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[music] >> Hello, I'm Anthony Okolie, in for Greg Bonnell, and welcome to MoneyTalk Live, which is brought to you by TD Direct Investing.
Every day, we're joined by guests from across TD, many of whom you'll only see here.
We'll take you through what's moving the markets and answer your questions about investing.
coming up on today's show, we will get a reaction to the decision by the Fed to take interest rates to a 22 year high.
As just part of the conversation we will have today with Brad Simpson, chief wealth strategist at TD Wealth. Our OWN Susan Prince will be here with an interesting story about Canada Goose creating its own trade-in program.
And in today's WebBroker education segment, a way for you to access to foreign listed shares on the WebBroker platform with Nugwa Haruna.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
And now for an update on the markets. In Canada, we opened higher, driven by energy and technology stocks, on optimism that the US Fed rate increase on Wednesday might be the last in its hiking cycle.
shares of Shopify are moving higher today.
Of course, Canadian technology stocks are seeing some strength a day after the Fed rate decision.
The stock currently is up we will call that nearly 2% on the day.
Let's take a look at stocks south of the border.
Wall Street open higher things to stronger-than-expected second-quarter GDP numbers, which are dispelling some recession fears. The S&P 500 index is currently trading up by nearly 20 points toward .4%.
We will take a look at the tech heavy NASDAQ composite index. It also open and positive territory. The index is currently trading up about hundred and 49 points, that's up just above 1%. Of course, investors will digest some more earnings from other Mega CAP Tech stocks later today with Amazon.com and Intel, chipmaker Intel, reporting their earnings after the closing bell.
Now let's take a look at some of the big movers on the market. We will start with Comcast. Shares of Comcast are moving higher today. Of course, the company reported second-quarter earnings that topped expectations as higher prices offset a slowdown in a broadband business.
Comcast telecom company is currently trading up just over 6% right now.
Some other big movers are in the semiconductor space. Applied Materials is moving higher in early trade. Of course, chipmakers have been in the spotlight as of late as the sector looks to capitalize from the AI craze and navigate the escalating US China chip War. Today, investors will also focus on Intel second-quarter results after the market close and shares of Applied Materials up about 10 points, to the tune of 7.2%.
And that's your market update.
The US Federal Reserve has taken interest rates to a 22 year high after raising its key rate by another 25 basis points. The central bank also indicated it may not be done, suggesting another hike could be in the works later this year.
And earlier today, the ECB, the European Central Bank, took its rate to a 23 year high, and said it to me not be done. So now what?
Well, let's bring in Brad Simpson, chief wealth strategist with TD Wealth.
Brad, thanks for joining us today.
>> Anthony, it's great to be here. Thanks for having me.
>> Brad, I want to start off with your take on the Fed's rate decision yesterday.
>> We've got an hour, let's do it.
at the end of the day, you have to think about the function of what a central bank is and I think you have to think about the function of where we are today. Every quarter, we publish a big strategy research document and you just happen to have made today were we are publishing hours in the next hour here.
It's about 80 pages long and I think probably about 30 of it we are talking about inflation and central banks.
The bottom line is that I think you have to think about it in these terms, that inflation for a central bank is the main thing that they are concerned about.
And I think if you look back at past times, I would say every central banker in the world, they grew up in a world where they went to school, where they listen to discussions with their parents, they remembered the thoughts and ideas they heard about 1970s inflation over and over and over again.
And the ills of it and how it no matter what you are going to do, make sure that you are going to never have a situation like the late 70s early 80s happen again.
If you think about it in that context, and in my introductory article to our publication that we did which is called soundproof, I have a quote from Ben Greinke who says that you've got to realize you could almost look at it wherefore central bankers it's almost like childhood trauma.
You never forget it. And the reality is is that the things that central banks did since 2020, from COVID in the Russia Ukraine war and all the fiscal policy that has been in the background of pushing behind all this monetary policy, it's been with the simple goal of first get ourselves through COVID 19, then let's work our way through getting the economy back up and running again.
And since that time, let's face it, I think we could all agree that they kept interest rates low to low for too long.
I'm not here to be critical of that.
It's just the reality is is that interest rates is like a blunt tool they use and know what's happened is inflation on the other side is is that they are going to, at the expense of almost anything else, they are going to go through the process of ensuring that they take care of it.
And so today, yeah, they are saying there data dependent and they're going to go day by day. He saw the 25 basis points increase by the US central bank yesterday.
ECB came out today and that until they see and feel confident that inflation is eradicated or at least back to the 2 to 3% target, yes, the trend is good, yes, it looks good, but I think you have to understand the impetus from them and if you look at it in those terms, all of a sudden, that starts to give you a pretty good idea.
>> Okay.
I want to stay with monetary policy because talk to us about the trial and error method causing havoc for data and portfolio managers.
>> I think that's one of the things that I really love about the environment that we have right now is this kind of contrast.
And that is you open up a newspaper or you go to any, read any book on business today and it's all about big data.
In our own company here, we love the word big data. Nothing gets people more excited than that.
And you know what?
My background is data of macroeconomics and as a portfolio manager, I come from a quantitative background. So I like data an awful lot. But one of the things we have to think about in terms of this is this trial and error approach that we are taking is that the steps and those sort of things that central banks have done in the last, especially in the last three years but you could almost at the last decade, and if you look at that,those sort of measures that have been taken don't exactly know, and they haven't exactly known, what is going to happen when they do the things that they do.
And so the reality of it is that what economists like to do, what quantitative portfolio managers like to do, what investment shops around the globe like to do is we like to take nice and tidy and neat data.
It's always past data and we extrapolated forward to make the decisions that how we are going to allocate capital.
In the issue that we have right now is that that data that we are gathering from the past is we are trying to extrapolate it to a future and an environment that we are today that quite frankly we have never seen before.
So I think the thing that we kind of have to understand with this is that it's kind of like high-frequency, and this high-frequency creates all kinds of distortions and if you think about it in that term it's that every time we try to use this data, what we are seeing here is that it's distorting a little bit how we are looking at things.
So one of the things we love to say in the investment business and the origin of it is Sir John Templeton said, beware of anybody who says, this time is different.
The reality is that it's always different and this time is especially different.
we have to start being a little bit moreclear and candid about ourselves.
We all know the future is going to be difficult and I think we have to know and we are making decisions either of trying to ascribe what is the economy going to look like over the coming quarters and then when we are trying to ascribe what do we think is going to happen in fixed income markets, our equity markets, or private markets. I think we have to be a little bit honest with ourselves here and say that how much we can know is incredibly limited and that's okay.
I think the issue actually is not being that clear on that because you can make all kinds of assumptions that go terribly wrong at the end of the day and that's not what you want to do.
> Great start to the discussion and we will get your questions about market strategy 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.
new figures show the US economy grew stronger-than-expected in the second quarter, despite a series of fed rate hikes.
US GDP grew at an annual rate of 2.4% in the second quarter, topping expectations.
Consumer spending drove the solid quarter, along with increases in business investment and government purchases.
The news comes a day after the Fed hiked interest rates 1/4 point, to their highest level in 22 years.
Meta Platforms reported revenue of $32 billion in the second quarter, marking an 11% increase from a year ago.
The Facebook parent said profits rose 21% year-over-year as well as issuing an upbeat outlook for the third quarter. The result, as demand for digital ads appears to be picking up steam again and enthusiasm for artificial intelligence technology remains strong.
finally, Canadian oil company Cenovus reported lower quarterly profits and cut its oil production forecast for the year on the impact of wildfires. The Calgary-based company reported a net income of $866 million, that's down from $2.4 billion a year earlier.
In its guidance for the year, the company says it now expects upstream production for 2023 to come in modestly lower from its outlook last quarter.
And here's how the main benchmark index in Canada is trading.
Currently, the SNP TSX is up modestly, just about 14 points, just under 1/10 of a percent.
Let's turn to the US now.
Take a look at the S&P 500.
Currently, the S&P 500 is also trading modestly higher. It's a 27.
4.6 percent.
Again, we are expecting some more earnings news and we got the strong GDP numbers as well that's helping to boost markets in early trade.
Okay, so now we are back with questions for Brad Simpson.
We will start with the first question.
How long can the job market remains strong with the economy getting weaker?
>> Well, let's combine this with two things.
Like, let's go through again what you just reported their.
Today, economic growth in the US came in at 2.4% year-over-year, quarter over quarter and annualized.
And that's versus the forecast which was 1.8. And then you said, by the way, the core PCE prices looks less than expected at 3.8% in the quarter, following a 4.9% rise in Q1.
That is a movement towards what economists would call kind of the Goldilocks economy, right?
And when you look at it in those terms, this was supposed to be when we were moving towards a recession because we had interest rates so high.
That's why this is such an incredibly difficult market right now.
And so looking at that, what is this thing that ultimately has the potential to lead to recession?
What is the thing that if you keep raising interest rates would slow things down enough? The bottom line is labour. It's employment. An employment today is incredibly low.
And so what we are seeing right now is that until, and if you look over the last few weeks, the different wage settlements that you're saying, particularly you could use as a great example in the airline industry, but there are other examples as well that until, if you are a central banker, what you are really, really concerned about is really tight employment and then, all of a sudden, you get all kinds of really dramatic wage increase settlements. And so employment and labour is an important part of the market and what we really have to watch for.
And so we are starting to see, inside the system, and I want to be clear on this, it's really early stages.
However, if you look at the tightening cycles in the past, it takes about 12 to 18 months to start impacting labour. We are about 12 to 18 months into that right now and we are seeing, initially starting to see some changes in jobless claims and the changes in jobless claims, and it's a really small and early stages right now, ultimately, we don't know if this trend is going to continue but what we can see is that, indeed, we are in the early stages of this component of employment starting to change. And so I don't think it's unreasonable that we came out with the Fed saying, look, we are still going to go data by data and we are going to look at other central banks in the same boat.
Today, it sitting a kind of your 3.8% for US unemployment. I don't think it's unreasonable that you could be looking at an unemployment rate around 4 1/2 to 5% which I know sounds odd to folks to go, that would be really good news for the central bank, but it would be really good news for the central bank because it would be one of the last steps that you would take two words, to start to see inflation starting to settle at 2 to 3%, which is where the target is.
>> Especially when unemployment in the US has been sitting at 50 year lows, so 4 1/2% is certainly much higher than it is now. Okay. We will move to the next viewer question. This is on bonds and equities.
What is your take on bonds versus equities right now?
>> I think a really good starting point is here at TD Wealth, we have something called the asset allocation committee.it meets every month and we set what we think our rate should be between fix, equity and alternative investments. So a great starting point is right out of the gate, we are maximum overweight fixed income and we are modest underweight equity. Sothose are the two weightings that tells you right now that okay, the starting point is when we look at where interest rates are today, I don't know, I think in the 15 minutes that we've been speaking here, I think we've used the handle five, 5 1/2% a couple of times here when talking about where interest rates are either headed or where they could be.
I think if you look at a 10 year US treasury, let's just call that around 3.8% today. And you kind of extrapolate that ± 50 basis points that's from government bonds to investment grade bonds to high-yield bonds, you can go out in the market and get somewhere, anywhere between 3 1/2% and 5 1/2%. You can get it somewhere between government guaranteed or an investment grade bond. There is also some really compelling interest rates and stuff that I am always a little bit cautious sounding like that when I look at I could talk to a generation of investment professionals who have never actually seen interest rates at 5%. That sounds astounding to me but that is the reality of it.
And then you put on the other side of the coin that what we do know when we look at the global economy and that we do know that we are a lot closer to a wait stage then we are at a new beginning.
It is reasonable in the next let's call it 12 to 24 months to seethat we will be in the midst of a slowdown again. When you look at the Canadian economy, the US economy and kind of look at the European Community as a whole, we have kind of kicked the slowdown to the global economy into 2024, but if we do start to see that slowdown, you'll start to see interest rates are to work their way down, which means that as those interest rates work their way down, you're getting this really nice interest coupon but you are also getting potential for capital gains down the road.
And so we think this is kind of a real sweet spot for fixed income right now and we think that over the short term, you can see short volatility for interest rates but if you kind of work your way through that volatility, fixed income makes a ton of sense to us here and when you throw that back into having a non-correlated asset, what we saw last year was that fixed income was not a great diversify your investment portfolio but that really brought the long term trend in reading the trend will be back in place in the next few years here.
So on the return side and on a coupon return side and then on a capital gain side, we think that fixed income here is pretty darn compelling.
>> Great perspective on the equities versus bonds picture.
As always, make sure you do your own research before making any investment decisions.
we will get back to your questions for Brad Simpson nonmarket strategy in just a moment. And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get to today's educational segment.
Today, we are looking at Canadian Depository Receipts, also known as CDRs, what they are, how they workand how to get access to them on the Whataburger platform.
Nugwa Haruna, Senior client education instructor at TD Direct Investing has the answers to those questions and more.
>>so you may have heard of depository receipts andthese allow investors to purchase foreign investments in local currency.
There are some popular ones in the states like Alibaba.
The ones that Americans buy are actually ADRs.
On the Canadian side, we have CDRs or Canadian Depository Receipts. And these actually let investors have access to US listed securities in Canadian dollars.
So let's happen to WebBroker and show you how you can find these.
Once we are in WebBroker, we are going to go research. Under investments, we are going to go stocks. So I'm going to pull up a US security in this instance.
When I do that, you are going to notice two things. First, you will see there is a stock listed in US dollarsand 1 Listed in Canadians. So let's click on the US dollar security.
So the security trades on a US exchange.
It's in US dollars, 182 was the last price.
I want to take a look at the volume, almost 25 million securities traded.
Let's not hobble over to the CDR for the security. So once I pull up the stock, I'm going to go to the Canadian listed version of the security.
One thing you will notice is the price.
Much less than the US version. That's because CDRs give you an opportunity to buy partial units of that security.
So one of the advantages of the CDR then is that you are able to enter a position with much less than you would need if you are buying a full share.
And so for investors who are looking to diversify, this could be a consideration.
Now something else I will talk about when it comes to CDRs, another advantage is that for investors, you don't have to worry about the potential currency difference between the original security and your local security. That's because CDRs aren't hedged. Now I do want to mention though one risk when it comes to CDRs.
If you recall, when you look at the US version, it was almost 25 million units traded today. On the other hand,when I look at the volume for the CDR, just under 30,000. A significant difference there. So investors want to be aware of this potential risk when it comes to the volume being traded. They may not have enough being traded that day for them to sell or buy into a position.
All in all, when it comes to investors deciding to use CDRs, they want to compare the risks versus the benefits before they make a decision on if they want to utilize this when it comes to their investing strategies.
>> Our thanks to Nugwa Haruna, senior client education instructor at TD Direct Investing.
And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
Now we are back to viewer questions for Brad Simpson.
We will go to the next question.
Markets have been performing better than anticipated this year.
Can these gains continue?
Brad, another great question.
>> Yeah, you guys are not taking it easy on me here.
I think you've got a break that apart a little bit.
We use markets really generally.
Markets, I think, for the most part, are translated to the S&P 500. And the S&P 500 had a really great year.
And I think most of us, most folks, if they follow markets at all, I think they know that, okay, the next step in this is that when we look at, yeah, markets have been really good, but I think you got a look at it and go, okay, if you dig in a little bit deeper, what you will find out is that it's about 7 to 10 names that have pushed the market almost altogether.
That's in the S&P 500.
When you are doing the report earlier, if you look at Canada, almost year today, you could almost say that even though the TSX returns haven't been that great, if you look at where the returns of come from, you will stop its modify and go, there is the returns. So I think we have to look at this and go, could you expect markets to continue to create the rate of returns at the rate they are if that continues? And I would suggest no, that can't go on. The good news is is that we are starting to see is dispersion is starting to pick up in the market.
In simple terms, dispersion means that the rest of the companies out there.
If you take a look at it in those terms, you limit the S&P 500, you go, okay, it's trading at 20 times earnings.
And then you go, yeah, okay, let's split of those big names. Then, you are getting closer to your 60 times earnings which all of a sudden you are into historical valuations with rates of these kinds of levels. And then you go, okay, all of a sudden this is kind of compelling.
So I think for us the starting point is that we are modest underweight equity because of this kind of dispersion and what the movements have been but if you think about it in those terms, what you can be allocating to is the rest of the market and then I think if you are looking at in terms of the rest of the market, that really does change the story. But I do want to keep a real cautionary tone here. Again, this was in the article, my article that we publish today. I confess, I have it on my mind because we've been living and breathing this thing for the last few days, is that if you go from the SNP and those big seven names and then you look over at the returns on the NASDAQ, it's even more dramatic.
And the language around the technology boom is AI.
You want to say AI every chance you get if you're talking about equity markets.
even if you're not using AI in your company, you want to make it sound like you are.
This reminds me a lot of a past experiences I had in younger days in my career, in the year 2000.
I know people like to back away from a little bit, but to mean, I look at that time and go, all the discussion with the Internet.
And Internet was going to change the world. Well, the Internet did change the world. Look at the interview you and I are doing today.
It is remarkable what has happened.
But we also priced up things during 2002 a ridiculous level based on the promise of that.
I think if you go out and do a tickertape and look up Cisco and look at the price strand of Cisco at that time, Cisco had a boom and people thought it was going to be the backbone of the Internet and in many ways it did become that. And if you look at it size back in 2000, you're still below what you bought it.
And I think you really want to remember that. So what I did in my article as I went out and I went to ChatGPT and I asked ChatGPT, it came back to me, it said, look, buying highly priced, highly valued technology companies is a very compelling thing to do.
It makes an awful lot of sense.
But you gotta make sure you think about understanding the business and you also have to think about it in terms of making sure you are diversifying.
I couldn't agree more.
I think the point is, let's be careful here because I see a lot of the stuff that I saw back in 2000.
I see a lot of that today and I think a lot of people participating in it, both retail investors and even professional investors who don't have that kind of experience they are, and you get caught up in the narrative, in the moment of now, you get caught up in either getting a return or if you're a pro you're getting caught up in trying to do some windowdressing on your returns in the quarter.
And I think this is a really good time to kind of look back out and go, okay, I think I could look at the rest of the market. I think I could look and I think if I did that, I think I'm going to do is find that there is opportunities there.
So what we're doing is we are really running a portfolio where we do have growth names and we think having growth names makes a lot of sense. As a quantitative money manager, there is momentum there, there's price moment of their. So that makes sense.
But on the other side of the coin is that you also want to make sure that you havethe cyclical names as you see the economy starting to turn up your little bit.
You look at the oil and gas sector right now, 75 bucks per barrel.
These companies are all trading like we are in the middle of a recession.
And we're not.
And that's not where we are.
We may be in a recession at the end of 2024, but meanwhile, there's always kind of cyclical names on there that are trading like it's a lot darker economy than it is.
but even for Canadians, banks in Canada trading at nine times earnings, yeah, something is up there.
Getting a 45% dividend that you can clip while you're holding that.
you will look over into emerging marketswhich have been really beat up on pricing and, yeah, there's lots of headwinds.
The whole rest of our interview could just dig into all the issues and problems in China, which are many and varied.
But I think if you look at it in those terms, in this sort of barbell approach for your equity portfolio, that makes an awful lot of sense. The problem right now is that I think the Bärbel, everything is just on the one side and I don't think that's what you want to do.
>> That brings me back to our discussion of the markets.
>> Absolutely. It is the perfect example of it. And the problem is is that as that amplitude picks up and those soundwaves, if you will look at a push and pull, you turn hard enough, you can break glass, then metal and also break the back of an equity market.
So I think you want to remember that when you are looking at some of this today.
>> Good perspective there.
Let's go to the next viewer question.
Everyone seems to be worried about commercial real estate.
What are your thoughts?
>> Well, I think the good news is is if everybody is worried about that, which they are, a lot of the pricing is in.
I think a couple words of caution here is that when we say real estate, when we say commercial real estate, we are basically saying commercial real estateand saying that real estate is difficult in the 11 Largest Commercial Markets in North America.
And then looking at the largest commercial markets and the rest of the world.
And we are seeing how we are really worried about those and I think that's really telling. I think that makes an awful lot of sense. And so I think that the issue we have is to say that office towers in major centres and taking that and saying that equals the rest of the real estate market is something that I think you want to be really cautious.
So for us right now, if you look at both global and domestic real estate, we are maximum underweight in both those areas.
Why are we? Well, because we can see those headwinds when it comes tothe commercial market space. But a lot of thoughts also already been priced in. This is where you start wanting both on the equity side. You can start looking through that, start digging through the REITs that have had a lot of this price in. I think there is something valuable there. When you're thinking about in terms of real estate isbroaden your horizons a little bit.
Our TD Economics yesterday published a report on the Canadian residential market in our portfolio strategy quarterly which we publish today, we kind of dig into the Canadian mill is a market as well, the residential side of it.
The bottom line is that we all know kind of the heights and portability in Canada and looking at the other industrialized nations, we are one of the most expensive, and the reason we are one of the most expensive is we don't actually have enough capacity to meet the demand.
And even if the new capacity that we are bringing on board, when we look at the sort of demand that's in our residential space in Canada, moving all the way up to 2030, it's really hard to see that we are going to meet the demand.
You translate that really simply, you're not meeting demand, that means that prices going to be the thing that's going to go up. And so for us, we think that that in particular makes a lot of sense today is gonna make a lot of sense in the coming years here as well.
>> Okay, we'll get back to your questions for Brad Simpson on market strategy in just a moment. As always, make sure you do your own research before making any investment decisions.
and a reminder that you can get in touch with us at any time.
>> Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker.
Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
>> Today, Canada Goose announced a program that makes it easier for consumers to trade in apparel and for buyers to look for preloved in genuine Canada Goose products.
They introduced a web platform called generation for customers to shop foreign trade secondhand pieces from the brand.
Susan Prince joins us now with more.
So Susan, what prompted Canada Goose to make this move to preloved apparel?
>> It's really interesting and there are three factors here. The first one is ESG goals. Environment, social and governance goals.
Basically, the company has had a sustainable impact strategy.
And by reselling and you saying, putting this in the marketplace, they can meet some of those targets.
And they had already set up generations in the states and so now they are starting it in Canada and they've already met their stated ESG targets and now this will allow them to improve on it. The other thing to keep in mind is changing consumer desire.
That's the second factor.
We look at one of the things that Canada Goose noticed was that the number of searches for secondhand Canada Goose products doubled.
It grew by 50%.
It didn't double. Between 2021 and 2022.
That's really useful information for the company.
And according to the Canada Goose president Carrie Baker, 80% of consumers under 30 a shop for preloved clothing and it's also really good for business.
There interesting stats coming out of Canada use.
In 2023, 30% of their buyers were repeat customers. That's important becauserepeat customers, according to Canada Goose data, spend almost 2 1/2 times more at the store.
So you get repeat customers, you get them spending more, now what you have is if the customer is trading in a product, so they are already a customer, they are automatically a repeat customer, what they are getting paid in is Canada Goose gift cards, so they will come back and spend more.
so this is just a fantastic business model. From a shareholders perspective, from the consumer's perspective, this is really attractive for them.
>> Secondhand stores have been around for a long time. I love downtown and see them all over the place. But it's kind of a niche market for retail.
So why are large clothing brands jumping in now?
>> It's moving away from the niche. Part of it is the perspective of there was a time when secondhand clothing was considered either vintage clothing and it was a niche that people used or it was secondhand because it marked that you couldn't afford something.
So what happened there is we've seen a change with that where people don't perceive preloved as a problem.
What they see it as is where they see the problem is that it's no longer a problem, buying secondhand is no longer a problem.
Were you will see it is lululemon has secondhand, Levi's has secondhand, Patagonia, Hudson's Bay and Simons also have resale opportunities there. So it's changing from niche to have a wide stream.
>> That was Moneytalk's Susan Prince.
Now for market update. Okay, let's take a look at what's moving the markets. We are take a look at the Advanced Dashboard right now, available at TD WebBroker. And let's take a look at the S&P 100. We're taking a look at big tech names.
Meta is up to the tune of just over 6%.
They had very strong second-quarter results. They've also seen some strength in chipmakers like Nvidia by 4%, MD is also 4%. Comcast is also up, seeing some strong bids there as well. He reported strong second quarter profits. Let's take a look at the TSX 60.
And here, you can see Cenovus of course, this is the energy company that just reported second quarter results, it seeing some strong bids of just over 5% despite the fact that it did report lower earnings this quarter.
Taking a look at some other names, we will look at technology, Shopify is also seeing some strong bids as well, it's up to the tune of just over 2%.
Okay, now we're back with Brad Simpson, chief wealth strategist with TD Wealth.
Here's the next question.
Everyone was expecting China's reopening to save the day.
That didn't happen. But what's the long-term outlook?
>> Yeah, that's a really great question.
I think we reversed and we looked out when we were coming into 2023, looking at the first quarter, that in China that the restrictions, the COVID restrictions were in place a lot longer than they were when you compare them to North America, so we thought they're gonna reopening things are gonna get going again.
The bottom line is that they haven't.
And you know, out of the gate, you saw services pick up a little bit.
You saw manufacturing start to pick up a little bit.
And then in the second quarter, we started to see both manufacturing and services start to fall off.
At the end of the day, there are real structural issues that are there.
And I think many of them are first and foremost is that this is an economy that is going from one that was about exporting to one that wants to have much like what we have in North America here, that the main part of your economy is the service side of that.
And the problem is is that we are starting to see that start to pick up, we are starting to see post-COVID that the population there are starting to travel more and getting into airplanes, going into hotels and restaurants.
But when they are doing that, they are being more cautious. They're not spending like they were pre-COVID. And so that caution is having an impact there.
And then looking on the other side is one of the things we talked a lot about at the beginning here's we have started to see that for the manufacturing sector that we bought up all the goods that we were gonna want to have globally when we were all locked inside our houses.
So now that we are looking at the opening either here in North America a couple years in or over there, looking at a few months and it's that manufacturing and those demands for those durable goods aren't terribly high either.
so the change that they are going through into the consumer when they are acting this way is acting as a real headwind.
Now the other side of the coin is we all know about the data issues that they have, both in the public balance sheet and the off-balance sheet and I don't think there's an investor on the planet who doesn't know that they have a real estate overhang issue there as well.
And all of these are pointing to an environment quite frankly that instead of talking about inflation, which we are talking about so much here, some of the conversation you could reasonably have in China is deflation.
And if they move into a deflation area in environment, announcing that they are there,but there are structural issues that they have, that this is not something that is going to change over the next couple of quarters.
This is an issue that will be ongoing over the next couple of years and that they will be working through.
that being said, remember, you have a long-term trend that you have to deal with. I don't think any of this, we don't think any of this is news to the policymakers in China.
And so I think the point you have to look at is that steps are going to be taken here to try to work with inside of that to get that economy going, which means that in the early stage, it's a long-term trend, but in the period of getting there, it doesn't mean that you can't go out and there aren't opportunities that we are going to be able to find in that market as we start to see more of a fiscal policy kind of kick in place to kind of try to get things moving there again.
>> Brad, great information as always.
Thank you very much for joining us and I look forward to seeing your piece coming up very soon.
>> Great. Thanks, Anthony. I appreciate it.
It's been a real pleasure.
>> Are things to Brad Simpson, chief wealth strategist with TD Wealth.
Tomorrow, make sure to tune in for some of the best interviews of the weekend on a programming no, MoneyTalk Live will be on a brief summer hiatus, returning on August 8. If there any shows he would like to catch up on, make sure to go to moneytalkgo.com to review any show you have missed. It that's all for show today.
Take care. See you tomorrow.
[music]
Every day, we're joined by guests from across TD, many of whom you'll only see here.
We'll take you through what's moving the markets and answer your questions about investing.
coming up on today's show, we will get a reaction to the decision by the Fed to take interest rates to a 22 year high.
As just part of the conversation we will have today with Brad Simpson, chief wealth strategist at TD Wealth. Our OWN Susan Prince will be here with an interesting story about Canada Goose creating its own trade-in program.
And in today's WebBroker education segment, a way for you to access to foreign listed shares on the WebBroker platform with Nugwa Haruna.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
And now for an update on the markets. In Canada, we opened higher, driven by energy and technology stocks, on optimism that the US Fed rate increase on Wednesday might be the last in its hiking cycle.
shares of Shopify are moving higher today.
Of course, Canadian technology stocks are seeing some strength a day after the Fed rate decision.
The stock currently is up we will call that nearly 2% on the day.
Let's take a look at stocks south of the border.
Wall Street open higher things to stronger-than-expected second-quarter GDP numbers, which are dispelling some recession fears. The S&P 500 index is currently trading up by nearly 20 points toward .4%.
We will take a look at the tech heavy NASDAQ composite index. It also open and positive territory. The index is currently trading up about hundred and 49 points, that's up just above 1%. Of course, investors will digest some more earnings from other Mega CAP Tech stocks later today with Amazon.com and Intel, chipmaker Intel, reporting their earnings after the closing bell.
Now let's take a look at some of the big movers on the market. We will start with Comcast. Shares of Comcast are moving higher today. Of course, the company reported second-quarter earnings that topped expectations as higher prices offset a slowdown in a broadband business.
Comcast telecom company is currently trading up just over 6% right now.
Some other big movers are in the semiconductor space. Applied Materials is moving higher in early trade. Of course, chipmakers have been in the spotlight as of late as the sector looks to capitalize from the AI craze and navigate the escalating US China chip War. Today, investors will also focus on Intel second-quarter results after the market close and shares of Applied Materials up about 10 points, to the tune of 7.2%.
And that's your market update.
The US Federal Reserve has taken interest rates to a 22 year high after raising its key rate by another 25 basis points. The central bank also indicated it may not be done, suggesting another hike could be in the works later this year.
And earlier today, the ECB, the European Central Bank, took its rate to a 23 year high, and said it to me not be done. So now what?
Well, let's bring in Brad Simpson, chief wealth strategist with TD Wealth.
Brad, thanks for joining us today.
>> Anthony, it's great to be here. Thanks for having me.
>> Brad, I want to start off with your take on the Fed's rate decision yesterday.
>> We've got an hour, let's do it.
at the end of the day, you have to think about the function of what a central bank is and I think you have to think about the function of where we are today. Every quarter, we publish a big strategy research document and you just happen to have made today were we are publishing hours in the next hour here.
It's about 80 pages long and I think probably about 30 of it we are talking about inflation and central banks.
The bottom line is that I think you have to think about it in these terms, that inflation for a central bank is the main thing that they are concerned about.
And I think if you look back at past times, I would say every central banker in the world, they grew up in a world where they went to school, where they listen to discussions with their parents, they remembered the thoughts and ideas they heard about 1970s inflation over and over and over again.
And the ills of it and how it no matter what you are going to do, make sure that you are going to never have a situation like the late 70s early 80s happen again.
If you think about it in that context, and in my introductory article to our publication that we did which is called soundproof, I have a quote from Ben Greinke who says that you've got to realize you could almost look at it wherefore central bankers it's almost like childhood trauma.
You never forget it. And the reality is is that the things that central banks did since 2020, from COVID in the Russia Ukraine war and all the fiscal policy that has been in the background of pushing behind all this monetary policy, it's been with the simple goal of first get ourselves through COVID 19, then let's work our way through getting the economy back up and running again.
And since that time, let's face it, I think we could all agree that they kept interest rates low to low for too long.
I'm not here to be critical of that.
It's just the reality is is that interest rates is like a blunt tool they use and know what's happened is inflation on the other side is is that they are going to, at the expense of almost anything else, they are going to go through the process of ensuring that they take care of it.
And so today, yeah, they are saying there data dependent and they're going to go day by day. He saw the 25 basis points increase by the US central bank yesterday.
ECB came out today and that until they see and feel confident that inflation is eradicated or at least back to the 2 to 3% target, yes, the trend is good, yes, it looks good, but I think you have to understand the impetus from them and if you look at it in those terms, all of a sudden, that starts to give you a pretty good idea.
>> Okay.
I want to stay with monetary policy because talk to us about the trial and error method causing havoc for data and portfolio managers.
>> I think that's one of the things that I really love about the environment that we have right now is this kind of contrast.
And that is you open up a newspaper or you go to any, read any book on business today and it's all about big data.
In our own company here, we love the word big data. Nothing gets people more excited than that.
And you know what?
My background is data of macroeconomics and as a portfolio manager, I come from a quantitative background. So I like data an awful lot. But one of the things we have to think about in terms of this is this trial and error approach that we are taking is that the steps and those sort of things that central banks have done in the last, especially in the last three years but you could almost at the last decade, and if you look at that,those sort of measures that have been taken don't exactly know, and they haven't exactly known, what is going to happen when they do the things that they do.
And so the reality of it is that what economists like to do, what quantitative portfolio managers like to do, what investment shops around the globe like to do is we like to take nice and tidy and neat data.
It's always past data and we extrapolated forward to make the decisions that how we are going to allocate capital.
In the issue that we have right now is that that data that we are gathering from the past is we are trying to extrapolate it to a future and an environment that we are today that quite frankly we have never seen before.
So I think the thing that we kind of have to understand with this is that it's kind of like high-frequency, and this high-frequency creates all kinds of distortions and if you think about it in that term it's that every time we try to use this data, what we are seeing here is that it's distorting a little bit how we are looking at things.
So one of the things we love to say in the investment business and the origin of it is Sir John Templeton said, beware of anybody who says, this time is different.
The reality is that it's always different and this time is especially different.
we have to start being a little bit moreclear and candid about ourselves.
We all know the future is going to be difficult and I think we have to know and we are making decisions either of trying to ascribe what is the economy going to look like over the coming quarters and then when we are trying to ascribe what do we think is going to happen in fixed income markets, our equity markets, or private markets. I think we have to be a little bit honest with ourselves here and say that how much we can know is incredibly limited and that's okay.
I think the issue actually is not being that clear on that because you can make all kinds of assumptions that go terribly wrong at the end of the day and that's not what you want to do.
> Great start to the discussion and we will get your questions about market strategy 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.
new figures show the US economy grew stronger-than-expected in the second quarter, despite a series of fed rate hikes.
US GDP grew at an annual rate of 2.4% in the second quarter, topping expectations.
Consumer spending drove the solid quarter, along with increases in business investment and government purchases.
The news comes a day after the Fed hiked interest rates 1/4 point, to their highest level in 22 years.
Meta Platforms reported revenue of $32 billion in the second quarter, marking an 11% increase from a year ago.
The Facebook parent said profits rose 21% year-over-year as well as issuing an upbeat outlook for the third quarter. The result, as demand for digital ads appears to be picking up steam again and enthusiasm for artificial intelligence technology remains strong.
finally, Canadian oil company Cenovus reported lower quarterly profits and cut its oil production forecast for the year on the impact of wildfires. The Calgary-based company reported a net income of $866 million, that's down from $2.4 billion a year earlier.
In its guidance for the year, the company says it now expects upstream production for 2023 to come in modestly lower from its outlook last quarter.
And here's how the main benchmark index in Canada is trading.
Currently, the SNP TSX is up modestly, just about 14 points, just under 1/10 of a percent.
Let's turn to the US now.
Take a look at the S&P 500.
Currently, the S&P 500 is also trading modestly higher. It's a 27.
4.6 percent.
Again, we are expecting some more earnings news and we got the strong GDP numbers as well that's helping to boost markets in early trade.
Okay, so now we are back with questions for Brad Simpson.
We will start with the first question.
How long can the job market remains strong with the economy getting weaker?
>> Well, let's combine this with two things.
Like, let's go through again what you just reported their.
Today, economic growth in the US came in at 2.4% year-over-year, quarter over quarter and annualized.
And that's versus the forecast which was 1.8. And then you said, by the way, the core PCE prices looks less than expected at 3.8% in the quarter, following a 4.9% rise in Q1.
That is a movement towards what economists would call kind of the Goldilocks economy, right?
And when you look at it in those terms, this was supposed to be when we were moving towards a recession because we had interest rates so high.
That's why this is such an incredibly difficult market right now.
And so looking at that, what is this thing that ultimately has the potential to lead to recession?
What is the thing that if you keep raising interest rates would slow things down enough? The bottom line is labour. It's employment. An employment today is incredibly low.
And so what we are seeing right now is that until, and if you look over the last few weeks, the different wage settlements that you're saying, particularly you could use as a great example in the airline industry, but there are other examples as well that until, if you are a central banker, what you are really, really concerned about is really tight employment and then, all of a sudden, you get all kinds of really dramatic wage increase settlements. And so employment and labour is an important part of the market and what we really have to watch for.
And so we are starting to see, inside the system, and I want to be clear on this, it's really early stages.
However, if you look at the tightening cycles in the past, it takes about 12 to 18 months to start impacting labour. We are about 12 to 18 months into that right now and we are seeing, initially starting to see some changes in jobless claims and the changes in jobless claims, and it's a really small and early stages right now, ultimately, we don't know if this trend is going to continue but what we can see is that, indeed, we are in the early stages of this component of employment starting to change. And so I don't think it's unreasonable that we came out with the Fed saying, look, we are still going to go data by data and we are going to look at other central banks in the same boat.
Today, it sitting a kind of your 3.8% for US unemployment. I don't think it's unreasonable that you could be looking at an unemployment rate around 4 1/2 to 5% which I know sounds odd to folks to go, that would be really good news for the central bank, but it would be really good news for the central bank because it would be one of the last steps that you would take two words, to start to see inflation starting to settle at 2 to 3%, which is where the target is.
>> Especially when unemployment in the US has been sitting at 50 year lows, so 4 1/2% is certainly much higher than it is now. Okay. We will move to the next viewer question. This is on bonds and equities.
What is your take on bonds versus equities right now?
>> I think a really good starting point is here at TD Wealth, we have something called the asset allocation committee.it meets every month and we set what we think our rate should be between fix, equity and alternative investments. So a great starting point is right out of the gate, we are maximum overweight fixed income and we are modest underweight equity. Sothose are the two weightings that tells you right now that okay, the starting point is when we look at where interest rates are today, I don't know, I think in the 15 minutes that we've been speaking here, I think we've used the handle five, 5 1/2% a couple of times here when talking about where interest rates are either headed or where they could be.
I think if you look at a 10 year US treasury, let's just call that around 3.8% today. And you kind of extrapolate that ± 50 basis points that's from government bonds to investment grade bonds to high-yield bonds, you can go out in the market and get somewhere, anywhere between 3 1/2% and 5 1/2%. You can get it somewhere between government guaranteed or an investment grade bond. There is also some really compelling interest rates and stuff that I am always a little bit cautious sounding like that when I look at I could talk to a generation of investment professionals who have never actually seen interest rates at 5%. That sounds astounding to me but that is the reality of it.
And then you put on the other side of the coin that what we do know when we look at the global economy and that we do know that we are a lot closer to a wait stage then we are at a new beginning.
It is reasonable in the next let's call it 12 to 24 months to seethat we will be in the midst of a slowdown again. When you look at the Canadian economy, the US economy and kind of look at the European Community as a whole, we have kind of kicked the slowdown to the global economy into 2024, but if we do start to see that slowdown, you'll start to see interest rates are to work their way down, which means that as those interest rates work their way down, you're getting this really nice interest coupon but you are also getting potential for capital gains down the road.
And so we think this is kind of a real sweet spot for fixed income right now and we think that over the short term, you can see short volatility for interest rates but if you kind of work your way through that volatility, fixed income makes a ton of sense to us here and when you throw that back into having a non-correlated asset, what we saw last year was that fixed income was not a great diversify your investment portfolio but that really brought the long term trend in reading the trend will be back in place in the next few years here.
So on the return side and on a coupon return side and then on a capital gain side, we think that fixed income here is pretty darn compelling.
>> Great perspective on the equities versus bonds picture.
As always, make sure you do your own research before making any investment decisions.
we will get back to your questions for Brad Simpson nonmarket strategy in just a moment. And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get to today's educational segment.
Today, we are looking at Canadian Depository Receipts, also known as CDRs, what they are, how they workand how to get access to them on the Whataburger platform.
Nugwa Haruna, Senior client education instructor at TD Direct Investing has the answers to those questions and more.
>>so you may have heard of depository receipts andthese allow investors to purchase foreign investments in local currency.
There are some popular ones in the states like Alibaba.
The ones that Americans buy are actually ADRs.
On the Canadian side, we have CDRs or Canadian Depository Receipts. And these actually let investors have access to US listed securities in Canadian dollars.
So let's happen to WebBroker and show you how you can find these.
Once we are in WebBroker, we are going to go research. Under investments, we are going to go stocks. So I'm going to pull up a US security in this instance.
When I do that, you are going to notice two things. First, you will see there is a stock listed in US dollarsand 1 Listed in Canadians. So let's click on the US dollar security.
So the security trades on a US exchange.
It's in US dollars, 182 was the last price.
I want to take a look at the volume, almost 25 million securities traded.
Let's not hobble over to the CDR for the security. So once I pull up the stock, I'm going to go to the Canadian listed version of the security.
One thing you will notice is the price.
Much less than the US version. That's because CDRs give you an opportunity to buy partial units of that security.
So one of the advantages of the CDR then is that you are able to enter a position with much less than you would need if you are buying a full share.
And so for investors who are looking to diversify, this could be a consideration.
Now something else I will talk about when it comes to CDRs, another advantage is that for investors, you don't have to worry about the potential currency difference between the original security and your local security. That's because CDRs aren't hedged. Now I do want to mention though one risk when it comes to CDRs.
If you recall, when you look at the US version, it was almost 25 million units traded today. On the other hand,when I look at the volume for the CDR, just under 30,000. A significant difference there. So investors want to be aware of this potential risk when it comes to the volume being traded. They may not have enough being traded that day for them to sell or buy into a position.
All in all, when it comes to investors deciding to use CDRs, they want to compare the risks versus the benefits before they make a decision on if they want to utilize this when it comes to their investing strategies.
>> Our thanks to Nugwa Haruna, senior client education instructor at TD Direct Investing.
And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
Now we are back to viewer questions for Brad Simpson.
We will go to the next question.
Markets have been performing better than anticipated this year.
Can these gains continue?
Brad, another great question.
>> Yeah, you guys are not taking it easy on me here.
I think you've got a break that apart a little bit.
We use markets really generally.
Markets, I think, for the most part, are translated to the S&P 500. And the S&P 500 had a really great year.
And I think most of us, most folks, if they follow markets at all, I think they know that, okay, the next step in this is that when we look at, yeah, markets have been really good, but I think you got a look at it and go, okay, if you dig in a little bit deeper, what you will find out is that it's about 7 to 10 names that have pushed the market almost altogether.
That's in the S&P 500.
When you are doing the report earlier, if you look at Canada, almost year today, you could almost say that even though the TSX returns haven't been that great, if you look at where the returns of come from, you will stop its modify and go, there is the returns. So I think we have to look at this and go, could you expect markets to continue to create the rate of returns at the rate they are if that continues? And I would suggest no, that can't go on. The good news is is that we are starting to see is dispersion is starting to pick up in the market.
In simple terms, dispersion means that the rest of the companies out there.
If you take a look at it in those terms, you limit the S&P 500, you go, okay, it's trading at 20 times earnings.
And then you go, yeah, okay, let's split of those big names. Then, you are getting closer to your 60 times earnings which all of a sudden you are into historical valuations with rates of these kinds of levels. And then you go, okay, all of a sudden this is kind of compelling.
So I think for us the starting point is that we are modest underweight equity because of this kind of dispersion and what the movements have been but if you think about it in those terms, what you can be allocating to is the rest of the market and then I think if you are looking at in terms of the rest of the market, that really does change the story. But I do want to keep a real cautionary tone here. Again, this was in the article, my article that we publish today. I confess, I have it on my mind because we've been living and breathing this thing for the last few days, is that if you go from the SNP and those big seven names and then you look over at the returns on the NASDAQ, it's even more dramatic.
And the language around the technology boom is AI.
You want to say AI every chance you get if you're talking about equity markets.
even if you're not using AI in your company, you want to make it sound like you are.
This reminds me a lot of a past experiences I had in younger days in my career, in the year 2000.
I know people like to back away from a little bit, but to mean, I look at that time and go, all the discussion with the Internet.
And Internet was going to change the world. Well, the Internet did change the world. Look at the interview you and I are doing today.
It is remarkable what has happened.
But we also priced up things during 2002 a ridiculous level based on the promise of that.
I think if you go out and do a tickertape and look up Cisco and look at the price strand of Cisco at that time, Cisco had a boom and people thought it was going to be the backbone of the Internet and in many ways it did become that. And if you look at it size back in 2000, you're still below what you bought it.
And I think you really want to remember that. So what I did in my article as I went out and I went to ChatGPT and I asked ChatGPT, it came back to me, it said, look, buying highly priced, highly valued technology companies is a very compelling thing to do.
It makes an awful lot of sense.
But you gotta make sure you think about understanding the business and you also have to think about it in terms of making sure you are diversifying.
I couldn't agree more.
I think the point is, let's be careful here because I see a lot of the stuff that I saw back in 2000.
I see a lot of that today and I think a lot of people participating in it, both retail investors and even professional investors who don't have that kind of experience they are, and you get caught up in the narrative, in the moment of now, you get caught up in either getting a return or if you're a pro you're getting caught up in trying to do some windowdressing on your returns in the quarter.
And I think this is a really good time to kind of look back out and go, okay, I think I could look at the rest of the market. I think I could look and I think if I did that, I think I'm going to do is find that there is opportunities there.
So what we're doing is we are really running a portfolio where we do have growth names and we think having growth names makes a lot of sense. As a quantitative money manager, there is momentum there, there's price moment of their. So that makes sense.
But on the other side of the coin is that you also want to make sure that you havethe cyclical names as you see the economy starting to turn up your little bit.
You look at the oil and gas sector right now, 75 bucks per barrel.
These companies are all trading like we are in the middle of a recession.
And we're not.
And that's not where we are.
We may be in a recession at the end of 2024, but meanwhile, there's always kind of cyclical names on there that are trading like it's a lot darker economy than it is.
but even for Canadians, banks in Canada trading at nine times earnings, yeah, something is up there.
Getting a 45% dividend that you can clip while you're holding that.
you will look over into emerging marketswhich have been really beat up on pricing and, yeah, there's lots of headwinds.
The whole rest of our interview could just dig into all the issues and problems in China, which are many and varied.
But I think if you look at it in those terms, in this sort of barbell approach for your equity portfolio, that makes an awful lot of sense. The problem right now is that I think the Bärbel, everything is just on the one side and I don't think that's what you want to do.
>> That brings me back to our discussion of the markets.
>> Absolutely. It is the perfect example of it. And the problem is is that as that amplitude picks up and those soundwaves, if you will look at a push and pull, you turn hard enough, you can break glass, then metal and also break the back of an equity market.
So I think you want to remember that when you are looking at some of this today.
>> Good perspective there.
Let's go to the next viewer question.
Everyone seems to be worried about commercial real estate.
What are your thoughts?
>> Well, I think the good news is is if everybody is worried about that, which they are, a lot of the pricing is in.
I think a couple words of caution here is that when we say real estate, when we say commercial real estate, we are basically saying commercial real estateand saying that real estate is difficult in the 11 Largest Commercial Markets in North America.
And then looking at the largest commercial markets and the rest of the world.
And we are seeing how we are really worried about those and I think that's really telling. I think that makes an awful lot of sense. And so I think that the issue we have is to say that office towers in major centres and taking that and saying that equals the rest of the real estate market is something that I think you want to be really cautious.
So for us right now, if you look at both global and domestic real estate, we are maximum underweight in both those areas.
Why are we? Well, because we can see those headwinds when it comes tothe commercial market space. But a lot of thoughts also already been priced in. This is where you start wanting both on the equity side. You can start looking through that, start digging through the REITs that have had a lot of this price in. I think there is something valuable there. When you're thinking about in terms of real estate isbroaden your horizons a little bit.
Our TD Economics yesterday published a report on the Canadian residential market in our portfolio strategy quarterly which we publish today, we kind of dig into the Canadian mill is a market as well, the residential side of it.
The bottom line is that we all know kind of the heights and portability in Canada and looking at the other industrialized nations, we are one of the most expensive, and the reason we are one of the most expensive is we don't actually have enough capacity to meet the demand.
And even if the new capacity that we are bringing on board, when we look at the sort of demand that's in our residential space in Canada, moving all the way up to 2030, it's really hard to see that we are going to meet the demand.
You translate that really simply, you're not meeting demand, that means that prices going to be the thing that's going to go up. And so for us, we think that that in particular makes a lot of sense today is gonna make a lot of sense in the coming years here as well.
>> Okay, we'll get back to your questions for Brad Simpson on market strategy in just a moment. As always, make sure you do your own research before making any investment decisions.
and a reminder that you can get in touch with us at any time.
>> Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker.
Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
>> Today, Canada Goose announced a program that makes it easier for consumers to trade in apparel and for buyers to look for preloved in genuine Canada Goose products.
They introduced a web platform called generation for customers to shop foreign trade secondhand pieces from the brand.
Susan Prince joins us now with more.
So Susan, what prompted Canada Goose to make this move to preloved apparel?
>> It's really interesting and there are three factors here. The first one is ESG goals. Environment, social and governance goals.
Basically, the company has had a sustainable impact strategy.
And by reselling and you saying, putting this in the marketplace, they can meet some of those targets.
And they had already set up generations in the states and so now they are starting it in Canada and they've already met their stated ESG targets and now this will allow them to improve on it. The other thing to keep in mind is changing consumer desire.
That's the second factor.
We look at one of the things that Canada Goose noticed was that the number of searches for secondhand Canada Goose products doubled.
It grew by 50%.
It didn't double. Between 2021 and 2022.
That's really useful information for the company.
And according to the Canada Goose president Carrie Baker, 80% of consumers under 30 a shop for preloved clothing and it's also really good for business.
There interesting stats coming out of Canada use.
In 2023, 30% of their buyers were repeat customers. That's important becauserepeat customers, according to Canada Goose data, spend almost 2 1/2 times more at the store.
So you get repeat customers, you get them spending more, now what you have is if the customer is trading in a product, so they are already a customer, they are automatically a repeat customer, what they are getting paid in is Canada Goose gift cards, so they will come back and spend more.
so this is just a fantastic business model. From a shareholders perspective, from the consumer's perspective, this is really attractive for them.
>> Secondhand stores have been around for a long time. I love downtown and see them all over the place. But it's kind of a niche market for retail.
So why are large clothing brands jumping in now?
>> It's moving away from the niche. Part of it is the perspective of there was a time when secondhand clothing was considered either vintage clothing and it was a niche that people used or it was secondhand because it marked that you couldn't afford something.
So what happened there is we've seen a change with that where people don't perceive preloved as a problem.
What they see it as is where they see the problem is that it's no longer a problem, buying secondhand is no longer a problem.
Were you will see it is lululemon has secondhand, Levi's has secondhand, Patagonia, Hudson's Bay and Simons also have resale opportunities there. So it's changing from niche to have a wide stream.
>> That was Moneytalk's Susan Prince.
Now for market update. Okay, let's take a look at what's moving the markets. We are take a look at the Advanced Dashboard right now, available at TD WebBroker. And let's take a look at the S&P 100. We're taking a look at big tech names.
Meta is up to the tune of just over 6%.
They had very strong second-quarter results. They've also seen some strength in chipmakers like Nvidia by 4%, MD is also 4%. Comcast is also up, seeing some strong bids there as well. He reported strong second quarter profits. Let's take a look at the TSX 60.
And here, you can see Cenovus of course, this is the energy company that just reported second quarter results, it seeing some strong bids of just over 5% despite the fact that it did report lower earnings this quarter.
Taking a look at some other names, we will look at technology, Shopify is also seeing some strong bids as well, it's up to the tune of just over 2%.
Okay, now we're back with Brad Simpson, chief wealth strategist with TD Wealth.
Here's the next question.
Everyone was expecting China's reopening to save the day.
That didn't happen. But what's the long-term outlook?
>> Yeah, that's a really great question.
I think we reversed and we looked out when we were coming into 2023, looking at the first quarter, that in China that the restrictions, the COVID restrictions were in place a lot longer than they were when you compare them to North America, so we thought they're gonna reopening things are gonna get going again.
The bottom line is that they haven't.
And you know, out of the gate, you saw services pick up a little bit.
You saw manufacturing start to pick up a little bit.
And then in the second quarter, we started to see both manufacturing and services start to fall off.
At the end of the day, there are real structural issues that are there.
And I think many of them are first and foremost is that this is an economy that is going from one that was about exporting to one that wants to have much like what we have in North America here, that the main part of your economy is the service side of that.
And the problem is is that we are starting to see that start to pick up, we are starting to see post-COVID that the population there are starting to travel more and getting into airplanes, going into hotels and restaurants.
But when they are doing that, they are being more cautious. They're not spending like they were pre-COVID. And so that caution is having an impact there.
And then looking on the other side is one of the things we talked a lot about at the beginning here's we have started to see that for the manufacturing sector that we bought up all the goods that we were gonna want to have globally when we were all locked inside our houses.
So now that we are looking at the opening either here in North America a couple years in or over there, looking at a few months and it's that manufacturing and those demands for those durable goods aren't terribly high either.
so the change that they are going through into the consumer when they are acting this way is acting as a real headwind.
Now the other side of the coin is we all know about the data issues that they have, both in the public balance sheet and the off-balance sheet and I don't think there's an investor on the planet who doesn't know that they have a real estate overhang issue there as well.
And all of these are pointing to an environment quite frankly that instead of talking about inflation, which we are talking about so much here, some of the conversation you could reasonably have in China is deflation.
And if they move into a deflation area in environment, announcing that they are there,but there are structural issues that they have, that this is not something that is going to change over the next couple of quarters.
This is an issue that will be ongoing over the next couple of years and that they will be working through.
that being said, remember, you have a long-term trend that you have to deal with. I don't think any of this, we don't think any of this is news to the policymakers in China.
And so I think the point you have to look at is that steps are going to be taken here to try to work with inside of that to get that economy going, which means that in the early stage, it's a long-term trend, but in the period of getting there, it doesn't mean that you can't go out and there aren't opportunities that we are going to be able to find in that market as we start to see more of a fiscal policy kind of kick in place to kind of try to get things moving there again.
>> Brad, great information as always.
Thank you very much for joining us and I look forward to seeing your piece coming up very soon.
>> Great. Thanks, Anthony. I appreciate it.
It's been a real pleasure.
>> Are things to Brad Simpson, chief wealth strategist with TD Wealth.
Tomorrow, make sure to tune in for some of the best interviews of the weekend on a programming no, MoneyTalk Live will be on a brief summer hiatus, returning on August 8. If there any shows he would like to catch up on, make sure to go to moneytalkgo.com to review any show you have missed. It that's all for show today.
Take care. See you tomorrow.
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