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[theme music] >> Hello, I'm Anthony Okolie and for Greg Bonnell and welcome to MoneyTalk Live, which is 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 show, we will discuss the perception versus reality issue in the markets with Brad Simpson, chief strategist with TD Wealth.
And in today's education segment, Hiren Amin will show us how to use the watchlist tool on Advanced Dashboard.
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.
And before we get to our Guest today, let's get you an update on the markets. We will start here in Canada where the TSX is trading modestly higher at the open.
The TSX is coming off a solid gain on Monday when it closed at its highest level in over three weeks and logged its best day in nearly 3 months. Right now the S&P TSX index is about 85.2.4 percent.
Taking a look at some of the big movers, we will start with shares of Cameco which are getting some bids today. The Saskatchewan-based Uranian company receives some favourable analyst comments. Right now, the stock is up 3.1%. Some other big movers, Pet Valu holdings are trading down, the petfood utility just reported first-quarter profits of 17 1/2 million dollars. That's down from nearly $19 million a year earlier. That is being reflected in the stock.
Right now the stock is trading at $31.28, down nearly 2.5%.
We are going to turn to Wall Street which also open higher.
That is due in part to declining treasury yields as traders look for more clues on what the Federal Reserve may start cutting interest rates.
Right now, the S&P 500 is trading up a modest 13 points or .3%.
Taking a look at the tech heavy NASDAQ composite index, that is also trading in positive territory.
We got weak jobs news and there are greater expectations that the feds might cut interest rates later this year. Right now it's up a modest .2%. Taking a look at some of the big movers in the markets, shares of Simon Property Group are getting some attention following the recent first-quarter loss.
The US company which invests in shopping malls and outlet centres reported earnings that beat forecasts by eight cents while revenue topped estimates. Simon Property Group is trading higher to the tune of 3.9%, nearly 4% so far.
Some other big movers today, shares of Nvidia are trading lower. There is news that Apple is reportedly developing its own chips to power artificial intelligence out of their data centres in a move to rival Nvidia.
Nvidia shares are down modestly, 1.2%.
And that is your market update.
While equity markets had positive performance so far this year, there still a lot of gloom amongst investors as funds continue to flow into GICs and money market funds.
Joining us now to discuss this perception versus reality issue in the markets is Brad Simpson, chief all strategist with TD Wealth. Things are joining us.
>> Things for having you.
>> You have this report called the best times and the worst times were you look at perception versus reality issues in the markets.
What are you seeing right now?
>> We are probably on month to you about this because we are fascinated by the subject and we are fascinated because in different periods of time, we have different extremes that happen in markets and this one, looking at your introduction today, what's going on in equity markets, if you think back over the last couple of years, how many times you said, well, the Fed things one thing, Nvidia is doing another thing and how much it has been those kind of, those are two tales there that have really driven us and I think these two tales are driving off a lot of the discussion.
When we look at the retail investor or the wealth investor and we look at what they are doing, on the one hand, they are bidding of equity markets on one side along with some institutional investors and on the other side they are building up these cash positions and so I think I've talked about that an awful lot and it's not just the non-sophisticated investor, you are also seeing this in the pros, and we've been seeing it in private markets, these kind of extremes with is the positive side and then we have this negative side. Of course I brought a charter long for this and really all we are looking at here is the deal count and the deal value in private equity over the last few years. That of course we see lines go down or up, what you are seeing is both the deals and the values are decreasing and that is less deal flow, less money going out of the banks and that's because there is the same sort of fear that's in public markets.
And that I think is indicative of, with all the things that we've been seeing going on geopolitically, concerns around inflation, and I think that it's really important for us to step back from this and come to terms with this duality that is in the marketplace. And so if you look at it, look at what private investors are doing in equity, they are starting to allocate capital. That's interesting. The deals they are doing a little bit smaller but their activity is increasing and decreasing quite dramatically. The other part of where it's increasing is they are starting to be more involved in secondaries. Secondary is taking the deals us that one private equity group is sitting on and then purchasing those. One of the things that I learned from one of my mentors along the way is that you can have really good assets shake out of the hands of weaker hands.
Some of those weaker hands are the folks that either can't deploy the capital or are kind of caught up in the fear part of this market. So I think this is a really interesting dynamic. The other part, if we kind of reverse and look back when I was here in January, I was talking about how little fear there is in the options market, how little hedging was going on. Now we have started to see that pick up a little bit.
So if we look at the expense of hedging today, it is considerably more expensive than it was.
>> What does that mean?
>> It means that because of this I would say the equity move we have seen in equity markets, one, so the valuations of them, too, that if we went back a few months ago, we were talking about inflation, it was at a more positive trend in the United States and then resell that CPI print in April and that started to change the narrative around the inflation stories so as that narrative started to change that we have seen in equity markets become a little bit more volatile.
We have certainly seen interest rates a little more volatile. I think we looked at April for example, you look at a 30 year Treasury bond, we saw its yield move up, you look at a 10 year treasury, is 25 to 30 basis points and those are, in bond market land, those are big moves and giving back all of the returns they saw in the early part of the first quarter.
And so what that means is that the tone where there was very little concern in the market and if you recall what you are saying is this is the time we should be buying these hedging strategies. I'm not saying they are incredibly expensive. They are not. We are still I would say kind of in this early stage of this but I think it is a way of looking at allocating in portfolios today that is important to keep looking at the two extremes and how you're going to manage through it.
>> You also say that China is a good example of this perception versus reality issue. Walk us through your thinking.
>> One of the things in our portfolio strategy you quarterly that we wrote an awful lot about was China and the reason we did so is one of the things that I think happens being in North America, particularly now, is we are so dominated by US media, and so if you turn on, I kind of do this in the evening, I kind of make this route where I go and watch a BBC update, I do a fox update, I do a CNN update, I do an MSNBC update and you kind of go across the board and it striking. When you do the BBC, what they are talking about, which is primarily Israel Gaza is really what they're focusing on, and if you look at the American networks, and CNBC as well, there is a brief snippet, and oh, this is what's happening in Gaza, and then back to Trump. The issue with that is for financial markets, there is the rest of the planet and the rest of what's going on in particular there is China, the second largest economy in the world and while the allocations that we have as an organization are quite low, in economic terms and in geopolitical terms, it's incredibly important which has an impact on what financial markets are going to do.
We said, let's try to take a step back from the North American bias that we have an drill in to what's happening in China and Europe and really what we wrote about his we think they are in the middle of what I would say if it isn't a complete shift, it's a really significant shift away from what they were doing from the past 30 years to a whole new thing that they will be doing let's call it 30 years or at least the next coming five years at any rate, so that we think is really, really important to frame and if we even look at what that impact is on the short term, if you looked at these two, if you put the United States and China side-by-side, this duality or different way of looking at things really jumps out at you. First and foremost, government spending.
Despite whatever you will hear on the media talk shows, you've had an enormous fiscal spending in the United States with the CHIPS Act and bringing manufacturing home.
>> Onshoring.
>> All that onshoring going on.
And in China, typically when you're getting a slowdown like what they are in the middle of, you would see the government getting active with fiscal policy but that's not what's happening.
They are modestly going through a process that we might've seen in the pre-COVID era and backwards. And then you look at the consumer.
If you look at the incredible activity of the consumer in the United States, the new look at what the consumer is doing in China, I think it's roughly 26% of somebody's personal profiler balance sheet in the United States comes down to their real estate portfolio or real estate holdings.
And there, is 41% in China.
I think we know what the property situation looks like there. On average, your average holder of that is down 20 to 40% and you think about the impact of that on the consumer in going out to spend. When you look at the American economy where they are today, you can kind of check off and go, the consumer is in good shape, still really active in spending and keeping the economy going, we are seeing in China an incredible reluctance from the consumer to go out and spend.
We can also look at that in the business community. The business community looks at that spending and says wait a minute, people are putting their wallet away, I'm not gonna be spending because they are not spending.
>> The domino effect.
>> Exactly.
When you are looking over into American public companies and you look at the rate of what they are spending on their businesses, it's extraordinary! And then, if you look at what happened even in the last week and 1/2, the announcements from the apples of the world, the Microsoft and apples, their share buybacks, normals get taken aback at the size of those who are seeing there. A very different feel there. To wrap all this up, this ongoing property crisis and you have a distinctly different environment there and the last part of it which we wrote about pretty extensively is I really do think that the portfolio manager community, the analyst community and I think the greater public at large haven't come to terms with that this is a different government in power there today and they have a different fiscal policy, different monetary policy than they used to and we need to adjust our thinking based on that. And why I think we need to look at this and keep our focus on this is that, as we talked a lot about over the last couple of years now, is one of our ongoing things are this idea of de-globalization.
And we continue to really hold onto that. We think it's imperative to go look at, okay, let's look at what's happening around the globe and what that looks like.
Even if you looked at, if you set up with any investor and said what the long-term trend in the US you're comfortable with? AI, tech, feel great about that.
If you look at government policy in China towards their technology community, they are stifling that community.
If you look at what you think your trends are going to be down the road and you look at the policy there and the difference that you have in the United States, they are pretty significant. So that ultimately is good.
That ultimately has an impact on both your portfolio and how it should be allocated and it also has an impact on potentially what inflation is going to look like. The last part is on this is that of course we were writing this in April and basically what we were writing this, the Chinese equity market started to go on a bit of a tear. Oh, there you go! We said, first of all, this is a long-term structural deal.
The second point is that I hear a lot of the old trigger equity folks that I grew up around when I was a kid, one of the things I think you need to be a bit mindful thereof is what you call a dead cat bounce. The valuations are really low, there is a little bit of fiscal monetary policy pick up in the last few weeks there, so you see those movements into the market there, but we don't think that sustainable and we think our neutral allocation there, our very low allocation there continues to make sense.
>> A great start the conversation and we will get back to your questions for Brad Simpson in just a moment and a reminder that you can get in touch with us at any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Now, here's an update on the top stories in the business world today and a look at how the markets are trading.
Disney's core streaming business Disney Plus swung to a profit for the first time since the launch in late 2019, reaching the milestone months earlier than expected.
Stripping out ESPN+, Disney Plus and Hulu, the streaming unit earned $47 million in the second quarter, thanks to aggressive cost-cutting, price hikes and popular Hulu programs including Shogun and the bear. However, the better-than-expected second quarter results were overshadowed by a decline in revenue and operating profit from the traditional television business.
The stock is down about 10%, just on the news.
Meanwhile, shares of Tesla are in the spotlight today amid report shipments from an Shanghai factory dropped year-over-year in April even as the overall market for new energy cars group.
Preliminary data from the China passenger car Association showed April deliveries came in at over 62,000 in China made electric vehicles in April, that's down 18% from April 2023.
The news highlights the pressure Elon Musk's companies under in China's hypercompetitive automobile sector.
Right now, shares of Tesla are down just two or four points or 2.6%.
Finally, shares of Peloton Interactive are trading higher amid reports a number of private equity firms have expressed interest in buying the fitness company.
The former pandemic darling, which saw interest surge when millions raced to buy it's at home exercise equipment, has fallen from grace amid declining users and exercise bike recalls. Recently, the company announced its CEO Barry McCarthy would be stepping down and that it would lay off around 400 workers were roughly 15% of its workforce in an effort to reduce costs.
Currently, the stock is trading positive on that news, it's up 12.7%.
Here's how the main benchmark index in Canada is trading. The TSX is up roughly 83 points or .4%. We take a look at the US where markets are also trading modestly higher, the S&P 500 sitting at 5197, up .3%.
All right, we are back with Brad Simpson, chief strategist with TD Wealth, taking your questions about market strategy. We will start with the first your question. Brad, what are a look for stocks right now and you expect the bull market to continue?
>> The first I would start with, and I know this is an investment show, but going to the Disney equities story, strong recommendation on both of those shows, the programs are good.
The bear… >> I haven't watched it but I've heard good things.
>> The bear might be the best television drama since the Sopranos. It's superb. I know we've gone off a little bit there. I think this kind of idea of duality which is our reoccurring theme here right now, I think you have to look at equity markets kind of in that way and I think our starting point for that, of course, is that so much of the move that we saw from October let's call it through April, of course, was the technology names and I'm not going to dig into those because I know you've discuss those ad nauseam here.
I think that where we are now is, and if you kind of look at when companies come out with the earnings or if they come out if you disappoint a little bit or you miss a little bit is that when you're sitting at the valuation level of where the S&P 500 is right now and if you say, okay, some are trading at 20, 22 times earnings as an index as a whole, it's difficult to say this is an inexpensive market. The other thing you have to look at is those big growers that have been a driver there. Think as an investor, if you're trading them, that's not my thing.
To me, that's a very different thing between trading and being an investor and allocating. When you look at the cash creation inside of these companies and their ability to be able to grow and reinvest in their business, to me, this is something that you continue to want to be allocated to but as a momentum play, clearly, there is a market that is starting to rotate from momentum and rotating more into a valuation basis and looking at were other parts of the market are. And I think, I'm not sure we have it because I know I brought a bunch of different ones, but one thing I brought us this idea of how equity markets are trading inside. When you look at how they are trading inside, what you're starting to see is first of all, broadening out dispersion and that's really positive because in simple terms that means the money isn't just going to a few names, is starting to hunt around through the indexing go where are other names?
>> We have a chart here that speaks to that.
>> If you start seeing dispersion pickup like you're seeing on the green line there, that's a really, really good sign.
Not usually a sign of seeing an equity market starting to get healthier.
You got this higher valuation but your health is starting to increase in you starting to grow into that valuation, you look at that and go, that something you really want to look at. Looking at the implied correlations inside the index and in the sub indexes, you're starting to see correlations break out between individual names.
That's kind of an active managers dream market that you're looking for. That's when he started saying, well, earnings matter, how they are reported matters and how you're going to build from there. For us, we've been doing is running a barbell strategy were you kind of all these momentum aims on one side and then on the other we have assets that we think are going to benefit when there is greater dispersion.
I would look at this and say, if you are looking for a correction based on valuation, when you have something that looks like that, it's one that is very, very difficult to see. So if you are going to have that big correction that people are waiting for were looking for, I think that's going to be more of an outlier event.
It's gonna be something that hits you that you don't see coming. When you look at earnings expectations, particularly looking at the S&P 500 as an example, I would think that if you look at the next quarter coming up it would seem that the analyst community is getting maybe a little too optimistic about the expectations, 14 to 17% earnings growth, which I think is a little bit frothy, if you will, for an expectation but we continue to be overweight US securities and so that would tell you that we are comfortable with that level.
Overall, equities as a whole, we are neutral, which tells you are cautious and we think that that make sense here too. I think if you look at it in those terms, I think the key here is that I think one of the things that people need to do it again is start taking out their time horizons a little bit and think that what am I actually allocating to? A business that can grow?
Looking at growth in our equity portfolios, we are building positions in Facebook, I looked at that, of course they came out with modestly disappointing earnings, the stock went through a big price correction, when you look at the health of that company, I think it's indicative of the growth story that we are talking about.
People need to stretch out their growth expectations on what's going to happen in the next week. We continue to think equity markets make a lot of sense but I think you need to have an investor mindset here and probably far less of a speculative mindset in an environment like this one.
>> As always, make sure you do your own research before making any investment decisions.
we will get back to questions for Brad Simpson on market strategy and just a moment. And reminder that you can get in touch with us anytime.
Just email moneytalklive@td.com.
Now, let's get to today's educational segment.
In today's education segment, we are having a look at TD's Advanced Dashboard, a PlatForm designed for active traders available through TD Direct Investing. Joining us now to show us how to set up a watchlist on Advanced Dashboard is Hiren Amin, senior client education instructor with TD Direct Investing. Welcome, thanks for joining us.
Walk us through how you set this up on TD Advanced Dashboard.
>> Absolutely, Anthony. Great to be back again, great to see you back in the hosting sea. Let's talk our viewers through Advanced Dashboard and how you can set up a watchlist. It comes as no surprise, it's probably a tool that most investors are familiar with.
Essentially, it's an investors Rolodex. It allows you to monitor ideas and analyse them using various price data points associated with it. To see some of those eye catchers, and how you can get those set up for yourself, we are going to step into Advanced Dashboard.
Most folks might already have a separate section created. In this case, I already have a watchlist created over here. Once you add the watchlist tool, what we are going to do is you can call up any list that you might already have existing but if you wanted to build a new list, you're going to come all the way to the right where it says new watchlist. Click in there and you can throw in any name to get started with.
I've already got one created, you can see it's called a sample over here. I have some takers additive.
So how do you get some of those names added in? There are two ways. You can go up to the symbol box.
We will add some consumer staples here.
Costco, you can often find me rowing the isles there on the weekend.
And we will do some domestic ones over here, Dollarama, in this inflationary time it seems to be doing well, and we will add in one more, Loblaws.
The reason I went with this is because the next and when you show everyone is once you get them into your watchlist, you're able to create a singular list and also segment them based on whatever way you want to do it.
You can see that I've got it segmented based on sector.
Where I would do that is you would just go next to reassemble is where you want to start that segmentation, and clicking on this menu, you will notice there is a section over here where you can go to group. We've already got some groups started.
You can see that these are my existing groups that I have. And when you create a new group.
I'm going to call this one consumer staples.
These are pretty much just your department stores, grocery stores. We are going hit save. You can see that it creates a new section here for us.
I can just drag and put Costco in that section as well, I can do the same thing with Dollarama.
You can move to group, that last one there, Loblaws.
This is the way of getting it set up and add your tickers in.
>> That was a great overview. Our investors able to customize the information they see about the securities on their watchlist?
>> Yes.
The way you can access the template is there is a drop-down menu over here and you can see these are different views that have been created. Most folks get a basic view which gives you simple, basic information but if you wanted to build it on your own, we will go to this menu right here, this is called a hamburger menu.
Then we are going to go to the first thing that says manage templates.
Under manage templates, what you are going to do is go into the custom area and just below it is where you will be able to create something new. I will do it for May 7 over here. Title it whatever you like.
Then anything on the left is available for an investor to choose from as to what they want and there. I'll put display name, day high and low as an example and then maybe I will just do one other thing, ex dividend date.
Just keeping it plain and simple, I've only got four and there. You don't have to hit a save button. You can click off the box over here.
Then you can call it that new view by going to the template drop-down and you can see is at the very bottom and you can see it just has the data that we wanted up there. That's how you can customize your template on your watchlist there.
>> Very informative. Thanks very much for joining us.
>> My pleasure. Have a good one.
>> Our thanks to Hiren Amin, senior client education instructor at TD Direct Investing.
For more information, you can visit the web broker education Centre or follow this QR code to go to TD Direct Investing's YouTube page.
We are back taking your questions for Brad Simpson.
What is driving the change in the trade deficit?
>> We have a geo-political environment that in the last couple of years has been altered dramatically and continues to alter itself dramatically so we have on the one hand this flight to quality and so the slide to production which has been the driver behind the US dollar.
We are all in favour of having a good US dollar investment allocation because of that.
On the other, you have the second largest economy in the world that wants to export their way out of their problems.
Then you have the weakening currency there as well.
Then you look over, we were talking about has lent some of their issues that they are having, you look at what's happening in Europe and the existential crisis you could almost call it with the car business there, you start piecing all those things together and it starts to change the flows between how countries are trading with one another and you circle that around and it pretty much get to see what your deficit is going to look like.
>> We will get back to your questions for Brad Simpson on market strategy and just a moment.
As always, make sure you do your own research before making any investment decisions.
Time now for an update on the markets.
We are looking at the heat map function here on Advanced Dashboard, which gives you a view of the market movers on the TSX 60 by both price and volume.
We will start here with the TSX 60.
We are seeing some green on the screen for some energy names which are tracking oil prices higher. We are seeing strength in CNQ, Enbridge as well. Just to the right, seeing some buying activity in some of the financials as well.
Just the right of that, we are seeing strength and technology names like Shopify, BCE and tell us.
Let's take a look at the S&P 500, the S&P 100 rather, see was moving the markets there.
We will start right at the top there, technology, we are seeing some strength in the Magnificent Seven stocks. We are seeing some pressure for Nvidia. Apple is reportedly developing its own chips to power artificial intelligence software and data centres in a move to rival Nvidia so we are seeing a little bit of weakness there. We look over to cyclical consumer goods and services, Tesla is also seeing some red on the screen after reports from its Shanghai factory dropped in April. Disney is also seen quite a bit of selling following surprise profit in its streaming division which was eclipsed by a drop in its traditional TV business and meagre box office.
We are back with Brad Simpson, cheap Bell Centre just said TD Wealth, taking your questions. What sector do you see as the most undervalued in this current market?
>> I wasn't going to say this but when you have those charts up… I love that stuff. I just eat that stuff up.
When you are going through the S&P TSX one, lots of strength in the financials as a trading group today, how positive they were. If you go inside and take a look at the big six banks, it's been rough.
I think if you look on a valuation basis and opportunity basis that might be one of our ongoing themes here, that to me is and then throw in the fact that the Canadian equity market has been so out-of-favour that you would think were starting to see the flows pick up their and I think if you have a time horizon that is the one you were looking at the world as an investor, that makes sense. On the second part of it, if you look at the stuff that's been out-of-favour, like utilities, money will start to flow there, it makes sense to have allocation there.
If we look at the midterm a little bit, one of the things that we look at when we look at things as we are a factor exposure host. We look at things in terms of what is the DNA inside of an investment.
When you look at, of course its momentum and big growth and quality is a factor that you want to allocate to.
They are miserable market timing devices.
But what factor exposures are good for is saying what are the valuations that are inside of there and if you start to see momentum combined with those we think it's a barbell idea which is something we talk an awful lot about. We think making sure that you are allocating into a quality factor and having some exposure into the value side of the market as well which typically starts to turn when you get into the first, into an early stage. We talked a lot about that here over the last is blurring the lines between late stage economy and early-stage economy and these lines continue to blur but I would say those are probably where you are low valuation in the mid-to longer-term opportunities are.
>> Will go to the next question.
Brad, what is your look for the commodity space?
>> I think the starting point is that I think there's a couple of different ways of being able to look at commodities and for us I think there is a trading community on commodities and I confess that that's not our forte or strength looking at them.
We have a strategic asset allocation and a dynamic asset allocation, meaning that we really like commodities such as exposure and we have when we were writing our year ahead last November, we said we wanted to be overwhelmed commodities because of geopolitical issues that we have around the world. You also seen the with thinking that if you reverse back a year ago, remember, we are doing things a year ago thinking of where we are going to be a year later, where so much of the talk was we would have United States in a recession, we do not have the United States in a recession. So demand on commodities like copper makes a lot of sense. You look at the volatility that we have seen in oil, of course, with the war in the Middle East, that puts pressure on oil prices there. It has been fluctuating but we still think that continues to present an opportunity so the starting out is is that I think many people's portfolios don't have a dynamic commodity exposure for diversification purposes and we really believe that is a really wise thing to do.
And so of course we are hammering the table on that constantly. And so as a long term, we think that makes an awful lot of sense.
And when we look in the shorter-term, the next 3 to 6 months here, between the US election coming up, between the war in the Middle East and ongoing, of course often lost along the lines of this is the war in Ukraine, and then you look at the activity between China and Russia and the mass purchases by their central banks of gold and the ongoing effort that I would argue something will be watching for a long time to try to put pressure on the US dollar as a reserve currency, all of those things from a diversification purposes to the timeliness of it today to being in an environment where if you are wanting to build hedges for geopolitical, we have looked at this and said, running long short equity portfolios, long short on duration or on credit are all good ways of hedging portfolios. The best way to head for geopolitical risk is making sure you have a dynamically managed commodities portfolio. So all of that combined makes a ton of sense to us.
>> Insightful as always. Thanks for joining us.
>> Thanks for having me.
>> Our thanks to Brad Simpson, chief wealth strategist with TD Wealth.
As always, make sure you do your own research before making any investment decisions.
if we don't get time to get your question today, we will aim to get into future shows.
Stay tuned. On Wednesday show, David Sekera, chief US market strategist with Morningstar Research will be our guest, take your questions about US equities.
And a reminder that you can get a head start.
Just email MoneyTalkLive@TD.com.
That's all for our show today.
Take care.
[theme 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 show, we will discuss the perception versus reality issue in the markets with Brad Simpson, chief strategist with TD Wealth.
And in today's education segment, Hiren Amin will show us how to use the watchlist tool on Advanced Dashboard.
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.
And before we get to our Guest today, let's get you an update on the markets. We will start here in Canada where the TSX is trading modestly higher at the open.
The TSX is coming off a solid gain on Monday when it closed at its highest level in over three weeks and logged its best day in nearly 3 months. Right now the S&P TSX index is about 85.2.4 percent.
Taking a look at some of the big movers, we will start with shares of Cameco which are getting some bids today. The Saskatchewan-based Uranian company receives some favourable analyst comments. Right now, the stock is up 3.1%. Some other big movers, Pet Valu holdings are trading down, the petfood utility just reported first-quarter profits of 17 1/2 million dollars. That's down from nearly $19 million a year earlier. That is being reflected in the stock.
Right now the stock is trading at $31.28, down nearly 2.5%.
We are going to turn to Wall Street which also open higher.
That is due in part to declining treasury yields as traders look for more clues on what the Federal Reserve may start cutting interest rates.
Right now, the S&P 500 is trading up a modest 13 points or .3%.
Taking a look at the tech heavy NASDAQ composite index, that is also trading in positive territory.
We got weak jobs news and there are greater expectations that the feds might cut interest rates later this year. Right now it's up a modest .2%. Taking a look at some of the big movers in the markets, shares of Simon Property Group are getting some attention following the recent first-quarter loss.
The US company which invests in shopping malls and outlet centres reported earnings that beat forecasts by eight cents while revenue topped estimates. Simon Property Group is trading higher to the tune of 3.9%, nearly 4% so far.
Some other big movers today, shares of Nvidia are trading lower. There is news that Apple is reportedly developing its own chips to power artificial intelligence out of their data centres in a move to rival Nvidia.
Nvidia shares are down modestly, 1.2%.
And that is your market update.
While equity markets had positive performance so far this year, there still a lot of gloom amongst investors as funds continue to flow into GICs and money market funds.
Joining us now to discuss this perception versus reality issue in the markets is Brad Simpson, chief all strategist with TD Wealth. Things are joining us.
>> Things for having you.
>> You have this report called the best times and the worst times were you look at perception versus reality issues in the markets.
What are you seeing right now?
>> We are probably on month to you about this because we are fascinated by the subject and we are fascinated because in different periods of time, we have different extremes that happen in markets and this one, looking at your introduction today, what's going on in equity markets, if you think back over the last couple of years, how many times you said, well, the Fed things one thing, Nvidia is doing another thing and how much it has been those kind of, those are two tales there that have really driven us and I think these two tales are driving off a lot of the discussion.
When we look at the retail investor or the wealth investor and we look at what they are doing, on the one hand, they are bidding of equity markets on one side along with some institutional investors and on the other side they are building up these cash positions and so I think I've talked about that an awful lot and it's not just the non-sophisticated investor, you are also seeing this in the pros, and we've been seeing it in private markets, these kind of extremes with is the positive side and then we have this negative side. Of course I brought a charter long for this and really all we are looking at here is the deal count and the deal value in private equity over the last few years. That of course we see lines go down or up, what you are seeing is both the deals and the values are decreasing and that is less deal flow, less money going out of the banks and that's because there is the same sort of fear that's in public markets.
And that I think is indicative of, with all the things that we've been seeing going on geopolitically, concerns around inflation, and I think that it's really important for us to step back from this and come to terms with this duality that is in the marketplace. And so if you look at it, look at what private investors are doing in equity, they are starting to allocate capital. That's interesting. The deals they are doing a little bit smaller but their activity is increasing and decreasing quite dramatically. The other part of where it's increasing is they are starting to be more involved in secondaries. Secondary is taking the deals us that one private equity group is sitting on and then purchasing those. One of the things that I learned from one of my mentors along the way is that you can have really good assets shake out of the hands of weaker hands.
Some of those weaker hands are the folks that either can't deploy the capital or are kind of caught up in the fear part of this market. So I think this is a really interesting dynamic. The other part, if we kind of reverse and look back when I was here in January, I was talking about how little fear there is in the options market, how little hedging was going on. Now we have started to see that pick up a little bit.
So if we look at the expense of hedging today, it is considerably more expensive than it was.
>> What does that mean?
>> It means that because of this I would say the equity move we have seen in equity markets, one, so the valuations of them, too, that if we went back a few months ago, we were talking about inflation, it was at a more positive trend in the United States and then resell that CPI print in April and that started to change the narrative around the inflation stories so as that narrative started to change that we have seen in equity markets become a little bit more volatile.
We have certainly seen interest rates a little more volatile. I think we looked at April for example, you look at a 30 year Treasury bond, we saw its yield move up, you look at a 10 year treasury, is 25 to 30 basis points and those are, in bond market land, those are big moves and giving back all of the returns they saw in the early part of the first quarter.
And so what that means is that the tone where there was very little concern in the market and if you recall what you are saying is this is the time we should be buying these hedging strategies. I'm not saying they are incredibly expensive. They are not. We are still I would say kind of in this early stage of this but I think it is a way of looking at allocating in portfolios today that is important to keep looking at the two extremes and how you're going to manage through it.
>> You also say that China is a good example of this perception versus reality issue. Walk us through your thinking.
>> One of the things in our portfolio strategy you quarterly that we wrote an awful lot about was China and the reason we did so is one of the things that I think happens being in North America, particularly now, is we are so dominated by US media, and so if you turn on, I kind of do this in the evening, I kind of make this route where I go and watch a BBC update, I do a fox update, I do a CNN update, I do an MSNBC update and you kind of go across the board and it striking. When you do the BBC, what they are talking about, which is primarily Israel Gaza is really what they're focusing on, and if you look at the American networks, and CNBC as well, there is a brief snippet, and oh, this is what's happening in Gaza, and then back to Trump. The issue with that is for financial markets, there is the rest of the planet and the rest of what's going on in particular there is China, the second largest economy in the world and while the allocations that we have as an organization are quite low, in economic terms and in geopolitical terms, it's incredibly important which has an impact on what financial markets are going to do.
We said, let's try to take a step back from the North American bias that we have an drill in to what's happening in China and Europe and really what we wrote about his we think they are in the middle of what I would say if it isn't a complete shift, it's a really significant shift away from what they were doing from the past 30 years to a whole new thing that they will be doing let's call it 30 years or at least the next coming five years at any rate, so that we think is really, really important to frame and if we even look at what that impact is on the short term, if you looked at these two, if you put the United States and China side-by-side, this duality or different way of looking at things really jumps out at you. First and foremost, government spending.
Despite whatever you will hear on the media talk shows, you've had an enormous fiscal spending in the United States with the CHIPS Act and bringing manufacturing home.
>> Onshoring.
>> All that onshoring going on.
And in China, typically when you're getting a slowdown like what they are in the middle of, you would see the government getting active with fiscal policy but that's not what's happening.
They are modestly going through a process that we might've seen in the pre-COVID era and backwards. And then you look at the consumer.
If you look at the incredible activity of the consumer in the United States, the new look at what the consumer is doing in China, I think it's roughly 26% of somebody's personal profiler balance sheet in the United States comes down to their real estate portfolio or real estate holdings.
And there, is 41% in China.
I think we know what the property situation looks like there. On average, your average holder of that is down 20 to 40% and you think about the impact of that on the consumer in going out to spend. When you look at the American economy where they are today, you can kind of check off and go, the consumer is in good shape, still really active in spending and keeping the economy going, we are seeing in China an incredible reluctance from the consumer to go out and spend.
We can also look at that in the business community. The business community looks at that spending and says wait a minute, people are putting their wallet away, I'm not gonna be spending because they are not spending.
>> The domino effect.
>> Exactly.
When you are looking over into American public companies and you look at the rate of what they are spending on their businesses, it's extraordinary! And then, if you look at what happened even in the last week and 1/2, the announcements from the apples of the world, the Microsoft and apples, their share buybacks, normals get taken aback at the size of those who are seeing there. A very different feel there. To wrap all this up, this ongoing property crisis and you have a distinctly different environment there and the last part of it which we wrote about pretty extensively is I really do think that the portfolio manager community, the analyst community and I think the greater public at large haven't come to terms with that this is a different government in power there today and they have a different fiscal policy, different monetary policy than they used to and we need to adjust our thinking based on that. And why I think we need to look at this and keep our focus on this is that, as we talked a lot about over the last couple of years now, is one of our ongoing things are this idea of de-globalization.
And we continue to really hold onto that. We think it's imperative to go look at, okay, let's look at what's happening around the globe and what that looks like.
Even if you looked at, if you set up with any investor and said what the long-term trend in the US you're comfortable with? AI, tech, feel great about that.
If you look at government policy in China towards their technology community, they are stifling that community.
If you look at what you think your trends are going to be down the road and you look at the policy there and the difference that you have in the United States, they are pretty significant. So that ultimately is good.
That ultimately has an impact on both your portfolio and how it should be allocated and it also has an impact on potentially what inflation is going to look like. The last part is on this is that of course we were writing this in April and basically what we were writing this, the Chinese equity market started to go on a bit of a tear. Oh, there you go! We said, first of all, this is a long-term structural deal.
The second point is that I hear a lot of the old trigger equity folks that I grew up around when I was a kid, one of the things I think you need to be a bit mindful thereof is what you call a dead cat bounce. The valuations are really low, there is a little bit of fiscal monetary policy pick up in the last few weeks there, so you see those movements into the market there, but we don't think that sustainable and we think our neutral allocation there, our very low allocation there continues to make sense.
>> A great start the conversation and we will get back to your questions for Brad Simpson in just a moment and a reminder that you can get in touch with us at any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Now, here's an update on the top stories in the business world today and a look at how the markets are trading.
Disney's core streaming business Disney Plus swung to a profit for the first time since the launch in late 2019, reaching the milestone months earlier than expected.
Stripping out ESPN+, Disney Plus and Hulu, the streaming unit earned $47 million in the second quarter, thanks to aggressive cost-cutting, price hikes and popular Hulu programs including Shogun and the bear. However, the better-than-expected second quarter results were overshadowed by a decline in revenue and operating profit from the traditional television business.
The stock is down about 10%, just on the news.
Meanwhile, shares of Tesla are in the spotlight today amid report shipments from an Shanghai factory dropped year-over-year in April even as the overall market for new energy cars group.
Preliminary data from the China passenger car Association showed April deliveries came in at over 62,000 in China made electric vehicles in April, that's down 18% from April 2023.
The news highlights the pressure Elon Musk's companies under in China's hypercompetitive automobile sector.
Right now, shares of Tesla are down just two or four points or 2.6%.
Finally, shares of Peloton Interactive are trading higher amid reports a number of private equity firms have expressed interest in buying the fitness company.
The former pandemic darling, which saw interest surge when millions raced to buy it's at home exercise equipment, has fallen from grace amid declining users and exercise bike recalls. Recently, the company announced its CEO Barry McCarthy would be stepping down and that it would lay off around 400 workers were roughly 15% of its workforce in an effort to reduce costs.
Currently, the stock is trading positive on that news, it's up 12.7%.
Here's how the main benchmark index in Canada is trading. The TSX is up roughly 83 points or .4%. We take a look at the US where markets are also trading modestly higher, the S&P 500 sitting at 5197, up .3%.
All right, we are back with Brad Simpson, chief strategist with TD Wealth, taking your questions about market strategy. We will start with the first your question. Brad, what are a look for stocks right now and you expect the bull market to continue?
>> The first I would start with, and I know this is an investment show, but going to the Disney equities story, strong recommendation on both of those shows, the programs are good.
The bear… >> I haven't watched it but I've heard good things.
>> The bear might be the best television drama since the Sopranos. It's superb. I know we've gone off a little bit there. I think this kind of idea of duality which is our reoccurring theme here right now, I think you have to look at equity markets kind of in that way and I think our starting point for that, of course, is that so much of the move that we saw from October let's call it through April, of course, was the technology names and I'm not going to dig into those because I know you've discuss those ad nauseam here.
I think that where we are now is, and if you kind of look at when companies come out with the earnings or if they come out if you disappoint a little bit or you miss a little bit is that when you're sitting at the valuation level of where the S&P 500 is right now and if you say, okay, some are trading at 20, 22 times earnings as an index as a whole, it's difficult to say this is an inexpensive market. The other thing you have to look at is those big growers that have been a driver there. Think as an investor, if you're trading them, that's not my thing.
To me, that's a very different thing between trading and being an investor and allocating. When you look at the cash creation inside of these companies and their ability to be able to grow and reinvest in their business, to me, this is something that you continue to want to be allocated to but as a momentum play, clearly, there is a market that is starting to rotate from momentum and rotating more into a valuation basis and looking at were other parts of the market are. And I think, I'm not sure we have it because I know I brought a bunch of different ones, but one thing I brought us this idea of how equity markets are trading inside. When you look at how they are trading inside, what you're starting to see is first of all, broadening out dispersion and that's really positive because in simple terms that means the money isn't just going to a few names, is starting to hunt around through the indexing go where are other names?
>> We have a chart here that speaks to that.
>> If you start seeing dispersion pickup like you're seeing on the green line there, that's a really, really good sign.
Not usually a sign of seeing an equity market starting to get healthier.
You got this higher valuation but your health is starting to increase in you starting to grow into that valuation, you look at that and go, that something you really want to look at. Looking at the implied correlations inside the index and in the sub indexes, you're starting to see correlations break out between individual names.
That's kind of an active managers dream market that you're looking for. That's when he started saying, well, earnings matter, how they are reported matters and how you're going to build from there. For us, we've been doing is running a barbell strategy were you kind of all these momentum aims on one side and then on the other we have assets that we think are going to benefit when there is greater dispersion.
I would look at this and say, if you are looking for a correction based on valuation, when you have something that looks like that, it's one that is very, very difficult to see. So if you are going to have that big correction that people are waiting for were looking for, I think that's going to be more of an outlier event.
It's gonna be something that hits you that you don't see coming. When you look at earnings expectations, particularly looking at the S&P 500 as an example, I would think that if you look at the next quarter coming up it would seem that the analyst community is getting maybe a little too optimistic about the expectations, 14 to 17% earnings growth, which I think is a little bit frothy, if you will, for an expectation but we continue to be overweight US securities and so that would tell you that we are comfortable with that level.
Overall, equities as a whole, we are neutral, which tells you are cautious and we think that that make sense here too. I think if you look at it in those terms, I think the key here is that I think one of the things that people need to do it again is start taking out their time horizons a little bit and think that what am I actually allocating to? A business that can grow?
Looking at growth in our equity portfolios, we are building positions in Facebook, I looked at that, of course they came out with modestly disappointing earnings, the stock went through a big price correction, when you look at the health of that company, I think it's indicative of the growth story that we are talking about.
People need to stretch out their growth expectations on what's going to happen in the next week. We continue to think equity markets make a lot of sense but I think you need to have an investor mindset here and probably far less of a speculative mindset in an environment like this one.
>> As always, make sure you do your own research before making any investment decisions.
we will get back to questions for Brad Simpson on market strategy and just a moment. And reminder that you can get in touch with us anytime.
Just email moneytalklive@td.com.
Now, let's get to today's educational segment.
In today's education segment, we are having a look at TD's Advanced Dashboard, a PlatForm designed for active traders available through TD Direct Investing. Joining us now to show us how to set up a watchlist on Advanced Dashboard is Hiren Amin, senior client education instructor with TD Direct Investing. Welcome, thanks for joining us.
Walk us through how you set this up on TD Advanced Dashboard.
>> Absolutely, Anthony. Great to be back again, great to see you back in the hosting sea. Let's talk our viewers through Advanced Dashboard and how you can set up a watchlist. It comes as no surprise, it's probably a tool that most investors are familiar with.
Essentially, it's an investors Rolodex. It allows you to monitor ideas and analyse them using various price data points associated with it. To see some of those eye catchers, and how you can get those set up for yourself, we are going to step into Advanced Dashboard.
Most folks might already have a separate section created. In this case, I already have a watchlist created over here. Once you add the watchlist tool, what we are going to do is you can call up any list that you might already have existing but if you wanted to build a new list, you're going to come all the way to the right where it says new watchlist. Click in there and you can throw in any name to get started with.
I've already got one created, you can see it's called a sample over here. I have some takers additive.
So how do you get some of those names added in? There are two ways. You can go up to the symbol box.
We will add some consumer staples here.
Costco, you can often find me rowing the isles there on the weekend.
And we will do some domestic ones over here, Dollarama, in this inflationary time it seems to be doing well, and we will add in one more, Loblaws.
The reason I went with this is because the next and when you show everyone is once you get them into your watchlist, you're able to create a singular list and also segment them based on whatever way you want to do it.
You can see that I've got it segmented based on sector.
Where I would do that is you would just go next to reassemble is where you want to start that segmentation, and clicking on this menu, you will notice there is a section over here where you can go to group. We've already got some groups started.
You can see that these are my existing groups that I have. And when you create a new group.
I'm going to call this one consumer staples.
These are pretty much just your department stores, grocery stores. We are going hit save. You can see that it creates a new section here for us.
I can just drag and put Costco in that section as well, I can do the same thing with Dollarama.
You can move to group, that last one there, Loblaws.
This is the way of getting it set up and add your tickers in.
>> That was a great overview. Our investors able to customize the information they see about the securities on their watchlist?
>> Yes.
The way you can access the template is there is a drop-down menu over here and you can see these are different views that have been created. Most folks get a basic view which gives you simple, basic information but if you wanted to build it on your own, we will go to this menu right here, this is called a hamburger menu.
Then we are going to go to the first thing that says manage templates.
Under manage templates, what you are going to do is go into the custom area and just below it is where you will be able to create something new. I will do it for May 7 over here. Title it whatever you like.
Then anything on the left is available for an investor to choose from as to what they want and there. I'll put display name, day high and low as an example and then maybe I will just do one other thing, ex dividend date.
Just keeping it plain and simple, I've only got four and there. You don't have to hit a save button. You can click off the box over here.
Then you can call it that new view by going to the template drop-down and you can see is at the very bottom and you can see it just has the data that we wanted up there. That's how you can customize your template on your watchlist there.
>> Very informative. Thanks very much for joining us.
>> My pleasure. Have a good one.
>> Our thanks to Hiren Amin, senior client education instructor at TD Direct Investing.
For more information, you can visit the web broker education Centre or follow this QR code to go to TD Direct Investing's YouTube page.
We are back taking your questions for Brad Simpson.
What is driving the change in the trade deficit?
>> We have a geo-political environment that in the last couple of years has been altered dramatically and continues to alter itself dramatically so we have on the one hand this flight to quality and so the slide to production which has been the driver behind the US dollar.
We are all in favour of having a good US dollar investment allocation because of that.
On the other, you have the second largest economy in the world that wants to export their way out of their problems.
Then you have the weakening currency there as well.
Then you look over, we were talking about has lent some of their issues that they are having, you look at what's happening in Europe and the existential crisis you could almost call it with the car business there, you start piecing all those things together and it starts to change the flows between how countries are trading with one another and you circle that around and it pretty much get to see what your deficit is going to look like.
>> We will get back to your questions for Brad Simpson on market strategy and just a moment.
As always, make sure you do your own research before making any investment decisions.
Time now for an update on the markets.
We are looking at the heat map function here on Advanced Dashboard, which gives you a view of the market movers on the TSX 60 by both price and volume.
We will start here with the TSX 60.
We are seeing some green on the screen for some energy names which are tracking oil prices higher. We are seeing strength in CNQ, Enbridge as well. Just to the right, seeing some buying activity in some of the financials as well.
Just the right of that, we are seeing strength and technology names like Shopify, BCE and tell us.
Let's take a look at the S&P 500, the S&P 100 rather, see was moving the markets there.
We will start right at the top there, technology, we are seeing some strength in the Magnificent Seven stocks. We are seeing some pressure for Nvidia. Apple is reportedly developing its own chips to power artificial intelligence software and data centres in a move to rival Nvidia so we are seeing a little bit of weakness there. We look over to cyclical consumer goods and services, Tesla is also seeing some red on the screen after reports from its Shanghai factory dropped in April. Disney is also seen quite a bit of selling following surprise profit in its streaming division which was eclipsed by a drop in its traditional TV business and meagre box office.
We are back with Brad Simpson, cheap Bell Centre just said TD Wealth, taking your questions. What sector do you see as the most undervalued in this current market?
>> I wasn't going to say this but when you have those charts up… I love that stuff. I just eat that stuff up.
When you are going through the S&P TSX one, lots of strength in the financials as a trading group today, how positive they were. If you go inside and take a look at the big six banks, it's been rough.
I think if you look on a valuation basis and opportunity basis that might be one of our ongoing themes here, that to me is and then throw in the fact that the Canadian equity market has been so out-of-favour that you would think were starting to see the flows pick up their and I think if you have a time horizon that is the one you were looking at the world as an investor, that makes sense. On the second part of it, if you look at the stuff that's been out-of-favour, like utilities, money will start to flow there, it makes sense to have allocation there.
If we look at the midterm a little bit, one of the things that we look at when we look at things as we are a factor exposure host. We look at things in terms of what is the DNA inside of an investment.
When you look at, of course its momentum and big growth and quality is a factor that you want to allocate to.
They are miserable market timing devices.
But what factor exposures are good for is saying what are the valuations that are inside of there and if you start to see momentum combined with those we think it's a barbell idea which is something we talk an awful lot about. We think making sure that you are allocating into a quality factor and having some exposure into the value side of the market as well which typically starts to turn when you get into the first, into an early stage. We talked a lot about that here over the last is blurring the lines between late stage economy and early-stage economy and these lines continue to blur but I would say those are probably where you are low valuation in the mid-to longer-term opportunities are.
>> Will go to the next question.
Brad, what is your look for the commodity space?
>> I think the starting point is that I think there's a couple of different ways of being able to look at commodities and for us I think there is a trading community on commodities and I confess that that's not our forte or strength looking at them.
We have a strategic asset allocation and a dynamic asset allocation, meaning that we really like commodities such as exposure and we have when we were writing our year ahead last November, we said we wanted to be overwhelmed commodities because of geopolitical issues that we have around the world. You also seen the with thinking that if you reverse back a year ago, remember, we are doing things a year ago thinking of where we are going to be a year later, where so much of the talk was we would have United States in a recession, we do not have the United States in a recession. So demand on commodities like copper makes a lot of sense. You look at the volatility that we have seen in oil, of course, with the war in the Middle East, that puts pressure on oil prices there. It has been fluctuating but we still think that continues to present an opportunity so the starting out is is that I think many people's portfolios don't have a dynamic commodity exposure for diversification purposes and we really believe that is a really wise thing to do.
And so of course we are hammering the table on that constantly. And so as a long term, we think that makes an awful lot of sense.
And when we look in the shorter-term, the next 3 to 6 months here, between the US election coming up, between the war in the Middle East and ongoing, of course often lost along the lines of this is the war in Ukraine, and then you look at the activity between China and Russia and the mass purchases by their central banks of gold and the ongoing effort that I would argue something will be watching for a long time to try to put pressure on the US dollar as a reserve currency, all of those things from a diversification purposes to the timeliness of it today to being in an environment where if you are wanting to build hedges for geopolitical, we have looked at this and said, running long short equity portfolios, long short on duration or on credit are all good ways of hedging portfolios. The best way to head for geopolitical risk is making sure you have a dynamically managed commodities portfolio. So all of that combined makes a ton of sense to us.
>> Insightful as always. Thanks for joining us.
>> Thanks for having me.
>> Our thanks to Brad Simpson, chief wealth strategist with TD Wealth.
As always, make sure you do your own research before making any investment decisions.
if we don't get time to get your question today, we will aim to get into future shows.
Stay tuned. On Wednesday show, David Sekera, chief US market strategist with Morningstar Research will be our guest, take your questions about US equities.
And a reminder that you can get a head start.
Just email MoneyTalkLive@TD.com.
That's all for our show today.
Take care.
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