Best Of – 07/04/2022

(Music) HELLO I'M GREG BONNELL AND WELCOME TO MONEYTALK LIVE WHICH IS BROUGHT TO YOU BY TD DIRECT INVESTING. COMING UP ON TODAY'S SHOW, WE'LL GET 3 VIEWS ON THE UNCERTAINTY FACING THE ECONOMY AND MARKETS IN JUST A FEW MOMENTS WE'LL HEAR FROM BART MELEK ON WHAT A RECESSION WOULD MEAN FOR COMMODITY PRICES, WE'LL ALSO GET HAFIZ NOORDIN'S VIEW ON POTENTIAL OPPORTUNITY IN THE EMERGING MARKETS SPACE. AND LATER ON THE SHOW WE'LL GET FRANCIS FONG'S TAKE ON WHY DECLINING HOME PRICES MAY NOT ACTUALLY SOLVE CANADA'S AFFORDABILITY PROBLEMS. PLUS, COMING UP IN TODAY'S WEB-BROKER EDUCATION SEGMENT WE'LL HAVE A LOOK AT HOW YOU CAN EXAMINE ANALYST RATINGS ON POSSIBLE INVESTMENTS WITH CAITLIN CORMIER AND BEFORE WE GET TO OUR GUEST TODAY LET'S GET YOU AN UPDATE ON THE MARKETS Of course it is July 4, the Americans are closed for their Independence Day holiday. The TSX starting on a fairly strong foot perhaps playing some catch-up remember Americans did trade on Friday when we had our candidate holiday. Starting with some gains on their second half of the year. Here we are 19,065 on Bay Street, the TSX up more than a full percent. Before I sat in the chair,… Let's check in on Alamosa gold, up a bit more… Teck is down to the tune of about almost 3%. About 15 a share to 3821. And that's your market update. COMMODITY PRICES HAVE BEEN ON THE RISE THROUGH 2022, BUT WITH GROWING TALK OF A POSSIBLE RECESSION THAT RIDE COULD COME TO AN END. EARLIER WE SPOKE WITH BART MELEK, HEAD OF COMMODITIES STRATEGY AT TD SECURITIES ON WHY HE THINKS ANY DOWNTURN IN THE VALUE OF COMMODITIES LIKE OIL OR BASE METALS WOULD BE SHORT LIVED. >> Commodities I think, like all other risk assets will feel a material slowdown in economic activity. Mainly because that will impact them. Let's start off with industrial metals and perhaps oil. Because they tend to respond the most to a reduction in activity around the world. So typically, what happens in this part of the cycle is we have lots of inventories and a significant amount of potential investors. We also would have pretty effervescent speculation where speculative traders and money managers would tend to be quite long. Now enter the central banks with the most aggressive tightening that we are probably going to see in some 40 years. That is of course due to inflation. … And like it or not, there will likely need to slow the economy in order to suppress inflationary pressures. Mainly because much of those pressures are supply driven. Everything from logistics to COVID based interruptions and of course the big war in Europe between Ukraine and Russia. What is that typically mean? Well, when the economy slows, demand slows. On the margin you will have a loosening of conditions. Investors, the ones that were fairly aggressively long, will tend to come off. We are already seeing that and we have seen that with oil. Prices come up from the highs of over 130 or so. Now back again to about 113. We have seen copper down around 20% already from the 10,000+ levels. That is in the case across the board. Even gold which tends to be seen as a hedge against inflation at a stabilizing asset. But even gold tends to move lower when interest rates particularly on the real side of things move down. So all commodities have been down. If we expect growth to materially deteriorate, we see more downside. >> You brought along some charts for us to help us illustrate what we are seeing here. I want to focus on the oil space and show the audience of course. The supply situation we have, we have this interesting crossroads. You cannot of a pandemic and think there will be increased demand. You are worried about a recession. But at the same time where is the supply the world is looking for? >> This chart is quite telling. It tells us that inventory levels are quite low. Not only at the cycle level where demand is expected to increase. We are not saying demand is going to decline. We are saying the growth rate is going to slow down. over the next few months, we think oil might go even higher. For the third quarter, there is a price of about 116 to 118 on average. That means we could easily see 130 or 130+ if not higher. Just from a trading perspective. Why? Two reasons. It seems that OPEC does not have spare capacity that can deploy anytime soon. In fact that was confirmed at the G7 were apparently it was whispered to one of the other world leaders that OPEC United Emirates doesn't really have a lot of… >> Sort of like don't get on us… >> We look at that data. We look at spare capacity. That seems to be you know, a fact. Now, OPEC has promised over the next few months to increase production by some 648,000 barrels per day over the next little while. They have been very much a disappointment in that respect. They cannot deliver what they promised. It's a case where countries with a quota to produce don't have the capability. Nigeria very much comes to mind. They are underperforming by half a million barrels. They did tell us the other day that probably in August they might deploy another half million barrels. But August is not necessarily now. So given the fact that we have a loss of refine and capacity in the United States of some 1 million barrels a day, demand after COVID has not really responded negatively to higher prices. People still have money in their pocket and I think we all are sick and tired of being at home. >> Yeah, I have to go somewhere. >> Airline tickets have skyrocketed but demand is high. So we are not really seeing the sort of price elasticity on demand that we would expect from higher prices. People just want to get out. So what does that mean for the next few months? As the driving season gets launched in the July 4 weekend in the United States? We will see a lot more gasoline used than normally. Then other times of the year. Refining capacity is not there. Russian oil and Russian refining capacity can't really reach us because of the sanctions. So we see a recipe for still higher gasoline prices in North America for the next few months of afraid. The difference between what the distillates are sold for and what the feed cost is in the oil you put into your refinery to bring a product that you can use, has skyrocketed. That feeds back into the oil price. So the problem is going to be there for the next little while these markets are going to get tight, tighter… Even if at some point OPEC and other producers are able to manage more supply. >> How much of a wildcard as China and all this? Either they go into more restrictive lockdowns and get us concerned about hunger for commodities or get past the worst of it and get hunger for commodities again? >> We think certainly in the short run the risk is somewhat temporarily the market will be lifted even further. We of course spoke about seasonal demand in the United States. With North America and the Western hemisphere are generally as we travel around to try and do something fun for a change outside. That takes fuel. Look, China has been locking down. They have this so-called zero-tolerance policy that we've seen entire cities of millions, tens of millions people in fact. Beijing and Shanghai is more than the entire population of Canada… Being locked down. There is evidence showing will retract mobility data that it seems like the worst is over. We are going to probably see more opening up. But that means the flows of crude and energy into China are going to be consumed more rapidly. I think that's a pretty reasonable assumption. natural gas is in short supply… That means wherever substitutes they have like petroleum products of some sort, they can use them and that means this market for the next few months can get opened up. Now, I will say that that is temporary. I did say that. If we look beyond the third quarter into the last few months of 2022, into 2023, we expect China to not deliver the growth that it has traditionally. Over the last three decades or so, we can always rely on China to make up for deficiencies. That helped the commodity market. We are not expecting that. If were lucky, China is gonna have a handle of the GDP. Many analysts think perhaps three. That's not conducive to a very robust demand. So we are not getting a lot of help. So my thesis is that this commodity market will probably be reinforced. But first it will be significantly better potentially even for some base metals. But certainly we think for energy, before things go up again. >>THAT WAS BART MELEK, HEAD OF COMMODITIES STRATEGY AT TD SECURITIES AND MAKE SURE YOU TUNE IN TO THE PROGRAM ON THURSDAY, JULY 7. GREG BARNES WILL BE ON THE SHOW DISCUSSING THE MINING SECTOR. NOW HERE'S AN UPDATE ON THE TOP STORIES IN THE BUSINESS WORLD TODAY AND A LOOK AT HOW THE MARKETS ARE TRADING CANADIAN BUSINESS LEADERS EXPECT INFLATION TO BE HIGHER FOR LONGER. THAT'S ONE OF THE MAIN TAKEAWAYS FROM THE BANK OF CANADA'S LATEST "BUSINESS OUTLOOK SURVEY." BUSINESSES ARE POINTING TO SUPPLY-CHAIN ISSUES AND HIGH COMMODITY PRICES AS KEY CHALLENGES – AND NEARLY ONE-QUARTER OF THOSE SURVEYED EXPECT INFLATION TO REMAIN ABOVE THE BANK'S 2 PERCENT TARGET FOR 3 YEARS OR MORE. THAT SAID, MOST BUSINESS LEADERS SURVEYED EXPECT INFLATION TO FALL BACK TO 2 PERCENT WITHIN THE NEXT FIVE YEARS. WHEN ASKED WHAT IT WILL TAKE TO BRING INFLATION DOWN, BUSINESSES SAID HIGHER INTEREST RATES, IMPROVED SUPPLY CHAINS, AND LOWER ENERGY COSTS. THE PROPOSED ROGERS-SHAW MERGER IS NOW BEFORE A MEDIATOR AS A KEY DEADLINE DRAWS CLOSE. THE COMPETITION BUREAU IS OPPOSED TO THE $20-BILLION DOLLAR TAKEOVER – ARGUING IT WOULD RESULT IN LESS COMPETITION FOR CANADIANS. THE WIRELESS BUSINESS AT SHAW IS OF PARTICULAR CONCERN TO THE REGULATOR. ROGERS HAS AGREED TO SELL "FREEDOM MOBILE" IN AN ATTEMPT TO WIN THE FAVOUR OF THE BUREAU. TODAY, THE PARTIES ENTERED INTO MEDIATED TALKS IN AN ATTEMPT TO FIND COMMON GROUND. IN A RELEASE, SHAW SAYS IT REMAINS "DEEPLY COMMITTED" TO THE DEAL – BUT IT DOES ACKNOWLEDGE THE REGULATORY RISKS WITH THE JULY 31ST CLOSING DATE LOOMING. ANOTHER CRYPTOCURRENCY EXCHANGE IS FREEZING WITHDRAWALS IN THE FACE OF THE CRYPTO MARKET ROUT. SINGAPORE-BASED "VAULD" SAYS IT'S BRINGING IN ADVISORS TO WEIGH A POSSIBLE RESTRUCTURING, AND HAS PUT A HALT ON CUSTOMERS WITHDRAWING FUNDS. VAULD SAYS IT WILL MAKE "SPECIFIC ARRANGEMENTS" FOR CUSTOMERS WHO NEED TO MEET MARGIN CALLS. "VAULD" JOINS OTHER CRYPTO FIRMS INCLUDING "CELSIUS NETWORK" AND "BABEL FINANCE" IN HAVING TO HALT OR CAP WITHDRAWALS AS THE VALUE OF CRYPTOCURRENICES PLUNGE. BITCOIN – FOR EXAMPLE – IS DOWN SOME 70 PERCENT FROM ITS PEAK IN NOVEMBER. The TSX index now up a bit. This is the other half of the trading year with us in Canada. We did not trade for the Canada Day holiday on July 1. The Americans did trade though and they had some green on the screen to start their second half of the trading year before they went on their long weekend. A little bit of catch-up trade right now. We will see how things shake out right now. Pretty low volume with the Americans not involved. I think tomorrow will be there official first day of the second half of the trade year if that makes any sense to you. THE BOND MARKET IS BEGINNING TO LOOK INTERESTING FOR THE FIRST TIME IN YEARS, AND IF YOU'RE LOOKING TO DIVERSIFY YOUR HOLDINGS OUTSIDE OF CANADA YOU MAY WANT TO CONSIDER THE EMERGING MARKETS. HAFIZ NOORDIN, PORTFOLIO MANAGER FOR GLOBAL FIXED INCOME AT TD ASSET MANAGEMENT LAID OUT THE POTENTIAL OPPORTUNITY > We are seeing rising global inflation. We are seeing at a period of time were growth will likely slow down a bit here. And so historically that is been a tough environment. But what we are seeing now is there have been a number of winners and losers in the emerging world. Some are more impacted by Russia's invasion of Ukraine. But on the other side, there is a number of Nations that have been proactive in raising rates in their central banks raising rates well ahead of what the Federal Reserve is doing. And add to that some of those countries are also commodity exporters. So there really late to the cycle we've seen in rising commodity prices and actually benefited. Those of provided interesting opportunities to enhance yield in fixed income portfolio. >> So the opportunities in the emerging markets, it's not just one group with all the same characteristics. Take us a little deeper into some of the different pockets you are seeing. >> For sure. I think it is nice to think about taking a regional approach. Latin America is really one of those regions where commodity exporting has really helped in terms of boosting fiscal revenues and providing more stability their currencies. But on the other section there are commodity importers that have been losing out. India, a lot of Asian countries… Some Eastern European countries. When they are importing commodities, that really has caused a lot more strain on their fiscal balances. That's one direct differentiator is commodities. Also how ahead or behind the curve these countries are raising rates. Some have been just behind the curve had a lot more pain. Their bonds are down about 4% this year just because of having to really catch up in hiking rates. Then on top of it, the sentiment around Russia's invasion of Ukraine. So I think it's the commodity links and also how good a central banks are doing in terms of hiking rates in the face of inflation. >> We talked so much about the Fed obviously for the whole world. Whole world is watching the world's most powerful central bank. Here at home we talk with the Bank of Canada. You mentioned the fact that perhaps or some central banks in these emerging markets that have been a little more proactive than we have been. >> That's right. And I think what happens in some emerging markets and, you know, Mexico and Brazil are probably good examples where they saw inflation rise quickly last year. They know from past cycles that they have to get ahead of this otherwise their currencies can get out of control. Because Christ is having a lot in emerging markets. So what they did on average in Latin America, about 650 basis points of hiking has occurred between the beginning of 2021 and now. That compares to the Fed and the Bank of Canada where it's been about 100 or hundred 50 basis points or hikes of the last few months only. So because they did that, a lot more foreign capital into the country. Comfortable that their yields were high enough to buffer inflation. They were able to keep it a bit more stable. >> We talked about emerging markets in fixed income opportunities. Are we almost on the cusp of calling at high yield or is that going a little too far? >> There is actually a distinction. There is some solid emerging-market names. Like China or Chile or Peru which have very low debt levels and historically have very good management teams. The government is certainly doing a good job of managing fiscal balances. Then in the triple B area, I would say I Mexico or Indonesia which are pretty solid investment ratings. Their credit quality is pretty good. But there are some more risks that you have to watch to make sure there are not going to get good downgraded. But in the meantime you're getting compensated for those risks. There is definitely a high yield names we can get a lot more risky if you do the bottom of research. There are opportunities but there are definitely some names there where, you know, things can get out of hand fairly quickly without the right government in place and they can get into default situations. So similar to the corporate market, you do have to do that bottom up research. I really don't think investing emerging markets are a passive investment. A lot of industries in emerging markets tend to allocate capital to the largest borrowers which is probably not the rule you want to be using when you have that kind of differentiation credit quality. > I have a feeling our audiences probably intrigued. Let's talk about doing your homework. That process of assessing different emerging markets. What are some of the screens you have in place? > Certainly starts with a sense of macro stability. What I mean by that is, you know, are there rules in place to manage fiscal balances? Emerging markets do have the benefit of being high-growth countries because their populations are growing more rapidly. There's more gains to be had from productivity improvements. But usually the trap to fall into is mismanaging their fiscal balances. Some countries have debt to GDP levels of 80 to 90 percent. That's where you have to be careful if they are going to those high debt levels. Are they putting in place rules, fiscal spending caps for instance to make sure that that's not going to much higher. The other area we look at our reserves. When there is a lot of currency volatility that we are seeing right now, we need to make sure that emerging markets that are borrowing in US dollars or borrowing in euro have the necessary currency reserves to help to meet some of those external liabilities. So really understanding the data and also how well the governments are doing in managing those balances and not spending them on, you know, nonproductive measures. >> I want to ask you about US currency reserves. Obviously the reason why the entire world looks at the US Federal Reserve is just the influence they have. What if the Fed has to say on this aggressive path? What is that start to do to the emerging-market opportunities? >> Well Greg that's a great point. At that is a key risk right now. The market for now has priced in the rate hikes that we are seeing that the federal have to get to above a mutual area. So call it a 3 1/2 to 4% area on their policy rate. Markets right now in Christ did in but the risk is that accelerates higher if inflation continues to surprise to the outside. I think that will cause is that those emerging markets that don't have sufficient reserves, they will start to see more expensive US dollar debt that they have to start to pay back. Turkey is a very good example. They have very low reserves and they have very unorthodox monetary policy intend to get in trouble at times like this. There you have been getting into trouble with US dollars starting to go up and with US bond yields going up. The flip side, there are some countries like Brazil that I highlight that have very strong reserves. Yes there debt levels are high but they have so much reserves that they have gained from commodity experts over the years. They can likely benefit from some of those US interest rates. >>THAT WAS HAFIZ NOORDIN, PORTFOLIO MANAGER FOR GLOBAL FIXED INCOME AT TD ASSET MANAGEMENT AND WE'LL HAVE MORE COVERAGE OF WHAT'S GOING ON IN THE MARKETS ON WEDNESDAY. DAMIAN FERNANDES WILL BE OUR GUEST DISCUSSING THE EQUITIES SPACE NOW LET'S GET TO TODAY'S EDUCATIONAL SEGMENT ANALYST REPORTS ARE ONE WAY YOU CAN RESEARCH A POSSIBLE INVESTMENT AND WEBBROKER HAS TOOLS THAT CAN HELP YOU GET A HANDLE ON THE STREET CONSENSUS. JOINING US NOW IS CAITLIN CORMIER, CLIENT EDCUATION INSTRUCTOR WITH TD DIRECT INVESTING. SO CAITLIN, TAKE US THROUGH IT >> Thanks so much Greg. Yes web broker has a great tool that we can use. The quality analyst Centre. it adds a little bit of context. Go into web broker and click the research tab. We are going to go under the markets heading in all the way down to the analyst sector. To give you an idea this is kind of the market as a whole as opposed to one specific security that we are seeing these reports on. When we get to the markets analyst Centre, we're going to see a couple things on its front page here. What were gonna see on the right are some of the most recent ratings that actually come through. So we will see on the left the date that they were published, so today for the majority of these. The company name, what the rating is, who the analyst is it is actually making the rating. As well as the price Target which is good content right there for one quick view. As you scroll down of course will get kind of the ones that have been rated a little bit in the past. Maybe last week… Up here we can also do a filter so we can choose the analyst ranking with the number of stars we like to choose. Maybe we want all your five-star investments. Maybe we are looking for some different buying opportunities. So we want to filter by that. We can also choose market Or sector as well. So depending what you're looking for, you can narrow down what you're looking to see. So a lot of information we can get in a small area with regards to those most recently rated stocks. >> Interesting stuff. What if we want to find stocks that have strong analyst coverage? >> For sure. So we can see some trending stocks. What we would see, kind of talking about the most actively rated stocks. The most analysts that are covering that particular stock. So instead of clicking on most recent, which is getting to the right here were it says trending stocks. We will see already that it is filtered to "most rated." There are some top rated here, they have the largest number of analyst followings… Next to the Amazon… Met. We talk about all the time so we can definitely see that. But again, if we want to kind of filter it down to find maybe the most stock in a particular sector, again we can scroll down. We can choose perhaps, if we wanted of the top consumer goods stocks so let's click on that and as we scroll up, we see Amazon. Followed by Tesla, Target and Walmart and also wayfarer coming in there. It's a way for us to filter that information, see what those analysts are saying about the particular stock and kind of see which ones are actually cover the most as well. >> Interesting stuff as always Caitlin thank you so much for that. > Thanks so much. >>THANKS CAITLIN, THAT WAS CAITLIN CORMIER, CLIENT EDUCATION INSTRUCTOR WITH TD DIRECT INVESTING. AND BE SURE TO CHECK OUT THE LEARNING CENTRE IN WEBBROKER FOR EVEN MORE EDUCATIONAL VIDEOS, MASTER CLASSES, AND WEBINARS. Let's check in on the market. The Americans for their long weekend. We are coming back from our long weekend and we are trading. This is the first trading day in the second half of the year for the TSX opposite. We are pretty happy of the first half of the are behind us. Right now some green on the screen. Not a bad way. Not a bad way to start the for third quarter. some of the names making gains in Toronto: Canadian natural resources… 2270 want to share an earlier today we saw Canada goose, the maker of high-end apparel was under some pressure. Let's check on their shares right now. Down a little more than 4%. RISING RATES HAVE BEEN HAVING A COOLING EFFECT ON SOME PARTS OF THE CANADIAN HOUSING MARKET, BUT JUST BECAUSE PRICES ARE DECLINING THAT DOESN'T MEAN REAL ESTATE IS ACTUALLY GETTING MORE AFFORDABLE. FRANCIS FONG, SENIOR ECONOMIST AT TD ECONOMICS JOINED ME EARLIER TO EXPLAIN. >> Maybe this is the time to get in in the fall? Unfortunately the story is maybe not that simple. Let's take a bit of stock shall we? We've Artie seen home prices all 10%. Sales are down at 25% we are anticipating that through the rest of the year will probably see… Through the end of the year. But all of that is coming on the back of rising interest rates as we all know. Already raised by hundred 25 basis points. Mortgage rates are up by 140 basis points from the fall of last year. So if we kind of anticipate even more interest rate increases, were seeing quite an increase in mortgage rates in totality. So if interest rates rise by roughly a percentage point, you need at least an 8 to 11% decline in prices just to keep your mortgage monthly payment online. So essentially what were seeing is the decline of prices that is pretty much consistent with what were anticipating interest rates to do. So by a large, even though prices are little bit lower, your soul can be making higher monthly so that can be a challenge for folks that are hoping to get in. Now, obviously it does help with the down payment. But if your savings have been in the market over the past year, it hasn't really been all that positive either. >> You talk about the headline number that if, you know, the forecast play, you talk about 20% reduction in price up from the peak. But that is even take as I think back to before the pandemic. There was a big run of of prices during the pandemic. >> That's right. Let's take Ontario for example. We saw an eye watering increase in prices. The prices outside the GTA outside the province were actually higher than that. So really, you've seen this kind of declining affordability hit everyone as we saw a lot of folks during the pandemic relieving the big cities and searching for more affordable real estate elsewhere. So yeah, there is definitely, there was definitely a massive bring up of prices post pandemic. This 20% decline really undoes that. So would be back to going into early 2020, late 2019 levels. I can't remember that time being all that affordable for folks either. >> You have voices saying obviously that when you see this kind of rate increase, pressuring mortgages, pressuring households that you can sell some very bad things for the Canadian housing market. I have no predictions because I'm not an economist that's why have you sitting here. What are the dynamics of the market? I think the past 10 years it's really been covering Canadian real estate. A lot of hurdles get thrown in its way. Seems to jump over all of them. I think people are asking when we will finally trip up on one of these hurdles? >> This resilient story is really been a defining feature of the Canadian economy relative to a lot of countries around the world. That narrative that we have told has always been kind of based on a few key elements. I think we look at boom bust cycles that we've seen in other housing markets in the past. Let's say the US, the obvious example. Between 2000 2006, huge rise in prices and huge crash. The differentiating feature between US and Canada is really about credit quality. Where you saw the big runner from prices in the US which is really driven by people that fundamentally couldn't afford those homes. Compare that to Canada, we've seen over the past 10, 20 years is this gradual uptake in credit quality which I think is kind of mind-boggling for a lot of folks. Because essentially what that is saying is the people that are purchasing to these for many people, agree just level prices are perhaps the ones you can best afford those level prices. Now add that to continued household formation, outpacing housing supply, in-house construction, just overall demand growth from all sorts of folks, and we've seen basically the Canadian housing market sustain itself through all these kind of shocks we've seen over the possible while. A great example that, a perfect example is Alberta post-2014. Oil prices crashed, you would think that this huge runner of prices that they had prior to that because what a doubling of the employment rate that was also associated with an increase in interest rates at the time as well. Yet you never saw major crash in home prices. They kind of just languished. … Definitely to your point, there has been a terminus amount of resiliency we are now kind of testing that on a nationwide basis. Were expecting this really big run up in interest rates on this whole notion of Canadian housing market resiliency I think is really going to be tested. > Doesn't come back ultimately to the labour market? Before the dislocation of the pandemic and before everything we thought we understood went sideways, if I had guests in front of me talking with the housing market, ultimately what will be the greatest challenge for Canadian housing? They say jobs, jobs jobs. People in jobs, they're gonna try to make their mortgage payments. It's that lack of employment. What is a situation in Canadian employment right now? Where are we headed? Cannot be a challenge? >> Obviously record low unemployment rate of 5% obviously the lowest level since 1974. Extremely tight labour market position now. That's obviously a good thing. It's a good starting point. But on the same token, that means there is some risk that we will see some reversal. Certainly as we see interest rates start to creep up. So to that point, I think there definitely is some vulnerability of the housing market to job losses. I think the real challenge again is, looking back, even in our recent history, looking back at Alberta. Again: a doubling of the employment rate during that time. One of the only provinces to get hit that hard because of all the oil prices. But yet we still didn't see any kind of structural decline in home prices. So it kind of really begs the question at the end of the day: what can we hit? If we are to hit markets with a huge increase of unemployment and huge interest rate increases, what is it take to take it down? >> One more thing: because everyone try to figure out what's been going on in Canadian real estate and what was the real driver… Was it a basket of things? Even the Bank of Canada is doing recently research about it. It's substantial to research. Is there a danger that in a downturn like this, the investor start to disappear? >> Absolutely. There is phenomenal research coming out of Canadian data. Talking about how the share of purchases that are first-time homebuyers which typically represent over 50%, has been on his gradual decline. It is calm but it is kind of sharpened with investors picking up the slack over the last two years post pandemic. A bit of a story. It does that reverse? I think the real challenge here, we need to talk about where household demand growth comes from. Ultimately there's been a tremendous amount of household demand coming from immigration, from just people living in their parents home and going elsewhere. Does that pullback? A fist if interest rates are to increase? Because we are getting into a really tough spot from an affordability perspective. Just because rates are so high. Does that pullback? Absolutely. I think that's absolutely risk. But certainly time will tell whether we see that kind of trigger any kind of structural problem. >>THAT WAS FRANCIS FONG, SENIOR ECONOMIST AT TD ECONOMICS. AND STAYING WITH THE ECONOMY, WE'LL DISCUSS THE RECESSION RISK FOR CANADA TOMORROW WITH ANDREW KELVIN FROM TD SECURITIESlet's get a final look at the TSX comp superego care. This is the first trading day of the second half of the year. We all of the first half of the year as investors. It's criticism green on the screen. To get a start for the third quarter here. 208 points on the upside. Again a 1%. Remember of course the Americans are off today so trading is pretty thin. Tomorrow will be an interesting one. That's all we have for you today. Thanks for watching MoneyTalk Live. We will see her tomorrow. (Music)