Hello, I'm Greg Bonnell and welcome to MoneyTalk Live, brought to you by TD Direct Investing.
every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We are going to take you through with moving the markets and answer your questions about investing.
Coming up on today show: we'll discuss the outlook for rates after the hawkish signals we got from the Fed with TD Securities at Chris Whelan.
And in today's WebBroker education segment, Nugwa Haruna is going to show us how you can create a mock fixed income portfolio using the WebBroker platform.
So here's how you can get in touch with us. Just email firstname.lastname@example.orgOr you can follow that your response box under the video player here on WebBroker.
And forget our guest of today, let's get you an update on the markets.
Got some down jabs on both sides of the border in the wake of the US Federal Reserve coming out with its interest rate hike yesterday.
The hike obviously expected. It was the tone you want to get out of Chairman Powell and Company and, committed to fighting inflation, need to go further.
The market doesn't seem to be taking it all that well today. We will start here at home with the TSX Composite Index.
We are down 357 points, 1.8%.
Sailings are widespread across sectors. Let's check in on Canadian Natural Resources, one of the names most actively being traded right now, down to a tune of… 2.7%, 72 bucks a share. It Manulife Financials under pressure today as well, it's down about 1 1/2% to 2384.
South of the border, we are seeing some selling pressure as well. The S&P 500, the broader read of the American market, down 102 points, more than 2 1/2%.
The tech heavy NASDAQ, let's see how it's bearing against the broader market.
There is an even steeper decline there, down a little more than 3% right now. Let's check and also the names that are moving south of the border, including Visa. We saw somebody move towards Visa and MasterCard earlier this week but today, we are down 2 1/2%, or Visa, at 207 bucks and change. And that's the market update.
It was a hawkish tone from the US Federal Reserve as they raised rates to the highest level in 15 years, and they signalled that more hikes are still ahead.
Joining us now for his reaction, Chris Wheeling, Senior Canada rates strategist TD Securities. Chris, this seems to bethe tone of the central banks.
The fight isn't over.
>>I was thinking as I was coming here today… Constantly talking aboutpersistent inflation concerns in the markets. I think that the Federal Reserve, we are thinking that they may bring rates 1% higher than they are right now.
1% higher two 525 year-over-year.
So there is still more increases coming in the US and I think that yesterday shows us that the bond market and the outbound stock market are taking this… >> Chris, I'm going to jump in because I think we may have lost your Mike and I can't see it on your body. We are going to get that taken care of and have that conversation.
I can't see it on your lapel at all.
>> I'll find it.
>> You might be able to get this fixed in real time.
It clips onto your jacket. That's it.
He got pulled off.
It happens sometimes on a live broadcast. You put the wrong way there you go.
So let's reset. Let's give her go again.
>> I was lip-synching.
>> Are trying to follow your mouth at the same time.
>> It was a hawkish tone from the US Federal Reserve as they raised rates to the highest level in 15 years and they signalled to that more hikes are ahead.
Joining us now for his reaction, Chris Whelan, Senior Canada rates strategist at TD Securities.
Chris, great to have you with us. Let's ask about what we got out of the Fed.
Seems like they were ready to say goodbye to 2022, the central bank saying they will stay the course for a while.
>> I think we are tired of the broken record now that we have in this year, the tight labour market, persistent inflation, we need to bring rates higher. I think yesterday's bond market reaction and I think today's stock market reaction that we are seeing is telling us that these rate hikes are going to be tough for the economy to absorb. I think we definitely have a highly indebted world and we are very sensitive to interest rates.
So I think the markets are bracing for what's probably not going to be a wonderful 2023 economically, and on our side, we think that the Federal Reserve could still raise rates another 1% from here on.
So still more pain ahead, I guess, we will call it, until things get resolved and we see those inflation numbers come down in the labour market he's a little more.
>> What's been sort of surprised me about all of this is that the message that we got yesterday isn't far off the message that really, if you go back to Jackson, when Jerome Powell wanted to say, we are serious about this fight against inflation, you gotta listen to what we are saying, but between those events, you get those market sort of thing, they're close to being done.
That optimism sort of creeps in.
With the dynamic year when the market keeps thinking, maybe we don't believe you until we hear from you again, that we believe you again?
>> I think the market is actually starting to get a good idea of where terminal rates are going to be. I think they are comfortable with them getting to somewhere in the 470 525% or we think a little bit higher than that. But I think that the market is starting to get a more narrowband where they see that terminal rate path ending up.
I think that's providing some clarity for the bond market, and I think that that's actually giving some stability to the bond market further at the curve. So I think you make a good point where we kind of… We've been kind of going in and out on, are they going to pause? Is there going to be a pause? Is there going to be pivot? And we kind of go back and forth.
So I think that the market is gearing back up for that pivot and pause but not here.
It's a pause away now.
So there is a bit of a change in tone, we are thinking about a pauseat least 1/2 a percent higher than we are right now with the overnight rate. I think we are in a bit of a different regime.
And I think the market is acting like we have some clarity and consensus of where we will end up on the overnight rate.
I think we know that we can't go to 10%. I don't think were going to make it through that.
I think we are starting to be comfortable with this five-ish area on the effective rate in the US.
>> What about this idea, and we've got new economic projections as well, the Fed seems to be assured that even though they are going to continue raising rates to try to tamp down inflation and slow the economy, they are not going to throw the economy over a cliff.
They're just going to find is perfect place where they can bring the consumer costs and inflation into line without doing too much economic damage.
Or even too much damage to the labour market.
Is that possible?
>> I think there is definitely an argument to be made that we can do it because we have the data, the economic, there are components of the economic data that have been holding up well, and so kind depends on how the job market evolves. We have seen some job turnover and dynamics turning up in the technology sector. We'll see how that pours over and you will see how that kind of 2023 realizes, I think we all know there is a delayed effect on the higher interest rates, so it depends. It really depends on how it realizes.
I think no one is really comfortable with what they know.
I think on our side we think that a soft landing becomes very difficult as we move through the year next year but at the moment, the data may just unfortunately hold up just a bit too long to get the hike a bit too far to then give us a bit more pain then we would've liked.
We'll see how that involves but I mean the soft landing scenario is so difficult when we are hiking at the magnitude we are with the debt levels that we have today. So I think that engineering a soft landing is a lower probability than not.
>> Do you think the banks are operating right now with an extra dose of hemolytic? I mean, if we backup a year ago, you have the central banks, okay, we know that consumer prices are getting beyond what we want them to be, but it's all transitory. We can work through with this disruption and that disruption. Everything is going to be fine. At some point, they had to admit everything is not going to be fine.
Is there more humility in their work right now?
>> I think there is some humility in their work but then I think we are… I'm surprised that we are not acknowledging downside risks as much as we are.
So we have kind of shifted from it's transitory, it's transitory, which brought us behind the ball, so we should have been hiking earlier in the year at a stronger rate than we are now.
Now, we are and catch up.
And now, we are sustaining these at least 50 basis point hikes each time which is still a notable pace. So as we move forward, I'm surprised you don't have humility to the downside risk this poses and that we are just becoming so confident that we need to going and that's the way forward. I'm not sure that the humility is there.
I think we have almost shifted from it's transitory to this is going to keep going to okay, maybe this isn't going to keep going.
So I'm not… I'm not sure the humility is totally there, but I think definitely there is some utility there because the transitory call wasn't the best call.
> Could that be one of the reasons why the markets don't seem to fully believe, in between inflation reports and fed announcements and central-bank announcements, what they are being told?
They seem to believe it today in the aftermath of the Fed yesterday, but sometimes market participants say, you got around a year ago, you got it wrong a couple times, why should we trust you this time?
>> I think right now, the bond market is saying, I think part of the bond market reactionis that you can argue that that's one part, the market not believing them, and on the flipside, the market believing them and knowing that that's going to cause pain.
But I think either way, the market is telling you that long-term interest rates are not where we are going to end up this cycle. This is, I think we said it, we talked about this before, this is more of an adjustment. We overshoot here, we take the windows out and we bring this back in to check and we see what we can do to manage damage when we are back there, but we are at least not fighting the inflation problem, and I think it's kind of a broken record.fight inflation at the expense of all else, and that seems to be the motivation and the overarching framework here.
>>Fascinating stuff and a great start to the show. We are going to get your questions about interest rates and the economy for Chris Whelan in just a moment time.
A reminder, of course, you can get in touch with us at any time, just email email@example.com or follow the viewer response box here in WebBroker. Right now, let's get you updated on some of the top stories in the world business and take a look at how the markets are trading.
shares of Tesla are in the spotlight today, that when news Elon Musk has sold another $3.6 billion worth of his stock, taking his total sale of Tesla shares almost $40 billion for the year.
While no reason has been given for the sale, much of the attention on musk recently has been focused on his $44 billion acquisition of Twitter.
Tesla is pretty much flat.
The US consumer pulled back on spending last month in the face of soaring inflation. Retail sales for November slid 0.6%, a deeper decline than the street was expecting. The weakness was widespread, with furniture and home goods, building materials and auto dealers showing weakness.
Empire Co. is selling gas stations in Western Canada to a subsidiary of Shell Canada.
The sale of the 56 locations will raise about 100 million in cash for the parent company of sobeys. The news came as Empire reported higher sales and profits in its legs quarter, compared to the same period last year.
Let's take a look at how the main benchmark index is trading here in Canada with the TSX Composite Index. We do have a downside, down 355 points at this hour, down 1.8%. And south of the border, as investors digest what they got from the Fed yesterday for the path forward in the economy in 2023, you got the S&P 500, the broader read of the American market, down a little bit more than 2 1/2%.
We are back now in Chris Whelan, we are take your questions about rates and the economy, so let's get to them.
This one about our central bank.
Is the Bank of Canada done hiking interest rates?
>> At the moment, our call is that they are done interest rate hiking. However, with a risk to another 25 BP move.
Another 25 feet move is small in the grand scheme of things coming from basically zero off the bottom. We are basically saying, give or take 25 basis points, they are done here.
We think the data is going to start deteriorating quite quickly here.
That's what puts this in that territory. That's why that's our call. I think what's interesting is that we are finally at the point where the US versus Canada dynamic is separating where it looks like they are continuing to go, potentially another 1%, maybe even higher, from where they are now where is Canada's looking at maybe another 25 basis points higher from here. So you have that divergence from Canada and the US and I think that's because we have a much higher debt sensitivity in Canada and I think that that… I think the Bank of Canada, we were speak about humility before, I think the Bank of Canada is starting to understand that we need to worry about the downside risks but also struggling with the battle to fight inflation.
So I think we've kind of seen in the last two Bank of Canada meetings, one of the meetings came across as dovish, the previous one, and the more recent one came across as a bit more hawkish. I think it shows you the struggle they have an balancing those two factors.
But I think Canada is going to find that balance sooner than the US. I think that that's playing out in real time right now.
>> Are there signs that what we have done in Canada is having any effect on Canadian inflation?
>> I think we are still stuck in this delayed impact.
You will start seeing that.
We can start getting into the three handle on inflation as we enter the fall of next year, potentially below that. That will just take time.
You will still be dealing with these higher inflation numbers for at least another nine months or so.
So that's basically are take there.
>> Let's talk about one of the places where we know Canadians are pretty heavily indebted.
We've got if you are wondering about the housing market risk we are seeing out there and are we at the bottom?
>> On the housing market, we are constructive on the housing market overall.
Does that mean there isn't still more pain to come? No.
We can still see the realities of these high interest rates and these shocks and payments hitting trigger points. We can see that coming up into the spring market and that can weigh on the market overall.
However, when you look at the demographics and the immigration that we have in Canada, can we sustain basically sales numbers of zero? No, we can't. So sales have to rebound.
And then in the new year, are we looking at potentially five year fixed mortgages with four handles in them? Is that a possibility? The bond yields are trending lower right now on the lower end of the curve and they have been trending lower for the last month or two. So can we get to 475, five year fixed rates in the spring market?
Yes, and then, can we get to some sales rebounding?
That could put a footing into the spring market for housing. So I think that we,there are risks on both sides but I think that we, I think that our conviction lies in a not catastrophic scenario so I think being constructive in terms of not seeing a doomsday scenario player.
>> If you're talking about a mortgage rate of five or shallower than five next year, although the move from where we were to where we are right now is pretty swift and took a lot people by surprise, these are historically not high-risk.
>>they are not historically high up at the prices of our houses are much higher so you can really feel that interest rate pain, which is why we can see a lot of impact on the consumer on spending next year. You can see it here> The whole wealth effect, right?
>> Yeah, essentially, you will have an average 20% of your mortgage coming up for renewal, we have five year fixed being popular in this country and then the variable effect.
So you have quite a lot of the population being affected by the higher mortgage rate so I think spending is going to hurt first.
No one says, my mortgage went up so let's get rid of it. You cut back everywhere else.
I think you're going to see a spending deterioration and we are surprised we haven't seen more of a spending deterioration you. It seems like everyone is spending until it runs out right now.
we will see if we hit a sudden moment where that suddenly slows down.
> You mentioned mortgage rates there.
We had a viewer wanting your outlook for mortgage rates next year.
She talked about what do we see in a five year fixed in a bond market? The other variable of courses the variable rate mortgage, which people… I think if you take a look at the numbers, maybe move towards that space considering where they were at the beginning of this year and what tensions could play out in that space, fixed versus variable products next year?
>> I think if you take variable versus fixed, you're going to be looking at somewhere in the six is for variable and you might even see that four handle on the five-year fixed which and you're seeing this 1% plus discount or moredifference in rate and it makes you tempted to reach out and fix out the curve, to fix your mortgage to get a lower rate. I think the one thing is though, when you see an inverted bond curve, which is what the higher variable is versus a lower five year fixed, is the bond market is basically forecasting that rates will be lower in the future. So it's kind of a… If you listen to the bond market, if you believe the bond market, it would say go variable and ride it out, even though it's more painful in the short term.
However, everyone has their own risk tolerance and the bond market is and always correct, and so you kind of have to play that scenario out.
But it is an interesting psychological dynamic when you have such a high variable versus fixed and that's what we are entering, that's the kind of territory we are entering.
>> A very interesting year with some of the things that have taken place. As always, at home, do your own research before you make investment decisions. We will get back your questions for Chris and we'll and when interest rates in the economy in a moment.
a reminder that you can contact with us any time. Just email firstname.lastname@example.org.
Now, let's get our educational segment of the day.
If you are interested in adding some fixed income exposure to your portfolio, WebBrokerHas tools which can help you research the space. Joining us now for more, Nugwa Haruna, Senior client education instructor at TD Direct Investing.
Great to have you back on the show. Let's talk about how investors can create and track hypothetical portfolio for fixed income products in WebBroker?
>> It's always a pleasure being here, Greg. So investors who are familiar with WebBroker may be comfortable with creating a mock portfolio for stocks, ETFs and mutual funds usingthe watchlist future. But those who want to create a hypothetical bond portfolio might not be aware that they can do that.
Once in WebBroker, you would click on research.
Under investments, click on fixed income. So once we get here, an investor who is looking to create more of a diversified bondportfolio may have different options available to them. So we will start off by looking at agency bonds there.
I'm going to select one that is coming due in about a year.
Now once you select a specific bond, you want to go just right of top your word says select portfolio name.
You click on the drop down and you can create a brand-new portfolio for yourself. In this case, we are going to call it diversified.
And we are going to just add that and we are going to add this specific bond to that portfolio.
Now, I'm going to add a couple of more bonds to this to make it diversified, as the name entails. I'm going to click on home, I will go to corporate bonds, 0 to 5 years, select one that is maturing in the year 2024 there. Once I select that, I click on this drop-down, I select my bond portfolio, diversified, I click add to portfolio.
And let's add a couple more under provincial bonds.
They are 0 to 5 years.
I will select some that are coming due in 2025 and another one coming due 2026.
We scroll back up, we click on this drop-down, we go diversified and we add to portfolio. So now that I've done this, I now have a hypothetical bond portfolio that I can track.
Investors may have different kinds of portfolios that they create and so if you want to keep track of your portfolios, you can just click on the tab here that says my portfolios. You'd be able to see all the portfolios you've created as well as some featured portfolios created by the WebBroker team that simplify the process for you. So if you want just a rated bond portfolios, you may be able to find them here.
If you are interested in high-yield bonds, and you want to track a hypothetical poor flu, you can do that as well by just clicking on here and reviewing the bonds in the portfolio.
>> Alright, so set up your hypothetical portfolios, we know where to find them after we have done the work on WebBroker. The whole point of a hypothetical portfolios to find how successful you may or may not have been with your choices. How do you review that?
>> One thing about bonds is we do know.
if you want to buy a bond, chances are the market value of the bond will be fluctuating and that will depend on a number of factors. It would depend on things like what the interest rates are in the economy when rates go up. The market value bonds, existing bonds, tend to go down.
Information like that may impact your decision as to when to purchase a bond. So we will go back into WebBroker and take a look at potentially how much an investor could get if they go ahead and make that purchase let's say today.
So using the portfolio we just created, click right on it. Now, I see the four bonds that I selected. What I want to do then is just put in a quantity that I want to be the face value I get as a return one the bond matures. I'm just going to put in the same amount in every instance here, so 5000.
And so once I do this, I know have the option to create the bond ladder.
Someone to click on create ladder report.
And I'm going to open that report.
Sorry, it is just taking a second to load here.
there you go. So once I have this report, it's going to give me a few things.
some of the information it presents to me is how much I pay right now if I go ahead and make this purchase.
But it also provides the investors some additional information.
It lets them know what the yield to maturity would be.
So if I am an investor and I decide to hold all these bonds, if I buy them now, hold them to lie mature, what my overall return would be, that's 3.93.
It also gives an investor an opportunity to see how much they have been making in annual income if they hold these bonds. There is some additional information as well if I go on the second page here.
Investors with the information such as just how diversified that portfolio is in terms of the issuers of these bonds.
They will see what the breakdown is in terms of the payments, when these annual payments are going to be coming in, as well as what the maturity profile looks like.
So this gives investors additional ideas or information about that specific portfolio they have.
The nice thing about this is if you don't like the way your payments are scheduled, you can always go back in and add in your portfolio, adds new bonds in there that pay their yields at different times.
This gives investors a way to track the portal is the great.
>> Great stuff as always.
>> Always a pleasure.
>> That was Nugwa Haruna, Senior client education instructor at TD Direct Investing. Make sure to check out thelearning Centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
As such as five ways to help lower taxes before year end.
Before you back to your questions about rates and the economy for Chris Whelan, a reminder of how you get in touch with us.
Do you have a question about investing or what's driving the markets? Carcass 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 email@example.com, or you can use the question box right below the screen here in WebBroker.
Just writing your question and hit send. We will see if one of our guests get you the answer right here at MoneyTalk Live.
We are back now with Chris wheeling, taking your questions about rates in the economy, so let's get to them. This one just coming in in the past couple of minutes. If rates keep Going up, what are the chances of getting a bad recession in Canada?
>>if rates keep going up an another 25 basis points from here, we are going to seea pretty rough recession.I think that's exactly what the risks are.
there is more utility on the downside risks.
We don't think they have to hike that fast right now in the US and it's exactly for these reasons it can take time to take stock and if we went another 1% higher in Canada from where we are now, I think we have a very, very difficult recession.
It would be very substantial.
>> On the other side of that, if we ended up in that situation, and the thick of a bad recession, the plan from central banks is to cut rates. Is it too late then?
will that be the reaction if they keep pulling a lever back and forth to fix things?
>> The one thing I think we've learned that, aside from the damage that's already on at the time, I think we've learned that we can get the economy going again.
We basically got the economy going to strong this time.
Part of this is some supply chain start stop on the economy and impact from the pandemic but I think we realize that if you drop rates to zero and you handed a bunch of money to everyone, you can get the economy going again.
What I thinks going to be interesting is howconfident they are and what they do to get it going again. If we got into a scenario where we really need to cut it would be easy, the polar opposite of what we are in right now.
I think they're going to be concerned about how much they do because they over did it this previous time.
So we learn that we can overdo it. For a while, they were used to having constantly wanting to ease and we weren't overdoing it, it was keeping the economy and check, but maybe now we are overdoing it.
That's a 2024, 2025 battle is how much to ease as a potential scenario.
>> Okay, another question here about monetary policy.
Isn't held by the Bank of Canada going to cause another type of inflation?
If the Fed keeps raising their raid, increasing the value of the US dollar versus the Canadian dollar, because we do a lot of trade with the US, aren't we just importing inflation?
>> So if we have a scenario which we are likely facing right now where the Bank of Canada pauses or just as a little bit moreand the Federal Reserve continues going to be another 1%, then you would think that that would push the US dollar higher versus the Canadian dollar.
Yes, it can. I think there are opposing forces for the currency both ways and the currency has shown us that it likes to trade at a range.
If we are in an environment, a risk positive environment, then that would be a downside for the dollar and that would buffer the dollar being stronger.
If we are in a deteriorating economic environment, which probably sees the Federal Reserve and not deliver another 1% rate hike, the risk environment is positive for the dollar than the the Fed is in delivering those hikes which offsets it.
Right now we are in an environment where there are a lot of buffers on both sides keeping the dollar in Canada and a fairly tight range.
So even if it moves to the higher end of that range or vicev erso, we don't expect the material passed through in terms of the currency right now.
if we break out of the range, get well above 140, we can talk about this. Until then, I think it's a little too early to worry about that. I think it's a really good question, I just think we are a little bit early to worry about that unless we are higher than 140 in Canada.
>> There is the mark to watch. Let's take another question now. All this volatility we've been saying in the oil trade, what impact is oil volatility at having on the Canadian economy?it was 70 bucks a barrel, 72, 76.
>> I think we are starting to see some return on energy investment in Canada, which is a requirement for oil maintaining its higher price.
If oil volatility maintains here and we start to see the downside oil scenario start to play out, that can pause energy investment.
That can be a downside for economy.
we benefit more as an economy at large when oil is higher than it is lower.
That is still the case.
So I think the volatility itself could scare off the investment, but otherwise, it's the absolute price level of oil that kind of dictates the overall economic impact.
>> Are going to get back to your questions for Chris Whelan when interest rates in the economy in just a moment time.
As always, make sure you do your own research before you make any investment decisions and reminder that you can contact us at any time.
Do you have a question about investing or withdrawing 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 firstname.lastname@example.org or you can use question box right below the screen here on WebBroker.
Just writing your question and hit send. We will see if one of our guests can get you the answer right here at MoneyTalk Live.
Canadian home sales edged down from October into November, that of course as a series of rate hikes from our central bank take a toll on the housing sector.
With more on these latest housing reports, and TD Economics outlook, is Anthony Okolie.
> Across Canada, the number of houses and condos being sold fell in November with about 60% of all local market seeing declines. Canadian existing home sales fell more than 3% month over month led by areas like greater Vancouver, the Fraser Valley, Edmonton, GTA and Montréal.
In terms of new supply, homeowners not flooding the markets. In fact, a number of new homes listed was down just over 1% last month.
And according to the Canadian Real Estate Association, with one exception of 2019, November saw the fewest listings for that month in 17 years.
And of course, in November 2019, the number of newly listed homes slid more than 15% and that was driven by the ongoing inventory… Under 50%. Meanwhile, the month supply inventories rose in November. Finally, the MLS home price index fell in November.
That continues the trend that we have seen since spring and the index is now about 12% below its peak level and the average prices are heavily influenced, of course, by sales in the greater Vancouver and GTA, two of Canada's most expensive and active housing markets.
If you actually cut out these two areas, that sheds over $123,000 from the national average home price.
So certainly, those two areas have a huge influence in terms of the pricing across Canada.
Now breaking it down by region, prices were down parts Ontario, parts of BC anddoubtless elsewhere, specifically prices in Calgary, Regina and Saskatoon were barely off their peaks at all.
So overall, no big surprises in the latest November housing read.
The data, again, continues to show the same trends of lower sales, moderating prices that we have seen over the past couple months.
>> Not surprising, considering the pace of rate hikes in this country you and the effects on the cost of borrowing.
So that's the year that we've been living through. I mean, we get one more report for this year. What about next year? That's a people want to know. What does the housing market look like in 2023?
>> When the dust settles, TD Economics expects Canadian home sales to a bottom to the 40% of what they were in 2022. TD Economics no said so far OPEC has actually fallen. A lot of adjustment we have seen has already happened. So further adjustments may not be quite as severe. Now TD Economics expects weaker sales activity should push prices even lower in the near term and they are forecasting the Canadian average home prices to drop about 22% from the peak, which would be the first quarter of this year, to the trial, which would be the first quarter of 2023. They knew note in the report that there is a risk to the forecast, and that specifically if more people actually list their homes because they are paying higher mortgage rates due to the increases in interest rates, if more people list their homes, that will put further downward pressure on home prices.
But so far, the data doesn't really show that new listings are coming on. It's actually been a more muted over the past couple months.
>> Interesting stuff.
Thanks for that.
> My pleasure.
>> MoneyTalk's Anthony Okolie. Let's check in on the markets today, one day after the Fed announcement.
There was the rate hike and the message sent by Jerome Powell, the chair of the US Federal Reserve.the TSX Composite Index at 19,580, down 1.57%. There is some weakness in the US dollar today. Let's check out Crescent Point Energy right now and see how it is faring , some energy names under pressure in Toronto, it is down about 3.8%. A checking in on Air Canada, the opportunism we are getting out of the states holding into next year, off the lows of the session but modestly in negative territory, 19 bucks and $0.13, Air Canada down half a percent.
South of the border, less chicken on the S&P 500, the broader read of the American market, down to the tune of 2.
2%. Let's check in on how the tech heavy NASDAQ stacks up against the rest of the market. It's off the lows of the session but down almost 3% and J.P. Morgan, check in on one of those Wall Street heavyweights, 2.5% to the downside, 129 bucks, we will call 130 bucks, rounded up therefore J.P. Morgan.
We are back now is Chris Whelan from TD Securities, we were talking about rates.
Here's a space that has gone a lot more attention this year and the rising rate environment.
Viewer wants to know, have GIC rates peaked for the cycle?
> Essentially, GIC rates are driven by the Bank of Canada rates. So essentially, if you take our view that the Bank of Canada has paused or is very close to pausing, then GIC rates are pretty close to having peaked.
A lot of GIC's are one year.
The one year rate right now is pretty much fully pricing and where we are going to end up.
So give or take 25 basis points, we would say they are close to peak. I think what would change our view on that, it would be just very strong data for the next three or four months that shows us that there's a lot more resilience and just a very strong, sustained inflation print. So for now, that's on our view.
There is always risks to your view but for now, I would say we are pretty close to peak GICs here.
I guess as always with GICs, the take is kind of locking yourself in and do you want to take advantage of the stock market movements? The stock market is lower here, the bond market is lower here. The betting on your risk profile, there are other avenues there to take advantage of in the markets here because these interest rate hikes are really putting a lot of pressure on the bond market and stock prices. I think it's interesting when you look at how attractive GICs are versus other assets but I think that you are close to peak here.
And if you have a conservative profile of that means your interest rate criteria and you don't want to look for opportunities in the broader market of the next year or so,those probably fit depending on your profile.
>> You know exactly what you want out of the market and your investments. Let's take a question here about China.
If China opens up, will that create more global demand and then drive inflation higher as well?
>> So I think on the China side, there is some really smart people in the world that are digging into this topic. I think I've seen arguments on both sides. I seen a strong China reopening story, and I've seen the argument where China is actually already operating not far off peak capacity and then I seen other arguments where they are not going to relax their COVID protocols that much. They are still gonna hold onto this for quite a while.
I'm seeing a complete mixed analysis across the board.
So I think if you just take a step back here, I would say the market is not telling you right now that the China reopening story is the narrative to focus on right now.
We are constructive on oil into the new year, into the 90s range. However, we don't have an oil forecast above 100.
The oil market is quite weak right now.
It's telling you that a China reopening is not… If it's in the cards, it's not a big deal.
The stock market is not will ring here on a global growth story.
So I think we look at the markets, the markets aren't telling you the China story is as in play as I think we are reading that it is.
I think it was a great narrative. I think, personally, I think I'd like to see some more proof in the pudding before kind of getting into that narrative for now.
and I think, on my side, have a humility on both sides of the narrative there, all the China side.
But absolutely, it's a big deal for Canada on the oil side. It's a big deal for interest rates and the global economy. It could be a big deal for the stock market.
It's an important question.
I think it's want to keep an eye on and a tough one to answer.
>> Always great to have you here and appreciate your time.
>> Thank you for having me.
> Thanks to Chris Whelan, Senior Canada rate strategist at TD Securities. Stay tuned, we'll be back tomorrow on the markets. On Monday, we will have Marisa Jones, utilities credit analyst at TD Asset Management. She will be our guests to take your questions about utility's. You can get your questions and in advance.
Email email@example.com. That's all the time we have for the show today. Thanks for watching. See you tomorrow.