?
>> Nothing specific about the Reddit IPO.
I would say IPOs in general.
We are 21 months into a bull market.
We are at new highs.
We basically had an IPO market that has been shut down for two years. Usually, people like to take risks in this environment. IPO window is opening. Reddit obviously getting a lot of attention but at the same time this week or last week, we had another AI driven type company called Sierra labs that also had a very successful IPO. There was an aesthetics business, again, good secular trend in Europe, Gail derma opened up quite well.
Amherst sports, which has Wilson and our Turks, was a decent IPO. So everyone that has been hanging around this window waiting for it to open, we will see more IPOs. That is a feature of a bull market.
That is healthy.
We have had a lot of companies struggle in terms of managing their finances. Now, they have another avenue to tap into which is the capital markets.
>> We will get back to questions for Benjamin Gossack on global stocks and just moments time.
As always, make sure you do your own research before making any investment decisions.
and a reminder that you get in touch with us at any time.
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 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.
Let's talk about the Canadian economy.
Growth was better than expected in the last three months of last year but if you look under the hood, every component of demand in the domestic economy was weaker.
Our Anthony Okolie joins us now to take a look at a TD economics report on their latest courtly forecast.
>> TD Economics does not predict that the economy will fall into a recession but they are forecasting growth in 2024 to reflect a small upgrade of roughly 1%. As you mentioned, Canada's economy bounced back in the last quarter of 2023 with real GDP edging up slightly after the slight drop in the fourth quarter. Despite that rebound in the fourth quarter, TD Economics says that the narrative remains the same that high interest rates and borrowing costs are continuing to hurt economic growth. Especially if used about international drivers, the economy in the fourth quarter contracted while GDP per capita has fallen in five of the last 6/4.
While consumer spending growth is looking better in the first quarter of this year, which has been boosted by auto sales, considering that the population is expected to grow to +3% pace in the first quarter of 2024, consumer spending is still projected to underperform on a per capita basis. TD Economics says that this will extend the economic downtrend and will feel similar to the weakness that we have seen in past recessions. Turning to the job markets, here in Canada, the job market is expected to tip into a net loss in the second half of this year according to TD economics.
Along with healthy labour force growth, this will push up the unemployment rate to 6.7% by year end. The downward trend in bond yields we have seen since the fall has taken mortgage rates lower and this has reignited Canada's housing market. TD Economics expects that residential investment to post a decent performance this year as it rebound off last year's lows.
Meanwhile, business investment in Canada is also looking a little bit brighter according to TD Economics this year, led by significant new investments in support of the clean energy transition.
This, TD Economics police, should help Canada's growth pickup back to its trend pace by the end of 2025.
On the inflation front, consumer prices have made headway in terms of cooling across most categories except shelter inflation as the chart shows.
In February, shelter inflation continue to move higher, it was of 6 1/2% year-over-year in February.
While CPI inflation excluding shelter… The Bank of Canada's preferred core measure… TD Economics notes that the Bank of Canada has a shelter problem which they will likely need to look past when it eventually decides to cut its interest rate.
>> Thanks for that, Anthony. Money talks Anthony Okolie.
Now, for an update on the markets.
We are having a look at TD's Advanced Dashboard, a platform designed for active traders available through TD Direct Investing.
This is the heat map function, we are take a look at the market movers, we are looking at the TSX 60 by Price and volume.
Where is the green? It is among some financial names. Some big banks are modestly to the upside. Bit of a mixed picture as you move across the space.
Energy, Cenovus is up modestly and Suncor down modestly and Kinross and materials space up almost a full percent.
Nutrien, we will give it its due, it is up one and 1/2% in the bottom of your screen.
Let's check in on the S&P 100 and see what's happening south of the border.
Tesla getting a bit today, up almost 5%.
EPS down there, United Parcel Service, their investor data came out this morning.
They see stronger volumes this year. Stock has been fading through the session, down almost 7% now.
You can find more information on TD Advanced Dashboard by visiting TD.com/advanceddashboard.
We are back with Ben Gossack from TD Asset Management. Let's get back to your questions.
Someone once your Outlook for small and mid-cap equities in emerging markets.
Do you see them following the US small and mid-cap stocks which are also underperforming so far? Way to set you off.
>> Yes! I mean, look.
I've been out marketing, which means visiting clients across the country and something I got this year that I never got before was what is our mid-cap exposure? I started to ask people what their definition of a mid-cap is, we have trillion dollar market Companies so maybe we need to change what mid-cap is but people, again, people lead busy lives and they've been told that it's only been seven stocks driving this market and so they are like, okay, that must be it.
Hopefully, maybe I will just keep coming back again, showing different parts of the market that are working. People now think, I don't want to chase the large-cap companies so let's look at the medium companies, the small companies.
We also know that emerging markets have not really participated. This is at the index level and so hopefully at the beginning of this year we talked about, yes, Russell 2000 and is not performing as well as the S&P 500.
But the Russell 2000 industrials are performing at the same pace as the S&P 500 if not better. So again, it's about what parts of the market do you want? I also, even in emerging markets, I think what's been holding back emerging markets has been China exposure.
You have, rightfully so, China has been weak, it has been reflected in the socks but there are great stocks I have seen let's say in Brazil, in India, Indonesia, so it's kind of… This is the challenge sometimes when you invest in a broad index, you get everything with it and sometimes you need to be a bit more specific, a little bit more surgical in the exposures that you want.
>> We will squeeze in one more question before the end of the show. This one a broad one. How do you hedge your risk assets?
>> Typically, people think about risk and managing risk, they are thinking about insurance. That is fine.
I think I would go back to what I was saying before when we talked about Japan, I think a risk that is really important and sometimes gets overlooked, he will think, well, if I invest in every industry and there's 11 of them that have been defined, maybe I spread my risk out. Maybe if I invested 200 companies, I spread my risk out. What I'm really worried about is that compounded risk exposure and that is where if you own a bunch of stocks, you could even have 50 stocks are 30 stocks in 20 stocks, but they all play along the same theme and you feel like an incredible genius on the way up. You have two stocks into different value chains, two different sectors, maybe two different countries and you're like, this is incredible, I'm an incredible Stock picker, nothing could stop me!
And then that seem may be in for a pause, maybe it has run out, maybe new competition has come, technology, it doesn't matter. But now, those two stocks are basically the same stock working against you and that is what we call compounded risk.
It's one that I stress all the time, it's the stuff that keeps me up at night.
Especially in a world right now where a lot of it is institutional investing, institutions don't really care about, we talked about an apple or industrials, the Khirbet factors. The way that we talk about socks, they talk about investing in a quality factor, a value factor. Stocks are getting lumped in with each other and so there are many stocks that you may think are completely diversified from each other but are very correlated and it's all great on the way up, it can be very challenging on the way down and that's why always stress, watch your compounded risk.
>> Always a pleasure to have a VO, always enjoy. Look forward to the next time.
>> Absolutely.
>> If you are limited by tie selection, we will hook you up with some ties.
>> Appreciate that.
>> How are things 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. if we didn't get time to get your question today, we will try to do so on future shows. Tomorrow, Benjamin Chim, VP, Dir. and lead of the high-yield fixed income team of TD Asset Management will be our guest tomorrow.
You can get a head start with your questions by emailing moneytalklive@td.com. As all the time we have the show today. Thanks for watching.
We will see tomorrow.
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