Show Transcript
Print Transcript
[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 be joined by TD Asset Management Ben Gossack. We are going to discuss the global pivot he's been seeing as he keeps an eye on the markets.
MoneyTalk's Anthony Okolie is going to have a look at our new TD Economics report on what we might get a rate cut here in Canada. In today's WebBroker education segment, Bryan Rogers will show us, take us through how you can make trades even after the closing bell have run.
So here's how you can 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 will start with the TSX Composite Index. We have some modest grain on the screen.
Very modest, just 31 points to the upside, a little more than 1/10 of a percent.
Among some of the most actively traded names at this hour include Air Canada.
Let's check in on those shares. It's modest, 19 bucks and $0.57 per share, up about 1 1/2%. And Barrick Gold, earlier showing modest downside. At 2312, it is down a little less than a full percent. I keep saying modest. Not a lot going on because of course tomorrow morning we are going to get another read on US inflation.
If you like the market is just waiting for that before making any big moves. Let's check in on the S&P 500. Seeing a bit of green on the screen.
Nothing too dramatic.
Up 10 points on the S&P 500.
More powerful chips for our PCs and laptops so they be getting a bit of a bit this week. 52 points the upside, about 1/3 of a percent on the NASDAQ. Checking in on Amazon, they're cutting hundreds of jobs across their film and film studio enterprise. Right out 153 bucks and change, it's a little more than a full percent. And that is your market update.
Signals from the US Federal Reserve that rate cuts could be on the table set off a market rally in the final weeks of 2023, marking an inflection point of sorts for several sectors. Here to walk us through what he is seeing in the markets, Ben Gossack, managing director and portfolio manager with TD Asset Management. Great to have you back.
>> Thanks, I even bought a new type. New year.
>> You always been the charts and you brought the tie for the new year as well.
Obviously, in the final innings of last year, the Fed came out and tipped its hand and said conditions are right, we could see some rate cuts next year. We can see that ourselves. The market took that information and ran with it but not all of the market. You've got some interesting stuff to share with us.
>> So we definitely saw pivot and we will call it the large Indices, so the S&P 500, TSX 60, we saw the sort of move and then for the full year, when we reflect back on 2023, we will say that's a great year because the S&P was up 20 something percent. Why were we sitting in Cashel your?
We have been talking about a market of stocks over all of 2023 and that market of stocks has actually been a bull market we think for about 18 to 19 months. That takes us back to the summer of 2022.
And throughout that bull market, there have been some key pivot points. In particular, one was around March and April 2022 which was when the Fed started their hiking cycle. We saw sectors like housing and trucking, so these are sectors that you would think would lead an economic cycle, outperform and still outperform.
And then when the market made its bottom in November, so the SNP of that year, we saw other sectors like semiconductors make their bottom and moved. But this last Fed announcement, what was notable to me were three sectors that made up of it and that would be banks, healthcare and real estate.
>> So let's talk about them. Last year we had discussions about financials but the discussion was more around the life Kos having the leadership there are not so much the banks. Maybe we start walking through some of the sectors.
>> Definitely there is a broader secular trend I can chart to even part of the financial crisis of US insurance outperforming US banks. But we are in a period where we are now seeing a leadership change towards the banks. I know I brought some charts as I normally do. Just checking to see if they were up.
>> Here they are, financials versus S&P 500, market cap-weighted and equal weighted.
>> Just to levels that remind people, the way we like to look at the market is still a correlative strength. Think of it as a tug-of-war. On the left-hand side, what you're looking at is S&P 500 financials.
And that's a tug-of-war versus the S&P 500. It's all market So you have to understand that companies like a J.P.
Morgan or Bank of America would represent the majority of that index. And you can see 2023 was a really tough year for banks and it's not until we get to that November, around that decision, there was a little left. So I would say that's notable. What's really interesting is, and we talked about this, but looking at things on an equal weight basis, so let's make J.P. Morgan equal to the tiniest regional bank index and then let's put that over and equal weight SNP 500. And you could say, I would say, since spring of last year, we've actually been kind of on a 45° angle. But what you can't tell is about that leadership change. A lot of it was being driven by insurance, so you could really see the strength of insurance.
And then around that Fed pivot, we saw insurance take a break and resell rotation into banks.
We have banks that are going to start reporting this Friday. Heading into those earnings, they are carrying some interesting momentum.
>> Okay, so it's a very interesting move in the financial space. You mentioned healthcare and real estate as well and this idea that when the Fed finally tipped his hand, some sectors woke up.
>> Yeah. One last point on the banks.
I think the reason why they are outperforming his people, you could tell that people were more worried about credit provisions and the fear of kind of provisions and loans that wouldn't perform.
>> That's a Canadian bank story too. I think we might have a picture of that.
>> And this move we are seeing towards the banks we are seeing in the US and we are seeing in Canada. What we are looking at here is at the Top Is Equal Way, Canadian banks, so we treat all six Canadian banks as equal in this Index and we put it over the market TSX 60. And what's really notable about Canadian banks, and this is why so many people own Canadian banks is, banking is a cyclical sector.
When you look at this chart, you can see the banks go on a four-year run.
When we had the oil collapse in 2014 2015, we saw banks depressed because they were worried about their exposure to the energy sector. That fear was not warranted. And then they went on a four-year outperformance. And then, sometimes, they run into issues.
Banks are on an economic cycle and they go on to years of underperformance. Canadian banks have been underperforming since call it the end of 21. We've had two years of underperformance.
Just like with the US banks, we have seen a notable shift in the banks. Again, I think it's driven by the fear of the provision. It across the country, everyone is saying, aren't we worried about the Canadian banks, all these mortgages are going to reset, doesn't the stock market understand what's going on? It's like, yes, it reflected that in the fear.
We don't need the Fed to cut to see the benefits already because we've already seen it across the yield curve. The market has already taken a percent off rates across the board.
We borrowed those rates today and so already we have provided let's say financial pressure really across the board and that's why you can see the banks performed now as opposed to having to wait for a Bank of Canada cut or a Federal Reserve cut.
>> Very interesting stuff there. Once a bit deeper there on the financial stuff. I think we're going to move on to the healthcare space now. What are you seeing there?
>> On our left-hand chart, again, we are talking about market. What's really notable about the healthcare sector is that it is really dominated by big companies. If you think about like a Johnson & Johnson and a Merck and Pfizer.
In 2022 and the market was selling off, these are typically defensive areas.
People have to take their medicine, they have to continue dialysis, all that type of stuff so you can see that in 2022, healthcare outperformed. In 23, it was the reverse. So those large-cap companies underperformed and most people would say and 23 healthcare was a bad sector to be in.
But it goes back to stock selection. If you owned Eli Lilly or other sort of GLP-1 type drug companies, you were, like, hey, this has been great in healthcare.
And it really shows up on our equal weight chart on the right hand side.
You can see that while large-cap companies were underperforming, equal weight was steadily working and then it stopped working. And we talked a lot about this last year in that there are lots of companies in the healthcare industry that we're facing some existential crises because these obesity drugs might impair their business models.
So if people who are, who would have been disposed to diabetes will become diabetic because their weight is under management, those are billion-dollar franchises where people are saying, are you able to earn the dollars in the future that you are earning today?
>> Let's talk about real estate. Sorry, yeah, we want to talk about real estate.
We got so much to get through.
Getting ahead of myself. Let's talk about real estate because obviously we saw aggressive interest rate hikes, there was an impact.
>> Yeah, you would expect that a lot of times you're looking at the market and you expect certain things to happen, you see it and you're like, okay, not the price.
Sometimes you look and you say okay that's not something I expected to happen. With real estate, it's very barnlike. We saw interest rates go up, we saw a real estate underperformed. There on top of that issues with office, issues regarding commercial real estate, all that type of stuff, it's just feeling the fire. It's underperforming. We are seeing a turn in US real estate sector and I see it on market And equal weight. It's not just one or two socks that are moving, all socks are moving.
Not only that, I see it in Canada and Europe.
It's a global phenomenon where real estate has underperformed and it prohibits. If I look at those charts, they seem to be in secular decline. So it's very possible that what we are seeing in real estate is, yeah, we declined, we are going to unwind and we could continue that decline. I'm not saying there's going to be a bonanza in real estate but it does look like there is a relief rally tied to the fact that interest rates have fallen.
>> A lot of those charts had something in common.
We saw when the Fed came in and stepped in, change the markets thoughts on what the movie up to this year, the inflection point. We are told the telecoms and utilities are also very rate sensitive.
They didn't appear to wake up which the charts are going to show us. What's going on there?
>> That's what I find more notable. There is stuff you would expect. You see a trope on the chart and you're like, yeah, the market is doing what you would expect it to do.
I find it more fascinating when you expect a result and you saw something else happen.
We have seen Staples decline even more. We have seen utilities decline more and telecom stocks. And you would think that while they declined all the time before, the narrative was, yes, this is being driven by interest rates so we lower interest rates, we see certain sectors perform and then these ones got worse. So now it's like, what's going on? That's something that I continue to ask myself.
Why aren't they participating? I don't have the answer right now. But that's the beauty of looking at charts and patterns.
I find they are not crystal balls but they help you to direct where to focus and were to ask the right questions.
>> Excellent stuff and always a great start to the program with Ben Gossack. We are going to get your questions for Ben about global stocks and just moments time.
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.
Hewlett Packard Enterprises it has a definitive agreement to acquire Juniper Networks in a deal valued at some $14 billion.
HPE says the deal is expected to double its networking business as it works towards meeting demand for artificial intelligence applications.
You see Juniper up another 2% today.
The big swing was in yesterday's session when the news that the steel was on its way was making its rounds. A little bit of a bump on the actual confirmation. Let's take a look at shares of Intuitive Surgical. They are on the move higher today. They were earlier when I took a look. Indeed, 6 1/2% still. The robotic surgery company says it expects $1.93 billion in revenue for the fourth quarter, that is above analyst estimate.
Intuitive says surgical procedures using its Da Vinci systems were up 21% compared to the same period last year.
Also going to check in on US homebuilder Lennar. It's boosting its dividend by 33% and increasing a share buyback program by an additional $5 billion. That's got the shares up a little less than 3%. The company says it strong balance sheet and cash position is behind the move to return capital to shareholders. The second on the market, we will start with the TSX Composite Index. Got some green on the screen although it is modest. I 35 points, just shy of 1/5 of a percent. South of the border, we are getting another read tomorrow morning on US inflation. It seems to be a sort of cautious day. A little bit of green. We will be generous and call that 10 points to the upside on the S&P 500, 1/5 of a percent.
Okay, we are back with Ben Gossack, take your questions about global stocks, so let's get to them. The first one here: the Magnificent Seven, or the great eight, had a big run up in 2023. The remainder of the market did not perform as well. Where does your guest see opportunities in 2024?
Let's talk about market breadth here because he took some issue last year with people saying it's only the seven stocks.
>> Yes, I still take issue. It's something I just do not believe in. And yet everyone continues to lecture me on it. And so I think we try to show that, yes, when these stocks move, we can attribute a lot of move into them. I've seen S&P's seven verses S and P4 93. Hopefully we can go back into the archives. We have done a lot of work to say, the last check I had, there were at least 130 companies in the S&P 500 that outperformed the index. So there was more market breadth then there was given account for.
I think also in a healthy market we have seen some leadership change. We've just talked about banks and healthcare, real estate taking some of that leadership to sort of pull up the market so I think that's good.
Other thing I take issue with is we are going to look back and say the SNP was of college 25% for 2023.
Companies like Nvidia, they did most of their work in the first half of the year and then went sideways for the second half of the year.
So it wasn't, it's not like they were up the entire year driving the market. So I would say there has been more breadth than people are giving this credit for. Another thing I would also say which I think is also healthy and why I think it's a bull market of stocks, correlations, into correlations between stocks have been pretty low.
This means that stocks are moving based on their own idiosyncratic issues as opposed to some big macro movement or some big macro fear that's working through the market.
>> We are in the early innings of this year but are you expecting more market breadth again, a bit of a healthier market?
>> Yes, I have never had issue with the market breadth. I think people might realize there is more market breadth.
We talked about Nvidia doing nothing for six months and just recently has woken up.
And so that's what stocks do you. They go on., Especially when they have financial momentum behind them, they go in periods where they outperform and then there is this. To, a digestion phase, and if everything continues, they can continue to wake up.
There was sort of the psychological level around $500 for Nvidia and it's clear that this week and continues to run but to say that's crazy, the stock did nothing for six months and now it's resuming because the trends are the same.
>> Interesting stuff. Let's get another question about healthcare. What are your thoughts on the US healthcare sector, particularly big pharmaceuticals in 2024?
>> So I've spent a lot of time thinking about the healthcare sector and my summation of it is that it's a sector of idiosyncratic stocks. A lot of times we lump stocks together and they can move together and that's very fair I would say for software stocks, semiconductor stocks, rails, banks, the market conditions are typically the same, yes. Business models can change between them but they are more or less on that same lazy river and some could be moving ahead of the others and some lagging but they are all kind of going in one direction.
In healthcare, unless they are all, unless it is in medical devices or let's say insurance where, again, it's a very similar business model, they are going after the same pool of people, especially when it comes to pharmaceuticals, it's like you have to pick winners.
So there are a whole bunch of people trying to get into obesity. So far, who are working on everyone else is falling apart or it's not working or their drug trials are not happening.
So just because a company has a certain drug doesn't mean they are winning with it. That's an area if you are going to look at pharmaceuticals you really have to do the work.
The benefit of a large Pharmaceutical, they will have a franchise and then they have to then replace the pipeline.
I would say if someone really cares about large-cap pharmaceuticals, between 25 and 2030 is Kia. For this industry or subsector because the back half of this decade is when a lot of their blockbuster drugs will lose their exclusivity.
>> Coming off patent.
>> Coming off patent. The market already knows that. It has a schedule.
They will start attacking that thesis and addressing management and putting them under pressure, what are you doing? For some companies, especially some of the big large-caps, this could be 50% of their revenue right now and so the market wants to understand and get confidence that management has a pathway to address that loss of revenue because we know the generics will come. That's just a fact.
And so that's why you're seeing, especially this year at the start of the year, a lot of M&A because companies are trying to replace that revenue that they are going to lose.
>> Interesting stuff. Let's talk alcohol.
We have a viewers saying I've owned Diageo for a couple of decades, it's not that kind of show but apparently it is that kind of show… I've owned Diageo for a couple of decades but was very little to show for it. Our top and alcohol brands the same kinds of stocks is the high-end autos and other pricey are exposed to companies that Ben has mentioned frequently?
Is Constellation a better choice?
You're on the platform we can give you investing advice or which company is better but obviously the viewer knows he speak about luxury and its staying power but do we consider high-end alcohol in that same breadth?
>> I think this is where I take issue with that invest in what you know or great companies don't translate integrate stocks.
And so I think on paper you can look at many of these branded alcohol and you could say there's customer loyalty or they are gaining market share, maybe they raise prices, but at the same time, it's a risk.
If I want to get a high-end bottle of we will call it let's say whiskey, bourbon, short of some sort of Kentucky Bourbon where I have to have a lottery or an allotment, I can basically walk into most bars and I can have that alcohol. The difference between I would say alcohol in the high-end luxury that we talk about is that you can't get it.
And you can bring stacks of cash to whatever retail store… >> Even if I have the bags of money, I'm not getting a Ferrari just because I want one.
>> Exactly.
That's not something you see in spirits.
The other thing I would watch for and it doesn't apply to every spirit company but there is a war going on between China, Europe and North America regarding electric vehicles. And you're gonna say, what does that have to do with it?
>> I thought we were just talking about bourbon, now we are talking about electric vehicles.
>> It was earlier this week I think China should issue to Europe having issue with China's subsidizing the electric vehicle sector and the response from China, and they are a particularly large consumer of brandy and cognac to put on tarriffs.
You could get caught up into that as well.
>> Fascinating stuff.
As always, make sure you do your own research before making any investment decisions.
we will get back to your questions for Ben Gossack on global stocks 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.
We are getting near the beginning of another earnings season and that can bring some pretty big market moves after the closing bell. Joining us now to discuss how you can make investments after regular trading hours is Bryan Rogers, Senior client education instructor at TD Direct Investing.
Ryan, great to see you again. We know that once the banks take off on Wall Street on Friday, we are going to start getting into the thick of it for several weeks.
The bells ring, the markets close, investors don't have to wait to the next day, do they?
>> Yeah, that's a common question that we get quite often is if I missed the 4 o'clock bell, we have had clients calling in the past saying, what do I do? Do I need to wait to the next business day?
Fortunately, the answer is no, you don't have to wait, but only in certain situations so it depends on the type of stock and we will get into that in a moment.
There is trading usually 24 hours a day around the world but we are normally restricted, 9:30 AM to 4 PM Eastern time which is when the exchanges are open but there are some windows and North America that are a little bit outside of that where you can place trades. If it was after hours, the reason why you would do that, let's jump into a brokerage we will show you how you could possibly set up a trade that would be after hours. I have Amazon here up as an example.
Any stock you can put into WebBroker that you wanted to buy or sell, either way, you're going to go to the order to get.
Let's say this was a situation where I wanted to sell.
Remember, one of those restrictions that you mentioned is that it has to be a US dollar stock. If I put in TD and it was on the Canadian exchange or any other Canadian stock, you're not going to see the same menus down here at the bottom but I'm going to show you in a moment. And it does have to pertain to a limit order.
Because in the after hours what they are doing, there's no exchange open any longer, there are no marketmakers, it's all computer-generated, you have to enter a limit order as well.
Let's say I have 100 shares of Amazon and I want to sell at limit price.
Maybe I missed that 4 o'clock window. And you mentioned earlier that one reason could be on earnings. Let's say there were earnings announced, somebody asked well why would I want to do this after hours?
Let's say the stock was dropping significantly or starting to drop and you wanted to catch it before it dropped even further, but the market is closed and he wanted to get it after hours, the window hears from the 4 o'clock time up until 7 PM Eastern time.
It doesn't go forever, you have a timeline. But if I put in a limit for example a to put in $154 or something like that if I wanted to try to get a little bit more and I wanted as you go into the after hours, you can do this after 4 o'clock and you can do this same step but you can do it during the day as well.
You can do day plus extended, that's going to keep this open until after 4 o'clock is going to stay open till 7 PM and it could get filled in the extended market session, which is what we call it.
>> We know that obviously earnings can break after hours. You showed us how people can place trades in the after-hours market. Some people like to wake up early.
I don't like it but I have to. But what about people who want to take action before the market opens?
>> Yeah, I like to sleep into, but if you want to get into or out of that position or maybe even into a position before the market opens, that is a possibility as well and let's jump into web broker and I can speak to the rules on that as well. It depends on your brokerage. Within TD Direct Investing, is going to be between 8 AM until 7 PM, so you can get an order in before that 930 Eastern time and it's the same step. If you notice here we will go from day plus extended markets, I'm going to do that during that time you just mentioned. I'm going to do it a little bit before. It doesn't matter if it's really early. You can do it before that time but it's not going to be active until it gets to that opening time for the extended, early market session. What will happen if you do this day plus extended, this is the only option we have with them WebBroker, we have day, specify, etc., and you can only leave it open for the day. You will have to do this again every day if you want to do it for tomorrow is an example.
Let's say if we were early in the morning, I could do tables extended, it's going to go from that time period that we want to leave it open and is going to go to the regular market session and it will leave it open and after the market session up till 7 PM. If that satisfies your limit, it will get filled and if not, it's going to expire during the day.
One last thing I would say you can do if you're interested in this is we always recommend you click on this?
Within the order ticket and you can go through, you will see as you go through if I keep scrolling down there should be some day plus extended information on here.
I'm going to go down. Keep going.
It will be here somewhere. There is the day plus extended, so as to showing you the information about that 8 AM to 920 would be early session, 4 PM to seven would be the extended session. So we are giving you some time frames if you had forgotten the date ranges there.
>> Great stuff as always.
There we are. The biggest decision I make economically in the morning in the morning is the size of the cup of coffee but hey, different people have different needs.
Thanks for that.
>> Thank you. Take care.
>> 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.
We are back with Ben Gossack taking your questions about global stock so let's get back to them.
Can your guest talk about preparing for the US election?
>> Different ways to make money in the market. Some people look at macro, some people pick single stocks, what works for me is I look for what human beings are doing and I look for secular trends based on human activity and then myself and my team try to figure out which stocks can exploit those trends which leads to stock price outperformance and then we build a portfolio around it and we make sure that we are not duplicating exposures.
Just because we see a stock do one thing and another dozen other things from different sectors, they might be tied to the same trend. That's why try to do everyday. What I didn't say is that I look at political secular trends and try to factor that in. Sometimes, politics can affect your investment portfolio. So the government changes the rules of the game.
Maybe they deregulate, maybe they overregulate. In the case for electric vehicles, the industry is on pause looking to the US and looking to Europe as they have their elections this year whether a change in administration would change subsidies for electric vehicles.
That's a big deal. That's what I would pay attention to.
Who's in charge, how it gets there, the reaction on election day versus the next four years after that is beyond my abilities.
I know my strengths, I know my weaknesses and I don't know how that filters, I don't see how that filters into the process.
Nevertheless, I do believe that will create some anxiety and uncertainty for people.
And I think that's actually okay when I think about there's so much cash sitting on the sidelines and if this bull market continues and we throw in the uncertainty of elections, you can see where a lot of people are going to be like, how do I take my cash and I buy a stock market that's trading at new highs? If we break through those highs and every day that we go higher will be a new high so it's good fuel for the market and rather than everyone putting all their cash and at the same time.
So I'm kind of happy there is a little added uncertainty.
And it also goes back to I'm not a market timer. I know lots of people that are experts in market timing or proclaimed experts and market timing.
Yes, elections are noisy. I would look more about the policies than the people.
This administration, the current administration in the US was supposed to bring a fresh air to the previous administration but if you actually look at the policies, there really isn't much different. A lot of the stuff that was done under the Trump administration, especially around China and tariffs and trade, those continued so that wasn't an issue.
>> Interesting set. It will be an interesting year indeed.
Here we have a company in the oil and gas sector.
What is your opinion on Suncor?
>> We cannot single out any company or stock. I do think in this movement towards renewables, I don't need to be the one to declare, most people declared that we still need fossil fuels and given the fact that we have a lack of investment in the sector, it just exacerbates the need for fossil fuel companies to continue to exist. I think specifically for portfolios, particularly in Canada, we've seen a big change in the US. We've told our company is not to DO greenfield projects and to take their excess capital and return it to shareholders in terms of dividends and buybacks. The slight difference that we see in the US that I'm not particularly excited about is we have seen some mega deals. Exxon's gotta make a deal, Chevron's gotta make a deal.
Once one does a mega deal, they all feel they have to do is make a deal.
The way they are financing these mega deals is with shares. So as an existing shareholder, you're like, okay, is this a good source of capital?
I would say I'm happy with the Canadian producers. They have kept that discipline.
I'm hoping that we are seeing in the US doesn't come into Canada.
But I do think energy producers are a good part of a healthy portfolio.
But it's more, I see that more in terms of like returning capital to shareholders. If that changes in my views will change.
>> We are going to get back to your questions for Ben Gossack on global stocks in just a moment's time.
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 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 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.
Interest rates still top of mind for investors even though it's a new year. We have a new TD Economics report stating that the Bank of Canada may need to cut rates sooner rather than later in the face of a high shelter inflation or they could risk sacrificing too much economic growth.
Anthony Okolie has been digging in and has all the details.
>> I think the key take away of the report is that this year is already shaping up to be a difficult one for the BOC and that's because the economy has flatlined in the second half of 2023 and annual inflation is still sitting at uncomfortably high levels. TD Economics says that the Bank of Canada will be forced to go down one of two paths.
First, fight inflation or cut rates sooner than later. It shelter remains a driver or inflation. Any monetary response that is not pivot to focus on other drivers of inflation would mean the policy rates will likely stay higher for longer and this would result in meagre economic growth here in Canada versus TD Economics baseline forecast.
TD Economics looks back to 2022 and inflation was high everywhere. As the chart shows, price gains are pretty broad based with 60% of items increasing by +4% in Canada and the US. The good news is the share of items comprised in price growth up 4% is already have that within the CPI basket. The bad news is the breadth is still too high given the size of the gains happening in the heavy heading shelter component. Here in Canada, shelter prices are hovering around 6% growth that year-over-year. Rents are around 8% year-over-year and the rise in the Bank of Canada's policy rate has pushed up mortgage interest costs which makes up about 5% of the core CPI basket, push up those interest costs a whopping 30% year-over-year. At the same time, the BOC has said monetary policy cannot solve the structural shortage of housing supply in Canada. Given this backdrop, TD Economics believes the BOC will need to sacrifice more economic growth if they want to get inflation, core inflation, down to 2% while shelter prices remain high around 6%. Should the Bank of Canada keep rates higher for too long, households will dedicate more money to paying their debts and that would mean less money to spend elsewhere sacrificing economic growth.
As this chart shows, there are two other more scenarios for shelter price growth at 4% and 3% which point again to the difficult task that the Bank of Canada has ahead for them, for the basket making up the rest of householders managers.
It would need to come down significantly in other areas of inflation would need to come down significantly to get down to the 2% target so that is a difficult task for the BOC. TD Economics is the Bank of Canada will be able to wait until all the stars are aligned before starting the process to normalize interest rates.
>> You put that all together and the big question everyone always has for us when they find out what we do for a living is one are the cuts coming?
>> TD Economics says CEPI excluding shelter now sits just above the Bank of Canada's 2% target year-over-year and even its preferred indicators are averaging just 2.4% on the three month annualized basis. This signals that annual core inflation rates are heading in the right direction. With underlying inflation moving towards the Bank of Canada's target, TD Economics April policy rate cut remains in view. That is in line with market pricing.
>> Interesting stuff. Thanks.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, for an appeal markets.
We are having a look at TD's Advanced Dashboard, platform designed for active traders available through TD Direct Investing. We are looking at the heat map function here which gives you a view of the market movers on the TSX 60 by Price and volume. Cameco is making gains in the energy sector.
It's more mixed among some of the biggest names they are talking about some of the gyrations we have seen lately in the price of oil. Shopify making some modest gains.
A bit of a modest gain there.
South of the border, we will get fresh read on consumer prices in the morning.
Ahead of that we are seeing movement into some of the big tech names. Not just the chip players even though Nvidia is up more than another 2% today, you got Meta up almost 4%, that is the parent company of Facebook. You can get more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
We are back with Ben Gossack from TD Asset Management talking about global stocks.
Thoughts on Air Canada?
>> Again, can't address any specific stock or company. I would say in general, we like travel, we like aviation specifically on the commercial side. We typically have not done it through the airline carriers.
That's just historically a tough business model. When things are great, they sell seats and when things are tough, they have to discount the seats.
Where we find things that are interesting, if you look at the leisure socks and some of the hotel stocks, I don't know why it's not discussed that often. When I turn on the TV, people want to talk about… >> Delta, Air Canada, United.
>> Yeah, or the Magnificent Seven. But if you look at some of the hotel stocks, they are pushing to new highs.
Again, talk about market breadth. And that's even after people have talked about revenge travel type of stuff.
We are into 24 and hotel stocks are still working. Aircraft suppliers, they are still-- there are still supply chain issues so the industry has really had to work the existing call it inventory of airplanes so companies that do aftermarket servicing have done really well and some of the supply chain so it could be an engine manufacturer, components, have also again continued to do very well.
So that's where again you like a trend, it doesn't have to be a household name like an Air Canada or WestJet or United.
That's where we spend our time looking through sectors or looking through second or third order effects they get that signal and that's what I find exciting about the job and where I think active management can shine.
>> Okay, before you let you go, we have run out of time for questions, but it's a new year.
I know you don't place a lot of stock in the flip of the calendar but what should we be thinking about going forward?
>> So I think for most people, there was an opportunity and 23 to sort of crisscross the company, talk to people. A lot of it was in conservative products underperformed for two years and now three years. So it was Cash's at five or 6% of the yield. Let me just hide out there. I think it goes back again we are not market timing expert so returns are not regular.
They come in spurts. If you were in cash, you miss the run in the last six weeks. I also think it's psychologically hard for people to buy stocks at new highs.
So just a reminder where it's like yeah no one said investing is going to be easy.
That's why you do have to have a discipline process and work with an advisor or a planner to build that process so you don't miss out on the really key, important days that helps to drive those compound returns. That's the other thing, its compounded returns. That requires time in the market.
>> Always great to have you. Looking forward to more chats in the next year.
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. Tomorrow, David Sekera, chief US market strategist from Morningstar Research will be our guest taking your questions about US stocks. You can get a headstart with your questions. Just email moneytalklive@td.com. That's all the time we have for the show today. And for watching. 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 be joined by TD Asset Management Ben Gossack. We are going to discuss the global pivot he's been seeing as he keeps an eye on the markets.
MoneyTalk's Anthony Okolie is going to have a look at our new TD Economics report on what we might get a rate cut here in Canada. In today's WebBroker education segment, Bryan Rogers will show us, take us through how you can make trades even after the closing bell have run.
So here's how you can 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 will start with the TSX Composite Index. We have some modest grain on the screen.
Very modest, just 31 points to the upside, a little more than 1/10 of a percent.
Among some of the most actively traded names at this hour include Air Canada.
Let's check in on those shares. It's modest, 19 bucks and $0.57 per share, up about 1 1/2%. And Barrick Gold, earlier showing modest downside. At 2312, it is down a little less than a full percent. I keep saying modest. Not a lot going on because of course tomorrow morning we are going to get another read on US inflation.
If you like the market is just waiting for that before making any big moves. Let's check in on the S&P 500. Seeing a bit of green on the screen.
Nothing too dramatic.
Up 10 points on the S&P 500.
More powerful chips for our PCs and laptops so they be getting a bit of a bit this week. 52 points the upside, about 1/3 of a percent on the NASDAQ. Checking in on Amazon, they're cutting hundreds of jobs across their film and film studio enterprise. Right out 153 bucks and change, it's a little more than a full percent. And that is your market update.
Signals from the US Federal Reserve that rate cuts could be on the table set off a market rally in the final weeks of 2023, marking an inflection point of sorts for several sectors. Here to walk us through what he is seeing in the markets, Ben Gossack, managing director and portfolio manager with TD Asset Management. Great to have you back.
>> Thanks, I even bought a new type. New year.
>> You always been the charts and you brought the tie for the new year as well.
Obviously, in the final innings of last year, the Fed came out and tipped its hand and said conditions are right, we could see some rate cuts next year. We can see that ourselves. The market took that information and ran with it but not all of the market. You've got some interesting stuff to share with us.
>> So we definitely saw pivot and we will call it the large Indices, so the S&P 500, TSX 60, we saw the sort of move and then for the full year, when we reflect back on 2023, we will say that's a great year because the S&P was up 20 something percent. Why were we sitting in Cashel your?
We have been talking about a market of stocks over all of 2023 and that market of stocks has actually been a bull market we think for about 18 to 19 months. That takes us back to the summer of 2022.
And throughout that bull market, there have been some key pivot points. In particular, one was around March and April 2022 which was when the Fed started their hiking cycle. We saw sectors like housing and trucking, so these are sectors that you would think would lead an economic cycle, outperform and still outperform.
And then when the market made its bottom in November, so the SNP of that year, we saw other sectors like semiconductors make their bottom and moved. But this last Fed announcement, what was notable to me were three sectors that made up of it and that would be banks, healthcare and real estate.
>> So let's talk about them. Last year we had discussions about financials but the discussion was more around the life Kos having the leadership there are not so much the banks. Maybe we start walking through some of the sectors.
>> Definitely there is a broader secular trend I can chart to even part of the financial crisis of US insurance outperforming US banks. But we are in a period where we are now seeing a leadership change towards the banks. I know I brought some charts as I normally do. Just checking to see if they were up.
>> Here they are, financials versus S&P 500, market cap-weighted and equal weighted.
>> Just to levels that remind people, the way we like to look at the market is still a correlative strength. Think of it as a tug-of-war. On the left-hand side, what you're looking at is S&P 500 financials.
And that's a tug-of-war versus the S&P 500. It's all market So you have to understand that companies like a J.P.
Morgan or Bank of America would represent the majority of that index. And you can see 2023 was a really tough year for banks and it's not until we get to that November, around that decision, there was a little left. So I would say that's notable. What's really interesting is, and we talked about this, but looking at things on an equal weight basis, so let's make J.P. Morgan equal to the tiniest regional bank index and then let's put that over and equal weight SNP 500. And you could say, I would say, since spring of last year, we've actually been kind of on a 45° angle. But what you can't tell is about that leadership change. A lot of it was being driven by insurance, so you could really see the strength of insurance.
And then around that Fed pivot, we saw insurance take a break and resell rotation into banks.
We have banks that are going to start reporting this Friday. Heading into those earnings, they are carrying some interesting momentum.
>> Okay, so it's a very interesting move in the financial space. You mentioned healthcare and real estate as well and this idea that when the Fed finally tipped his hand, some sectors woke up.
>> Yeah. One last point on the banks.
I think the reason why they are outperforming his people, you could tell that people were more worried about credit provisions and the fear of kind of provisions and loans that wouldn't perform.
>> That's a Canadian bank story too. I think we might have a picture of that.
>> And this move we are seeing towards the banks we are seeing in the US and we are seeing in Canada. What we are looking at here is at the Top Is Equal Way, Canadian banks, so we treat all six Canadian banks as equal in this Index and we put it over the market TSX 60. And what's really notable about Canadian banks, and this is why so many people own Canadian banks is, banking is a cyclical sector.
When you look at this chart, you can see the banks go on a four-year run.
When we had the oil collapse in 2014 2015, we saw banks depressed because they were worried about their exposure to the energy sector. That fear was not warranted. And then they went on a four-year outperformance. And then, sometimes, they run into issues.
Banks are on an economic cycle and they go on to years of underperformance. Canadian banks have been underperforming since call it the end of 21. We've had two years of underperformance.
Just like with the US banks, we have seen a notable shift in the banks. Again, I think it's driven by the fear of the provision. It across the country, everyone is saying, aren't we worried about the Canadian banks, all these mortgages are going to reset, doesn't the stock market understand what's going on? It's like, yes, it reflected that in the fear.
We don't need the Fed to cut to see the benefits already because we've already seen it across the yield curve. The market has already taken a percent off rates across the board.
We borrowed those rates today and so already we have provided let's say financial pressure really across the board and that's why you can see the banks performed now as opposed to having to wait for a Bank of Canada cut or a Federal Reserve cut.
>> Very interesting stuff there. Once a bit deeper there on the financial stuff. I think we're going to move on to the healthcare space now. What are you seeing there?
>> On our left-hand chart, again, we are talking about market. What's really notable about the healthcare sector is that it is really dominated by big companies. If you think about like a Johnson & Johnson and a Merck and Pfizer.
In 2022 and the market was selling off, these are typically defensive areas.
People have to take their medicine, they have to continue dialysis, all that type of stuff so you can see that in 2022, healthcare outperformed. In 23, it was the reverse. So those large-cap companies underperformed and most people would say and 23 healthcare was a bad sector to be in.
But it goes back to stock selection. If you owned Eli Lilly or other sort of GLP-1 type drug companies, you were, like, hey, this has been great in healthcare.
And it really shows up on our equal weight chart on the right hand side.
You can see that while large-cap companies were underperforming, equal weight was steadily working and then it stopped working. And we talked a lot about this last year in that there are lots of companies in the healthcare industry that we're facing some existential crises because these obesity drugs might impair their business models.
So if people who are, who would have been disposed to diabetes will become diabetic because their weight is under management, those are billion-dollar franchises where people are saying, are you able to earn the dollars in the future that you are earning today?
>> Let's talk about real estate. Sorry, yeah, we want to talk about real estate.
We got so much to get through.
Getting ahead of myself. Let's talk about real estate because obviously we saw aggressive interest rate hikes, there was an impact.
>> Yeah, you would expect that a lot of times you're looking at the market and you expect certain things to happen, you see it and you're like, okay, not the price.
Sometimes you look and you say okay that's not something I expected to happen. With real estate, it's very barnlike. We saw interest rates go up, we saw a real estate underperformed. There on top of that issues with office, issues regarding commercial real estate, all that type of stuff, it's just feeling the fire. It's underperforming. We are seeing a turn in US real estate sector and I see it on market And equal weight. It's not just one or two socks that are moving, all socks are moving.
Not only that, I see it in Canada and Europe.
It's a global phenomenon where real estate has underperformed and it prohibits. If I look at those charts, they seem to be in secular decline. So it's very possible that what we are seeing in real estate is, yeah, we declined, we are going to unwind and we could continue that decline. I'm not saying there's going to be a bonanza in real estate but it does look like there is a relief rally tied to the fact that interest rates have fallen.
>> A lot of those charts had something in common.
We saw when the Fed came in and stepped in, change the markets thoughts on what the movie up to this year, the inflection point. We are told the telecoms and utilities are also very rate sensitive.
They didn't appear to wake up which the charts are going to show us. What's going on there?
>> That's what I find more notable. There is stuff you would expect. You see a trope on the chart and you're like, yeah, the market is doing what you would expect it to do.
I find it more fascinating when you expect a result and you saw something else happen.
We have seen Staples decline even more. We have seen utilities decline more and telecom stocks. And you would think that while they declined all the time before, the narrative was, yes, this is being driven by interest rates so we lower interest rates, we see certain sectors perform and then these ones got worse. So now it's like, what's going on? That's something that I continue to ask myself.
Why aren't they participating? I don't have the answer right now. But that's the beauty of looking at charts and patterns.
I find they are not crystal balls but they help you to direct where to focus and were to ask the right questions.
>> Excellent stuff and always a great start to the program with Ben Gossack. We are going to get your questions for Ben about global stocks and just moments time.
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.
Hewlett Packard Enterprises it has a definitive agreement to acquire Juniper Networks in a deal valued at some $14 billion.
HPE says the deal is expected to double its networking business as it works towards meeting demand for artificial intelligence applications.
You see Juniper up another 2% today.
The big swing was in yesterday's session when the news that the steel was on its way was making its rounds. A little bit of a bump on the actual confirmation. Let's take a look at shares of Intuitive Surgical. They are on the move higher today. They were earlier when I took a look. Indeed, 6 1/2% still. The robotic surgery company says it expects $1.93 billion in revenue for the fourth quarter, that is above analyst estimate.
Intuitive says surgical procedures using its Da Vinci systems were up 21% compared to the same period last year.
Also going to check in on US homebuilder Lennar. It's boosting its dividend by 33% and increasing a share buyback program by an additional $5 billion. That's got the shares up a little less than 3%. The company says it strong balance sheet and cash position is behind the move to return capital to shareholders. The second on the market, we will start with the TSX Composite Index. Got some green on the screen although it is modest. I 35 points, just shy of 1/5 of a percent. South of the border, we are getting another read tomorrow morning on US inflation. It seems to be a sort of cautious day. A little bit of green. We will be generous and call that 10 points to the upside on the S&P 500, 1/5 of a percent.
Okay, we are back with Ben Gossack, take your questions about global stocks, so let's get to them. The first one here: the Magnificent Seven, or the great eight, had a big run up in 2023. The remainder of the market did not perform as well. Where does your guest see opportunities in 2024?
Let's talk about market breadth here because he took some issue last year with people saying it's only the seven stocks.
>> Yes, I still take issue. It's something I just do not believe in. And yet everyone continues to lecture me on it. And so I think we try to show that, yes, when these stocks move, we can attribute a lot of move into them. I've seen S&P's seven verses S and P4 93. Hopefully we can go back into the archives. We have done a lot of work to say, the last check I had, there were at least 130 companies in the S&P 500 that outperformed the index. So there was more market breadth then there was given account for.
I think also in a healthy market we have seen some leadership change. We've just talked about banks and healthcare, real estate taking some of that leadership to sort of pull up the market so I think that's good.
Other thing I take issue with is we are going to look back and say the SNP was of college 25% for 2023.
Companies like Nvidia, they did most of their work in the first half of the year and then went sideways for the second half of the year.
So it wasn't, it's not like they were up the entire year driving the market. So I would say there has been more breadth than people are giving this credit for. Another thing I would also say which I think is also healthy and why I think it's a bull market of stocks, correlations, into correlations between stocks have been pretty low.
This means that stocks are moving based on their own idiosyncratic issues as opposed to some big macro movement or some big macro fear that's working through the market.
>> We are in the early innings of this year but are you expecting more market breadth again, a bit of a healthier market?
>> Yes, I have never had issue with the market breadth. I think people might realize there is more market breadth.
We talked about Nvidia doing nothing for six months and just recently has woken up.
And so that's what stocks do you. They go on., Especially when they have financial momentum behind them, they go in periods where they outperform and then there is this. To, a digestion phase, and if everything continues, they can continue to wake up.
There was sort of the psychological level around $500 for Nvidia and it's clear that this week and continues to run but to say that's crazy, the stock did nothing for six months and now it's resuming because the trends are the same.
>> Interesting stuff. Let's get another question about healthcare. What are your thoughts on the US healthcare sector, particularly big pharmaceuticals in 2024?
>> So I've spent a lot of time thinking about the healthcare sector and my summation of it is that it's a sector of idiosyncratic stocks. A lot of times we lump stocks together and they can move together and that's very fair I would say for software stocks, semiconductor stocks, rails, banks, the market conditions are typically the same, yes. Business models can change between them but they are more or less on that same lazy river and some could be moving ahead of the others and some lagging but they are all kind of going in one direction.
In healthcare, unless they are all, unless it is in medical devices or let's say insurance where, again, it's a very similar business model, they are going after the same pool of people, especially when it comes to pharmaceuticals, it's like you have to pick winners.
So there are a whole bunch of people trying to get into obesity. So far, who are working on everyone else is falling apart or it's not working or their drug trials are not happening.
So just because a company has a certain drug doesn't mean they are winning with it. That's an area if you are going to look at pharmaceuticals you really have to do the work.
The benefit of a large Pharmaceutical, they will have a franchise and then they have to then replace the pipeline.
I would say if someone really cares about large-cap pharmaceuticals, between 25 and 2030 is Kia. For this industry or subsector because the back half of this decade is when a lot of their blockbuster drugs will lose their exclusivity.
>> Coming off patent.
>> Coming off patent. The market already knows that. It has a schedule.
They will start attacking that thesis and addressing management and putting them under pressure, what are you doing? For some companies, especially some of the big large-caps, this could be 50% of their revenue right now and so the market wants to understand and get confidence that management has a pathway to address that loss of revenue because we know the generics will come. That's just a fact.
And so that's why you're seeing, especially this year at the start of the year, a lot of M&A because companies are trying to replace that revenue that they are going to lose.
>> Interesting stuff. Let's talk alcohol.
We have a viewers saying I've owned Diageo for a couple of decades, it's not that kind of show but apparently it is that kind of show… I've owned Diageo for a couple of decades but was very little to show for it. Our top and alcohol brands the same kinds of stocks is the high-end autos and other pricey are exposed to companies that Ben has mentioned frequently?
Is Constellation a better choice?
You're on the platform we can give you investing advice or which company is better but obviously the viewer knows he speak about luxury and its staying power but do we consider high-end alcohol in that same breadth?
>> I think this is where I take issue with that invest in what you know or great companies don't translate integrate stocks.
And so I think on paper you can look at many of these branded alcohol and you could say there's customer loyalty or they are gaining market share, maybe they raise prices, but at the same time, it's a risk.
If I want to get a high-end bottle of we will call it let's say whiskey, bourbon, short of some sort of Kentucky Bourbon where I have to have a lottery or an allotment, I can basically walk into most bars and I can have that alcohol. The difference between I would say alcohol in the high-end luxury that we talk about is that you can't get it.
And you can bring stacks of cash to whatever retail store… >> Even if I have the bags of money, I'm not getting a Ferrari just because I want one.
>> Exactly.
That's not something you see in spirits.
The other thing I would watch for and it doesn't apply to every spirit company but there is a war going on between China, Europe and North America regarding electric vehicles. And you're gonna say, what does that have to do with it?
>> I thought we were just talking about bourbon, now we are talking about electric vehicles.
>> It was earlier this week I think China should issue to Europe having issue with China's subsidizing the electric vehicle sector and the response from China, and they are a particularly large consumer of brandy and cognac to put on tarriffs.
You could get caught up into that as well.
>> Fascinating stuff.
As always, make sure you do your own research before making any investment decisions.
we will get back to your questions for Ben Gossack on global stocks 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.
We are getting near the beginning of another earnings season and that can bring some pretty big market moves after the closing bell. Joining us now to discuss how you can make investments after regular trading hours is Bryan Rogers, Senior client education instructor at TD Direct Investing.
Ryan, great to see you again. We know that once the banks take off on Wall Street on Friday, we are going to start getting into the thick of it for several weeks.
The bells ring, the markets close, investors don't have to wait to the next day, do they?
>> Yeah, that's a common question that we get quite often is if I missed the 4 o'clock bell, we have had clients calling in the past saying, what do I do? Do I need to wait to the next business day?
Fortunately, the answer is no, you don't have to wait, but only in certain situations so it depends on the type of stock and we will get into that in a moment.
There is trading usually 24 hours a day around the world but we are normally restricted, 9:30 AM to 4 PM Eastern time which is when the exchanges are open but there are some windows and North America that are a little bit outside of that where you can place trades. If it was after hours, the reason why you would do that, let's jump into a brokerage we will show you how you could possibly set up a trade that would be after hours. I have Amazon here up as an example.
Any stock you can put into WebBroker that you wanted to buy or sell, either way, you're going to go to the order to get.
Let's say this was a situation where I wanted to sell.
Remember, one of those restrictions that you mentioned is that it has to be a US dollar stock. If I put in TD and it was on the Canadian exchange or any other Canadian stock, you're not going to see the same menus down here at the bottom but I'm going to show you in a moment. And it does have to pertain to a limit order.
Because in the after hours what they are doing, there's no exchange open any longer, there are no marketmakers, it's all computer-generated, you have to enter a limit order as well.
Let's say I have 100 shares of Amazon and I want to sell at limit price.
Maybe I missed that 4 o'clock window. And you mentioned earlier that one reason could be on earnings. Let's say there were earnings announced, somebody asked well why would I want to do this after hours?
Let's say the stock was dropping significantly or starting to drop and you wanted to catch it before it dropped even further, but the market is closed and he wanted to get it after hours, the window hears from the 4 o'clock time up until 7 PM Eastern time.
It doesn't go forever, you have a timeline. But if I put in a limit for example a to put in $154 or something like that if I wanted to try to get a little bit more and I wanted as you go into the after hours, you can do this after 4 o'clock and you can do this same step but you can do it during the day as well.
You can do day plus extended, that's going to keep this open until after 4 o'clock is going to stay open till 7 PM and it could get filled in the extended market session, which is what we call it.
>> We know that obviously earnings can break after hours. You showed us how people can place trades in the after-hours market. Some people like to wake up early.
I don't like it but I have to. But what about people who want to take action before the market opens?
>> Yeah, I like to sleep into, but if you want to get into or out of that position or maybe even into a position before the market opens, that is a possibility as well and let's jump into web broker and I can speak to the rules on that as well. It depends on your brokerage. Within TD Direct Investing, is going to be between 8 AM until 7 PM, so you can get an order in before that 930 Eastern time and it's the same step. If you notice here we will go from day plus extended markets, I'm going to do that during that time you just mentioned. I'm going to do it a little bit before. It doesn't matter if it's really early. You can do it before that time but it's not going to be active until it gets to that opening time for the extended, early market session. What will happen if you do this day plus extended, this is the only option we have with them WebBroker, we have day, specify, etc., and you can only leave it open for the day. You will have to do this again every day if you want to do it for tomorrow is an example.
Let's say if we were early in the morning, I could do tables extended, it's going to go from that time period that we want to leave it open and is going to go to the regular market session and it will leave it open and after the market session up till 7 PM. If that satisfies your limit, it will get filled and if not, it's going to expire during the day.
One last thing I would say you can do if you're interested in this is we always recommend you click on this?
Within the order ticket and you can go through, you will see as you go through if I keep scrolling down there should be some day plus extended information on here.
I'm going to go down. Keep going.
It will be here somewhere. There is the day plus extended, so as to showing you the information about that 8 AM to 920 would be early session, 4 PM to seven would be the extended session. So we are giving you some time frames if you had forgotten the date ranges there.
>> Great stuff as always.
There we are. The biggest decision I make economically in the morning in the morning is the size of the cup of coffee but hey, different people have different needs.
Thanks for that.
>> Thank you. Take care.
>> 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.
We are back with Ben Gossack taking your questions about global stock so let's get back to them.
Can your guest talk about preparing for the US election?
>> Different ways to make money in the market. Some people look at macro, some people pick single stocks, what works for me is I look for what human beings are doing and I look for secular trends based on human activity and then myself and my team try to figure out which stocks can exploit those trends which leads to stock price outperformance and then we build a portfolio around it and we make sure that we are not duplicating exposures.
Just because we see a stock do one thing and another dozen other things from different sectors, they might be tied to the same trend. That's why try to do everyday. What I didn't say is that I look at political secular trends and try to factor that in. Sometimes, politics can affect your investment portfolio. So the government changes the rules of the game.
Maybe they deregulate, maybe they overregulate. In the case for electric vehicles, the industry is on pause looking to the US and looking to Europe as they have their elections this year whether a change in administration would change subsidies for electric vehicles.
That's a big deal. That's what I would pay attention to.
Who's in charge, how it gets there, the reaction on election day versus the next four years after that is beyond my abilities.
I know my strengths, I know my weaknesses and I don't know how that filters, I don't see how that filters into the process.
Nevertheless, I do believe that will create some anxiety and uncertainty for people.
And I think that's actually okay when I think about there's so much cash sitting on the sidelines and if this bull market continues and we throw in the uncertainty of elections, you can see where a lot of people are going to be like, how do I take my cash and I buy a stock market that's trading at new highs? If we break through those highs and every day that we go higher will be a new high so it's good fuel for the market and rather than everyone putting all their cash and at the same time.
So I'm kind of happy there is a little added uncertainty.
And it also goes back to I'm not a market timer. I know lots of people that are experts in market timing or proclaimed experts and market timing.
Yes, elections are noisy. I would look more about the policies than the people.
This administration, the current administration in the US was supposed to bring a fresh air to the previous administration but if you actually look at the policies, there really isn't much different. A lot of the stuff that was done under the Trump administration, especially around China and tariffs and trade, those continued so that wasn't an issue.
>> Interesting set. It will be an interesting year indeed.
Here we have a company in the oil and gas sector.
What is your opinion on Suncor?
>> We cannot single out any company or stock. I do think in this movement towards renewables, I don't need to be the one to declare, most people declared that we still need fossil fuels and given the fact that we have a lack of investment in the sector, it just exacerbates the need for fossil fuel companies to continue to exist. I think specifically for portfolios, particularly in Canada, we've seen a big change in the US. We've told our company is not to DO greenfield projects and to take their excess capital and return it to shareholders in terms of dividends and buybacks. The slight difference that we see in the US that I'm not particularly excited about is we have seen some mega deals. Exxon's gotta make a deal, Chevron's gotta make a deal.
Once one does a mega deal, they all feel they have to do is make a deal.
The way they are financing these mega deals is with shares. So as an existing shareholder, you're like, okay, is this a good source of capital?
I would say I'm happy with the Canadian producers. They have kept that discipline.
I'm hoping that we are seeing in the US doesn't come into Canada.
But I do think energy producers are a good part of a healthy portfolio.
But it's more, I see that more in terms of like returning capital to shareholders. If that changes in my views will change.
>> We are going to get back to your questions for Ben Gossack on global stocks in just a moment's time.
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 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 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.
Interest rates still top of mind for investors even though it's a new year. We have a new TD Economics report stating that the Bank of Canada may need to cut rates sooner rather than later in the face of a high shelter inflation or they could risk sacrificing too much economic growth.
Anthony Okolie has been digging in and has all the details.
>> I think the key take away of the report is that this year is already shaping up to be a difficult one for the BOC and that's because the economy has flatlined in the second half of 2023 and annual inflation is still sitting at uncomfortably high levels. TD Economics says that the Bank of Canada will be forced to go down one of two paths.
First, fight inflation or cut rates sooner than later. It shelter remains a driver or inflation. Any monetary response that is not pivot to focus on other drivers of inflation would mean the policy rates will likely stay higher for longer and this would result in meagre economic growth here in Canada versus TD Economics baseline forecast.
TD Economics looks back to 2022 and inflation was high everywhere. As the chart shows, price gains are pretty broad based with 60% of items increasing by +4% in Canada and the US. The good news is the share of items comprised in price growth up 4% is already have that within the CPI basket. The bad news is the breadth is still too high given the size of the gains happening in the heavy heading shelter component. Here in Canada, shelter prices are hovering around 6% growth that year-over-year. Rents are around 8% year-over-year and the rise in the Bank of Canada's policy rate has pushed up mortgage interest costs which makes up about 5% of the core CPI basket, push up those interest costs a whopping 30% year-over-year. At the same time, the BOC has said monetary policy cannot solve the structural shortage of housing supply in Canada. Given this backdrop, TD Economics believes the BOC will need to sacrifice more economic growth if they want to get inflation, core inflation, down to 2% while shelter prices remain high around 6%. Should the Bank of Canada keep rates higher for too long, households will dedicate more money to paying their debts and that would mean less money to spend elsewhere sacrificing economic growth.
As this chart shows, there are two other more scenarios for shelter price growth at 4% and 3% which point again to the difficult task that the Bank of Canada has ahead for them, for the basket making up the rest of householders managers.
It would need to come down significantly in other areas of inflation would need to come down significantly to get down to the 2% target so that is a difficult task for the BOC. TD Economics is the Bank of Canada will be able to wait until all the stars are aligned before starting the process to normalize interest rates.
>> You put that all together and the big question everyone always has for us when they find out what we do for a living is one are the cuts coming?
>> TD Economics says CEPI excluding shelter now sits just above the Bank of Canada's 2% target year-over-year and even its preferred indicators are averaging just 2.4% on the three month annualized basis. This signals that annual core inflation rates are heading in the right direction. With underlying inflation moving towards the Bank of Canada's target, TD Economics April policy rate cut remains in view. That is in line with market pricing.
>> Interesting stuff. Thanks.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, for an appeal markets.
We are having a look at TD's Advanced Dashboard, platform designed for active traders available through TD Direct Investing. We are looking at the heat map function here which gives you a view of the market movers on the TSX 60 by Price and volume. Cameco is making gains in the energy sector.
It's more mixed among some of the biggest names they are talking about some of the gyrations we have seen lately in the price of oil. Shopify making some modest gains.
A bit of a modest gain there.
South of the border, we will get fresh read on consumer prices in the morning.
Ahead of that we are seeing movement into some of the big tech names. Not just the chip players even though Nvidia is up more than another 2% today, you got Meta up almost 4%, that is the parent company of Facebook. You can get more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
We are back with Ben Gossack from TD Asset Management talking about global stocks.
Thoughts on Air Canada?
>> Again, can't address any specific stock or company. I would say in general, we like travel, we like aviation specifically on the commercial side. We typically have not done it through the airline carriers.
That's just historically a tough business model. When things are great, they sell seats and when things are tough, they have to discount the seats.
Where we find things that are interesting, if you look at the leisure socks and some of the hotel stocks, I don't know why it's not discussed that often. When I turn on the TV, people want to talk about… >> Delta, Air Canada, United.
>> Yeah, or the Magnificent Seven. But if you look at some of the hotel stocks, they are pushing to new highs.
Again, talk about market breadth. And that's even after people have talked about revenge travel type of stuff.
We are into 24 and hotel stocks are still working. Aircraft suppliers, they are still-- there are still supply chain issues so the industry has really had to work the existing call it inventory of airplanes so companies that do aftermarket servicing have done really well and some of the supply chain so it could be an engine manufacturer, components, have also again continued to do very well.
So that's where again you like a trend, it doesn't have to be a household name like an Air Canada or WestJet or United.
That's where we spend our time looking through sectors or looking through second or third order effects they get that signal and that's what I find exciting about the job and where I think active management can shine.
>> Okay, before you let you go, we have run out of time for questions, but it's a new year.
I know you don't place a lot of stock in the flip of the calendar but what should we be thinking about going forward?
>> So I think for most people, there was an opportunity and 23 to sort of crisscross the company, talk to people. A lot of it was in conservative products underperformed for two years and now three years. So it was Cash's at five or 6% of the yield. Let me just hide out there. I think it goes back again we are not market timing expert so returns are not regular.
They come in spurts. If you were in cash, you miss the run in the last six weeks. I also think it's psychologically hard for people to buy stocks at new highs.
So just a reminder where it's like yeah no one said investing is going to be easy.
That's why you do have to have a discipline process and work with an advisor or a planner to build that process so you don't miss out on the really key, important days that helps to drive those compound returns. That's the other thing, its compounded returns. That requires time in the market.
>> Always great to have you. Looking forward to more chats in the next year.
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. Tomorrow, David Sekera, chief US market strategist from Morningstar Research will be our guest taking your questions about US stocks. You can get a headstart with your questions. Just email moneytalklive@td.com. That's all the time we have for the show today. And for watching. We will see you tomorrow.
[music]
