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[music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought you by TD Direct Investing.
Every day, I'll be joined by guests from across TD, many of whom you will only see here.
We are going to take you through what's moving the markets and answer your questions about investing.
Coming up on today show, we are going to discuss whether global central banks are winning the fight against inflation and what it means for the passive race with Chris Whelan, Senior Canada rates strategist with TD Securities. Our Anthony Okolie is going to have a look at a new report on the Canadian real estate investment trust sector.
plus, in today's WebBroker education segment, Jason Hnatyk is going to take us through how you can find out information about dividends on the platform.
So here's how you can get in touch with us. Just email moneytalklive@td.com or you can fill out the viewer response box under the video player on WebBroker.
Forget our guest of the day, let's get you an update on the market.
Of course, yesterdayWas the US Federal Reserve rate decision.
We got the 25 basis point bum, the commentary afterwards and the market decided that want to buy on that information. So you saw a big push yesterday.
You're still seeing a big move into tax out of the border. Today, it's also earning season and Meta Platforms came out a lot better than the market was expecting. Here in Toronto you've got crude under little bit of pressure, there's some green on the screen was pretty modest compared to what's happening on Wall Street. We are up to 14 points, just seven takes. God Shopify rallying along with many big tech names in the state's.
At 7137, it's almost 7%.
We are seeing some pressure on gold, including B2Gold, right now down to the tune of 3 1/2%.
Things look a little firmer south of the border in the wake of the Fed. Let's check in on the S&P 500, it is up to 1 1/3%. Seeing some of the big tech names lift off of the index with some pockets of strength as well.
Let's check in on the NASDAQ. That's where the big action is today to the upside, God again in the tech heavy in the sea of almost 3%.
We are going to talk a little bit later in the show about Meta Platforms and its results but it seems to be a number of boats in the big mega-cap tech names including Amazon, let's check in on this one as well.
It's up to the tune of 6%, a little bit more than 111 bucks per share.
That's your market update.
Investors are getting some clear signals from central banks after nearly a year of aggressive rate hikes it seems that inflation is pulling in the right direction.
So what does that mean for the path of rates in the economy this year?
Joining us now is Chris Whelan, Senior Canada rate strategist, TD Securities. It's great to have you back on the program.
>> Thank you.
>> Clearly the big show of the week was the Fed, yesterday.
We heard from our Bank of Canada last week. We heard from the Bank of England today. The question becomes, do we feel that after all those aggressive rate hikes and the pain felt across all the asset classes that the battle against inflation is starting to show results?
>> I think that's exactly what the market is telling us right now.
The Bank of Canada led off with the pause, they signalled a pause. We are taking them at face value here, that they are pausing.
it's just face value, but we are taking them at face value that they are pausing. Then we rolled forward to the Fed yesterday and it wasn't easy to discern what kind of meeting that was at first but when you take a step back and look at the market's reaction, we've got stocks going up bond yields going lower and it has a kind of mission accomplished, we are doing pretty good here feeling.
The economy is showing us that the stock market is telling us that the economy might have a bit more left in the tank to hold up for longer.
I think everyone is kind of scratching their head on are we going to endure a recession or not?
Is going to be a bad recession?
I think we are all confused on how that's going to evolve.
I think the bond market right now is pushing yields lower and I think that the bond market is reading as the Fed shifting to more data dependence.
That's what they were nodding towards. I think that is why we are seeing a large reaction in yields yesterday that is holding today and with some follow-through.
So I think that the hikes are working.
Inflation is slowing down.
I think with good reason that that inflation is going to fall.
I think that, for now, we will take it as a healthy sign that things are okay for now.
>> The Fed did signal, and Chairman Powell used the word this inflationary at some point during his press conference, but he did say there is more work to be done.
They are not done. They didn't get the same signal that the Bank of Canada gate.
They said, they are going to have to do a little bit more to rates on the upside. Based on what we are seeing and on some of the data that's coming in, I'm not going to get you to give a prediction, but when does the Fed consider it safe to move to the sidelines?
Is it one more, to more?
>> We are in the 1 to 2 more camp right now.
There is risk. The sensitivity to data, picking up… We have a lower sensitivity to data in Canada because for the next month or two in Canada because the Bank of Canada has kind of set a pause so they are going to take stock of what the next two months look like.
We have had a lot of backward -looking data. We are starting to get that 2023 data to start coming in as we move our way through February into March.
So in Canada, we are taking stock.
In the US, they are more data sensitive because a big shock lower in data is more risk of one or done and then big beats on data is a shifted to or maybe even more than that.
So I think there is a high data dependent scenario in the US right now and a lower one in Canada.
I think that that's kind of the regime we are heading into for the next month or two.
So I think it really depends on your kind of view.
And if we look at the stock market, the stock market is probably telling us that the data holds up a little bit longer.
So that favours our 1 to 2 more scenario versus imminent done.
So that's kind of where we are as an and strategy at TD.
> So it's clear for the month of reports that we get that we do have inflation moving in the right direction, which is lower, although it is still high.
We heard as much from the Fed.
We have heard as much from other central banks. What could a knight inflation again?
What's to say our central bank after taking that pause that there might be for them to go?
> I think the economy holding up longer, as the stock market may be nodding towards, is just a general strength in the economy can make it difficult for inflation to push lower. The other thing is the oil story. The oil is a big driver in the inflation equation from not necessarily a big driver on its own but it's tends to be very highly correlated to inflation.
So if there is a larger rally on oil with the China reopening story or the economy holding up longer story or the reserves being drawn down to a large extent, there are a lot of large narratives that are talked about on the show often that could drive that further.
That's kind of your double top in inflation scenario.
I think whether you are confused right now are not, the bond market is getting a sign that it's okay to jump back into bonds. The stock market is liking that yields are starting to get tapped out.
We are unsure about the economy but not overly scared about the economy but that is why I think we are getting the market reaction we are getting.
>> It's fascinating that through this and all these aggressive rate hikes to bring down inflation and cool the economy, so many central bankers have said, we need to see some pain in the labour market. We really haven't seen that pain.
It starts making me think, can we actually get a cooling of inflation, bringing it back to that target range, without severe damage the labour market?
In those two things coexist?
>> That depends. I think that's the question right now.
Can you have this sustained pain in the economy? In the labour market sustain where it's at?
Where are we coming from an overly strong point in the labour market? We have seen some headlines but we are also starting to understand that those laid off are starting to get jobs quite quickly.
And so we have layoffs from this economy slowing or concerns about it, and then you have a tight job market, people can replace their job right away, that's a dynamic we don't have a lot of recent historical precedents on.
So can they coexist?
I mean it's hard to argue that they can't.
And it's hard to see how they can.
> It's a tricky one.
>> I don't think that's an easy question to answer. I can see how they could coexist.
one thing to understand as we are coming from a pretty high level of economic activity.
a recession is a rate of change.
So when you go from a high level to a medium level, you still have a recession.
But I think in that context, why is the stock market so positive right now?
That may be a positioning story and a lot of people may be overly defensive right now, but that also may be telling us that with economic activity might slow, but it's not going to be so dire, deep recession, job losses, that dark looming picture. So maybe they can coexist and maybe it's a decrease, maybe a soft landing is in play and these positive economic trends can go on for a lot longer than we think sometimes.
>> Fascinating stuff and a great start to the show.
We're going to get your questions about the economy and interest rates for Chris Whelan and just moments time.
We will look at his outlook for the Canadian dollar, chances of recession and more.
Get in touch anytime. Email moneytalklive@td.com.
Orville at the viewer response box under that video player on WebBroker.
Now here's an update on the top stories in the world of business and a look at how the markets are trading.
BC is warning investors that higher borrowing costs will hit the bottom line this year. The Telcom giant is forecasting earning per share could fall by as much as 7% in fiscal 2023, due to higher rates and other factors.
BC also announced a more than 5% hike to its dividend.
Shares of Canada Goose are the spotlight today, that's after the high-end parka maker fell short of expectations and place order.
COVID 19 Outbreaks in China in December did hit sales of Canada Goose apparel in that market, pretty important market for them. The companies also cuttings outlook for this fiscal year.
The shares right now are the lows of the session, about 21%.
It appears the parent company of Facebook is primed to be good on its cost-cutting initiatives.
Meta Platforms is/cost by more than $5 billion this year. The social media giant is also providing optimistic sales forecast, lifting Meta Platforms shares to the tune of 24% at this hour, it seems to be injecting a little enthusiasm back into some of the mega-cap Tech names.
A quick check in on the market, we will start here at home with the TSX Composite Index.
We are not faring quite as well as the Americans today.
We have 30 points on the table, just 15 percentage points. South of the border, let's take a look at the… You know what I'm trying to say. You can see on the screen. Let's check in on the S&P 500, south of the border. A little firmer down there.
Up to 1 1/4%. Obviously, Facebook/Meta Platforms is having a bit of an effect on the broader market today.
All right, we are back with Chris Whelan, we are taking your questions about the economy and interest rates.
I'm gonna let you talk, Chris, and give my mouth a break.
If you are wants to know, when will central bank start cutting rates after all this?
>> I think that's the golden question.
I think right now, when did they cut rates?
There is market pricing for cuts to happen as early as this year when we look at market pricing right now.
So if you take what the market is telling you, it's the end of this year.
So we think on our side in Canada we might see cuts, we see them starting early next year.
So it really comes back down to the data and how long we hold up.
You can have your view and then you have with the markets are doing and you need to kind of take stock of where your view is and where the markets are at assess where the risks are to your views.
At the moment, positive stock market is telling us that a positive economy, it probably tells us that cuts come later or if they do come as early as this year or early next year, that they might be less aggressive.
So if we aren't in a stressful economic scenario with job losses spiking monumentally, then we are going to have a very slow cutting cycle.
So it kind of depends on is inflation fallen?
If inflation is falling and growth is getting quite low, then they are going to want to start cutting.
If inflation is stabilizing, they are going to want to stop cutting.
If job losses aren't spiking monumentally and inflation isn't falling like a rock, they don't need to be cutting anywhere near to the degree that they hiked.
I think it's not just about when did they start cutting because at 25, 50 beats cut, it doesn't matter what they have already hiked, four, 4 1/4% off the bottom.
It did agree to how much the cuts come.
>> And why, right? If someone is hoping for an aggressive rate cut for the end of the year, then there also hoping for a little bit of economic calamity.
There is not a good reason why they would do that.
> Yes, so you might get modest cuts at the end of the year based on the market. The current positive backdrop is telling us that we could get cuts and they will start cutting slowly, not aggressively.
If they were cutting aggressively, we are usually not in a great situation.
So we have to think about the degree of the cuts verses when they start.
I would say it's the magnitude more than just getting started.
>> Interesting stuff. Let's get another question in here.
this one is about our economy.
Can Canada avoid a recession?
>>we can totally avoid a recession. It's totally possible.
It seems inevitable that, given our debt sensitivities, we are not going to have substantial economic pain eventually.
It's not about an it's, it's about a one.
However, a soft landing is possible if they start cutting sooner.
I think unequivocally we are in restrictive territory right now. Rates are too high. So if we are going to have a soft landing, they're going need to be brought down, sooner rather than later, to do so.
so if they do cut, and the market is suggesting that they will,then it reduces the chances… Increases the chance of a soft landing.
But at the moment, we are calling for recession so we would say that it is less likely that they avoid one and it's more likely that we do so in.
>> Is our central bank or any central bank really able to react in a timely manner?
Because they think about monetary policy and it does work with a legate, right? We heard that from Jay Powell. We heard that from Tiff Macklem in recent days.
They do all these things and they don't take hold immediately.
We are seeing signs but really it's further down the road. They are laying the groundwork for what the world looks like 12 months from now. If the role changes quickly, can they react quickly enough?
>> We have learned that they can absolutely simulate their economy.
It's just as they're going to be a momentary, is there going to be a moment where that's uncomfortable?
And then, at the same time, are we going to be a little bit more reluctant this time to do that because you don't want to start back up again?
So I think that's going to be a delicate situation and I think we all hope that they take us out of restrictive territory as soon as they can, and hopefully we see that substantial fall in inflation that gives us that ability.
If inflation stays too high for too long, then I think it doesn't matter. The interest rates will have had to stay too high and will put us into a recession.
I think we should all just hope that inflation falls really soon.
>> Definitely, we have to watch that pretty carefully.
This one is about the sort of interplay between housing and all these rate hikes.
The viewer wants to know, how the housing market react to the end of rate hikes?
The Bank of Canada is pausing.
What do you think?
>> I think you're taking a guess that human psychology here, but I think at the margin,but when we see in the media that inflation is falling and rate hikes are pausing, they may even be cutting, I think you have removed, there is definitely a subsetof buyers that are concerned how high interest rates will go and they don't know, which is a very fair feeling.
So when they can see a pause and see a potential for cuts, they can start to have more confidence in their own purchase.
It's hard to know what the subset of numbers is but that shift there will translate into higher sales.
Generally speaking, our demographics are positive.
The positive population growth.
We generally, our sales are generally below trend.
It would probably be a safe assumption that there are people waiting to buy a house and they are nervous.
I think that's going to reduce the amount of people that are nervous. It will give more confidence to homebuyers to come in.
I think that is naturally a bump in sales.
>> Let's talk about one of the important calculations in this for a lot of people. I guess the criticism in the age of low interest rates was people were looking at less at the overall price tag of a house but the carrying costs.
Right now, mortgage rates are very interesting between fixed and floating. What is happening there right now?
There is a difference between yields in the five-year bond market and then we are actually seeing from the prime rate.
>> We talked about this a couple times on the show.
Basically, we are in restrictive territory right now.
It's not the neutral interest rate.
This is not the norm, this is not the going interest rate that the economy now works at.
This is a rate that is designed to restrict our economic activity, reduce our economic activity to bring it down and bring inflation in line.
We are deliberately above our neutral rate.
So what the interest rate curve is telling us right now which is what variable and fixed mortgages are, the two, three, five-year bond market yields and you drive the mortgage from that and the variables are set by the Bank of Canada. Right now the variable is high because we are in restrictive territory.
Further out, the bond market is telling us that restrictive policy will work and that we will return to something more neutral, which is lower, in the future.
So when you get locked into a fixed mortgage, you're getting locked into a more neutral rate further and further out in time.
So we are getting that strong divide.
And I think that variable versus fixed in the interest rate curve is agreeing, the bond market is agreeing with what I just said.
We are in restrictive territory right now and we are moving to neutral.
That does create some relief on the variable payment for someone wanting to lock-in.
I think it's hard for a lot of people to stomach locking into these high levels for five years. I think everyone has their own risk tolerance.
It's nice to have a two-year option that's lower than variable right now and a three-year option.
So there are a lot of options out there. We don't think that it's going to be, in the past, you've generally seen variable or five-year fixed.
I think you're going to see a lot of different flavours across variable two, three, four, five year, we will see a mix of what people decide to do over the next while.
But it is nice to have the two year, three year fixed as a cheaper option to variable right now and that's why that is.
>> A fascinating time in the market.
As always, at home, do your own research before making investment decisions. We'll get back to your questions for Chris Whelan on the economy and interest rates in just a moment's time.
I'll reminder, of course, you can get in touch with us anytime.
Email moneytalklive@td.com.
Now, let's get to our educational segment of the day.
If you're looking to find out information about dividends, the WebBroker platform has tools which can help. Joining us now with Maurice Jason Hnatyk,Senior education instructor at TD Direct Investing.
Let's talk about dividend information that you can find on the platform.
>> Great to be here, as always read the hunt for yield is that age-old discussion that investors are always having and whether or not we are thinking about maybe GICs or other fixed income products. There can be alternatives and let's focus on how to find out dividend information on a particular company.
First of all, we are going to jump to research at the top of the page. We will choose, under investments, stocks. For the stock that I am on here, we are noticing that at the top of the screen we have news and other information.
What I want to focus on is on the right-hand side of the screen.
That's where a lot of the quick hitting fundamental information can be found.
What we are going to focus on here is dividend yield, annual dividend rate, all important information to keep in mind when we are thinking about dividends.
Dividend yield, that is telling us what the percentage of the annual dividend is of the current value of the stock.
It's quoted in a percentage.
So it's easier to compare different stocks with different values. It's an apples to apples comparison we are looking to make.
That annual dividend rate, you have $3.84 on the particular company, that is telling us what that total value of the dividend payment is over the course of the year.
Not all companies pay dividends and those that do decide the schedules they are paying on.
Dividends are going to be the most commonly used schedules that you will see.
Moving down to one you should expect to see your dividend payments or when you need to buy the shares are like the X states and the pay dates. The paydays when you can see the cash that your account but the ex-date determines whether you're eligible for the dividend or not. The most recent dividend for this company was January 5.
That's telling us that if you want to get the dividend paid into your account, you will need to own the stock at any point prior to 5 January.
Conversely, if you hold the stock and you still want to receive that payment, you can sell it on the fifth or any die after and you will still get that dividend paid into your account.
Let's go to the top of the screen briefly here. I want to show everybody the events tab. We will click into this. This is important information.
In the dividends tab, this is going to show us all the history of the dividends.
If we are looking at what the dividend per share is, we will see the different pay dates and get a sense of their structure.
Ultimately, what's nice about this is that we get a larger overview. We get to see how sustainable is this company, are they reducing dividends or are they increasing dividends?
We get a sense of confidence from the company and we know that we are may be in a hopefully more stable environment to receive those dividend payments into the future.
>> Great information there about the dividends and when you are looking at an individual security.
What if someone is just wondering about which stocks pay dividends?
How do you find that a WebBroker?
>> I don't want to say it's a needle in a haystack but let's see if we can narrow it down and find an official way to find some of those companies they can get into some more research on them.
Back in WebBroker, we will go to research at the top of the screen and under tools, we have been here many times on the program, but it's a useful tool that WebBroker offers. This is our screeners tool.
We have the ability to screen for stocks, technical events. If you are looking to identify certain signals for buying and selling. Let's focus on stocks.
I'm going to create a very basic screen here but you have the opportunity to be very specific.
You can cast a narrow net to make sure only stocks that meet your criteria come up or you can make it as broad as possible to get a wide-open list to start narrowing things down from.
Your dividend criteria is going to be located on the top right-hand corner of the screen here.
We go ahead and select dividend yield. Here's where we get the opportunity to kind of identify how much yield we are looking for. Let's say we are looking for something with a minimum of 5%.
We can put that in there and will tell us how many stocks are going to be paying at minimum that percentage of yield.
Let's go in and add in one other piece of criteria.
We've got an opportunity to evaluate and may only find companies that are increasing their dividends over a five-year period.
My apologies here.
I'm just going to go ahead and set this to zero to show that it's only going to display for those companies that are increasing dividends over that timeframe.
Lastly, we will narrow it down, you have to either narrow down by sector or country.
So with the two criteria on the screen, we can see we found 206 companies that have a 5% dividend that have been increasing it over a five year time period.
Down here, we have a list of companies that we can choose to jump right into buy and sell or start creating a watchlist to keep a better eye for the future the time that market and maybe find a good buying opportunity for yourself.
>> Great stuff as always.
Thanks for that.
>> My pleasure.
>> Jason Hnatyk, senior client education structure at TD Direct Investing.
Make sure to check out the Learning Center in WebBroker from our educational videos, live, interactive master classes and upcoming webinars.
Now before we get back to questions about the economy and interest rates for Chris reeling, a reminder with how you get in touch with us.
Do you have a question about investing or what's driving them? Argus her ears to hear what's on your mind. So send us your questions. You can get in touch with us two ways.
Email is any time via moneytalklive@td.com or you can use the question box right below the screen here in WebBroker.
Just read in your question and hit send. Let's see if one of Argus get you your answer right here MoneyTalk Live.
We are back with Chris reeling, we are taking your questions about the economy and interest rates. Let's get back to them.
We have of you are asking, I'd like to know your guests projections for the Canadian dollar versus the US dollar over the next year in light of what we heard from the Fed.
And we heard from the BOC last week.
>> Our team coming out of the Fed yesterday is more biased to see the dollar weaker in the near term.
That's in line with the bond market's reaction. The bond market is moving to lower yield.
The market is taking that as a cue that the Fed is going less hard, less strong as we go forward.
That's less of an interest rate higher pressure on the US. So if you take out of that meeting, bond yields are lower, that means less pressing on the gas by the Fed.
That is dollar negative. Over the next year, we are… It's pressure lower than the interim.
> I think one of the stories, there have been so many things that play of the last couple of years.
Aggressive monetary policy, fiscal stimulus, but a lot of people wondered what happened with the correlation between our Canadian dollar and energy prices because when energy prices were soaring, people were scratching their heads and saying, should we be seeing something in the Canadian dollar?
That was a correlation that worked in the past but doesn't seem to hold up anymore.
>> There are a couple of things. There is a reduced sensitivity economically to the energy sector.
Still absolutely we do benefit from a strong energy sector but there is a reduced sensitivity to it.
At the same time, we have to realize is this time around, we have an inflation driven market regime, so oil pushing higher, a lot of things are pushing higher.
That means US interest rates are pushing higher.
Canadian interest rates are pushing higher. However, Canadians have a higher debt load than the US.
We are more debt sensitive so we may not push interest rates as high as in the US. In that case, curtsies are not just economic sensitivity, well, interest rates are economic sensitivity but they are not just the economic idiosyncrasies that an economy has, there is also other aspects that drive interest rates so the debt sensitivity. Our debt loads are a bigger factor than our energy sensitivity.
So given our higher debt sensitivities, we can't move interest rates as high as the US likely can and we are seeing them play out right now.
So the Canadian dollar can't perform as well even when oil is going strong because you're not going to see interest rates go as high.
Or there is an expectation that interest rates can't go as high. So that explains a lot of that reduce correlation to oil this time around.
We have to take a lot of factors into account and it's primarily squares up to how to the interest rates of the two countries shift and evolve and that is the story.
>> Interesting stuff. How would GEO a prepare forthis year's market volatility? Is it time to buy the long bond?
>> Coming into this year, I think when you look at a lot of institutional money managers last year, that was a very tough year and they think everyone just wanted to… Risk management, we will to a new calendar year and we looked at the market and we can take stock of where we are at.
And equity prices were depressed.
They are not at the lows but they are depressed.
Bond yields are high.
They are not at the highest but they are still quite attractive to where they've been. So are you getting some compensation for taking on risk in bonds and stocks? Yes, you are.
Are you getting a full compensation of a full-blown recession? No.
Generally speaking, there is the age-old wisdom of always being deployed in the market, always having a long-term approach, getting the money to fly.
So I think when you roll forward to January that you are looking to take stock now, is it a reasonable time to have your money in the markets? Yes, because you are getting stocks and bonds at cheaper levels.
Whether we have a recession or not, yes, you may see weaker prices, but if you are committed for the longer term, it's a reasonably attractive long-term level to do so.
I think with an uncertain outlook, you're not certain that it's dire, it makes sense to deploy.
See of equities off the highs, bond yields fairly high, it makes sense to deploy money into both assets. The 6040, there's a lot of talk about 6040, 7040, is a debt.
It was a terrible year for 6040, but maybe now 6040 is on sale. Our bonds which protect you?
If the economy falters, our bonds going to protect you?
Probably.
Bond yields are going to fall, bond yield prices are going to go up, so bonds are going to protect you and provide that diversification benefit that they did not last year but they have the potential to do so now.
So does it make sense to have bonds in the portfolio?
Yes.
Does it make sure, make sense to be fully invested or largely so as we move forward this year?
I think that's what we are seeing in the markets.
So I think it depends on everyone's case and it's unique to them but as we go forward, you're getting a discount versus where we have been and it's an uncertain economic outlook, so it's reasonable to deploy money and bonds will protect going forward.
>> We have another question here that is somewhat similar to the bond space but itis a bit of a different vehicle. GIC rates appear to have peaked, is the run over in GIC rates?
>> So I think now, that depends on if you are locking in.
It depends on if you need the cash shorter-term.
Then that GIC yield is… It goes back to the variable versus fixed mortgages.
So that makes sense. If you are taking a long term investing perspective here, the stock market generally exceeds the overall long-term GIC rate currently.
Our corporate bond yields giving you about what a GIC is? Yes. Is there yield compression potential, can yield go lower just on the government and credit side?
Yes.
We are seeing both of those happen right now.
It's a trade-off between… GIC is overly defensive versus being deployed in the market or locking yourself into by at a more opportunistic time in the market if that's what you're waiting for.
So I think the appeal of GICs is losing its lustre.
Now versus where it was a year ago. The year ago, the stock market was heading down. The play last year was being in cash and now maybe it's a better time to be putting the money to work.
I think that's a story we see.
>> For people who are curious about GIC rates, I think I'm pointing in the right direction in my broker.
If you up around here and look at the research tab and follow that down in the investment column, at the very bottom is the GIC Rate Sheet and you can check out all the rates there and do a little homework for yourself.
We are going to get back your questions for Chris Whelan on the economy and interest rates in a moment.
Make sure you do your own research before you make any investment decisions and a reminder that you can get in touch with us at any time.
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, 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 will see if one of our guests can get you the answer right here at MoneyTalk Live.
Combination of recession fear is, inflation concerns and steep increase in bond yields weighed on the Canadian real estate market in 2022. But now we have the Bank of CanadaSignalling pretty firmly appalls on further rate hikes. Our real estate investment trust, reads, looking more attractive in this environment?
Anthony Okolie it joins us now and looking at a new TD Securities report on the topic.
>> TD Securities is forecasting the overall real estate sector adjusted funds from… To moderate in the fourth quarter of last year to less than 1%. That's down from just over 2% in the third quarter of 2022.
TD Security says this lower fourth-quarter growth is due to tougher year-over-year comparisons to the fourth quarter in 2021 where Adjusted Funds From Operations per unit growth was just slightly above 6%. They also point to the fact that higher interest expense as well, that is going to weigh on growth despite the fact that we have seen higher year-over-year occupancy and rents.
TD Securities expects fourth-quarter growth to be led by industrial, retail and office followed by declines in residential, and seniors. I'm going to focus on the five sectors here.
We will start off with industrial rates.
They look for the Adjusted Funds From Operations per unit growth of about 11%. They say that the Canadian industrial space leasing market continues to show strong fundamentals in the fourth quarter with vacancy largely unchanged while market rent growth accelerated to 31% year-over-year.
That's compared to 29% year-over-year growth in the third quarter.
The second is retail rates and TD expect solid operation… Really driven by higher year-over-year occupancy, variable revenue, along with continued red growth.
Turning to the office space, they do see slower growth here as both national and downtown Toronto vacancy rates rose in the fourth quarter after holding steady the past two consecutive quarters.
With residential, they expect higher year-over-year interest costs to weigh on fourth-quarter results leading to slightly negative forecasts for the residential REIT sector. For seniors, REI TS, they expect pressure on margins from elevated labour and pandemic related costs.
That said, they believe that the labour and pandemic related costs could moderate as 2022 progresses.
>> As 2023 this year progresses, if we did end up in an economic slowdown, what is TD Securities thinking about REI TS?
> TD Securities expects management teams to provide positive outlook on near-term fundamentals across almost all sectors.
That being said, they believe that the residential and industrial sectors will have the most favourable 2023 outlooks while office REI TS will likely have softness.
>> Fascinating stuff.
Something our viewers are definitely interested in, real estate. Our thanks to money talks Anthony Okolie.
> My pleasure.
>> Let's check in on the markets now.
We will start your own Bay Street with the TSX Composite Index.
Making some gains since the start of the show. It's still pretty modest, about 50 points right now or 1/4 of a percent on the TSX Composite Index.
some of the big energy names were not participating earlier in the session and I want to check in on Suncor and see how it is faring right now it is 44 bucks and $0.
12, based down 3%, some weakness in energy names. A lot of lumber plays are getting a bid today. Fraser Timbers of 3 1/2%.
BCE, wow, got a triple play here on the Canadian stocks.
One author wrote up on the screen? BCE came out today and warned about how higher borrowing costs will pressure the bottom line on earnings per share.
They announced a dividend increased as well.
At $61.36, it BCE is down 3%.
The S&P 500, the broader read of the American market, things are a bit firmer south of the border. Up one and 1/2%.
Some of the mega-cap and tech names getting a bid today in the wake of Meta Platforms pleasing the market.
Let's take a look at the tech heavy NASDAQ. It was faring even better than the broader market, up just a little shy to 3%.
Let's show you Meta, the parent company of Facebook.
Vitali Mossounov was on the program a while ago talking about what you need to see from tech this year, what is the market waiting to see?
They are wanting to see some cost discipline after spending during the pandemic. Definitely hearing overtures from Meta on that front and giving us a pretty good optimistic forecast. Meta shares are at hundred 92 bucks and change, up more than 25% on the day.
We are back now with Chris Whelan from TD Securities.
Let's get back to your questions, this one about China.
The question is about code China's reopening stoke inflation? We have had a reopening.
Are there any signs that perhaps it could?
>> I think that's definitely the risk for now.
That actually could create a lot of awkwardness for developed economies of China is reopening right as we need to bring interest rates down. That could create a soft landing if this China reopening happens, that you could get this inflation pop and hopefully that translates into GDP growth for us so that we can weather the storm.
I think that the China reopening story has both bullish and bearish anecdotes overall in general but for now, the bond market is ignoring it and I think we need to see it show up in the data.
I think we have so much uncertainty in the data that we don't know if these interest-rate effects have even impacted the data right now. We don't know if you're going to need the China reopening just have a soft landing. You don't know if the China reopening is going to pressure things.
I think it is really hard to put any kind of conviction out there. You have to have a large margin for era right now.
It's one of those things you have to be alert to if you want to catch the large moves this year or understand why they are going on. I think you need to be really in tune to how the China reopening story is playing into the economic mosaic in the coming months.
I think that's a really hard one to talk to, and I think it's a really important one to be watching. But I think we are more watch and see right now.
>> Economic mosaic, I like that.
If you ever catch me saying that, you can say it he got it for me. Running out of time for questions from the audience. Any final thoughts on the rate environment this year is a hopefully come around the other side of these aggressive hikes?
>> I think at the end of the day, it just goes back to what I was saying today. We are in restrictive territory.
This is not the neutral interest rate. This is not the interest rate that the economy operates at.
And us moving to a more neutral, lower interest rate in the coming future is, I think… A very reasonable expectation priced into the market, it makes a lot of sense, and that's how we are taking them.
That's how we drive forward in terms of thinking of interest rates in the future, we think of them lower.
>> Always great to have you here. Looking forward to the next time.
Our thanks to Chris Whelan, Senior Canada rate strategist we TD Securities. Stay tuned. We'll be back tomorrow with a reaction to the latest US jobs data.
That's going to be pretty interesting in light of what we heard from the Fed this week.
On Monday, Greg Barnes, mining analyst at TD Securities will be taking your questions about mining stocks. You can get a head start with your questions, just email moneytalklive@td.com.
that's all for our show today.
Thank you for watching, we will see you tomorrow.
[music]
Every day, I'll be joined by guests from across TD, many of whom you will only see here.
We are going to take you through what's moving the markets and answer your questions about investing.
Coming up on today show, we are going to discuss whether global central banks are winning the fight against inflation and what it means for the passive race with Chris Whelan, Senior Canada rates strategist with TD Securities. Our Anthony Okolie is going to have a look at a new report on the Canadian real estate investment trust sector.
plus, in today's WebBroker education segment, Jason Hnatyk is going to take us through how you can find out information about dividends on the platform.
So here's how you can get in touch with us. Just email moneytalklive@td.com or you can fill out the viewer response box under the video player on WebBroker.
Forget our guest of the day, let's get you an update on the market.
Of course, yesterdayWas the US Federal Reserve rate decision.
We got the 25 basis point bum, the commentary afterwards and the market decided that want to buy on that information. So you saw a big push yesterday.
You're still seeing a big move into tax out of the border. Today, it's also earning season and Meta Platforms came out a lot better than the market was expecting. Here in Toronto you've got crude under little bit of pressure, there's some green on the screen was pretty modest compared to what's happening on Wall Street. We are up to 14 points, just seven takes. God Shopify rallying along with many big tech names in the state's.
At 7137, it's almost 7%.
We are seeing some pressure on gold, including B2Gold, right now down to the tune of 3 1/2%.
Things look a little firmer south of the border in the wake of the Fed. Let's check in on the S&P 500, it is up to 1 1/3%. Seeing some of the big tech names lift off of the index with some pockets of strength as well.
Let's check in on the NASDAQ. That's where the big action is today to the upside, God again in the tech heavy in the sea of almost 3%.
We are going to talk a little bit later in the show about Meta Platforms and its results but it seems to be a number of boats in the big mega-cap tech names including Amazon, let's check in on this one as well.
It's up to the tune of 6%, a little bit more than 111 bucks per share.
That's your market update.
Investors are getting some clear signals from central banks after nearly a year of aggressive rate hikes it seems that inflation is pulling in the right direction.
So what does that mean for the path of rates in the economy this year?
Joining us now is Chris Whelan, Senior Canada rate strategist, TD Securities. It's great to have you back on the program.
>> Thank you.
>> Clearly the big show of the week was the Fed, yesterday.
We heard from our Bank of Canada last week. We heard from the Bank of England today. The question becomes, do we feel that after all those aggressive rate hikes and the pain felt across all the asset classes that the battle against inflation is starting to show results?
>> I think that's exactly what the market is telling us right now.
The Bank of Canada led off with the pause, they signalled a pause. We are taking them at face value here, that they are pausing.
it's just face value, but we are taking them at face value that they are pausing. Then we rolled forward to the Fed yesterday and it wasn't easy to discern what kind of meeting that was at first but when you take a step back and look at the market's reaction, we've got stocks going up bond yields going lower and it has a kind of mission accomplished, we are doing pretty good here feeling.
The economy is showing us that the stock market is telling us that the economy might have a bit more left in the tank to hold up for longer.
I think everyone is kind of scratching their head on are we going to endure a recession or not?
Is going to be a bad recession?
I think we are all confused on how that's going to evolve.
I think the bond market right now is pushing yields lower and I think that the bond market is reading as the Fed shifting to more data dependence.
That's what they were nodding towards. I think that is why we are seeing a large reaction in yields yesterday that is holding today and with some follow-through.
So I think that the hikes are working.
Inflation is slowing down.
I think with good reason that that inflation is going to fall.
I think that, for now, we will take it as a healthy sign that things are okay for now.
>> The Fed did signal, and Chairman Powell used the word this inflationary at some point during his press conference, but he did say there is more work to be done.
They are not done. They didn't get the same signal that the Bank of Canada gate.
They said, they are going to have to do a little bit more to rates on the upside. Based on what we are seeing and on some of the data that's coming in, I'm not going to get you to give a prediction, but when does the Fed consider it safe to move to the sidelines?
Is it one more, to more?
>> We are in the 1 to 2 more camp right now.
There is risk. The sensitivity to data, picking up… We have a lower sensitivity to data in Canada because for the next month or two in Canada because the Bank of Canada has kind of set a pause so they are going to take stock of what the next two months look like.
We have had a lot of backward -looking data. We are starting to get that 2023 data to start coming in as we move our way through February into March.
So in Canada, we are taking stock.
In the US, they are more data sensitive because a big shock lower in data is more risk of one or done and then big beats on data is a shifted to or maybe even more than that.
So I think there is a high data dependent scenario in the US right now and a lower one in Canada.
I think that that's kind of the regime we are heading into for the next month or two.
So I think it really depends on your kind of view.
And if we look at the stock market, the stock market is probably telling us that the data holds up a little bit longer.
So that favours our 1 to 2 more scenario versus imminent done.
So that's kind of where we are as an and strategy at TD.
> So it's clear for the month of reports that we get that we do have inflation moving in the right direction, which is lower, although it is still high.
We heard as much from the Fed.
We have heard as much from other central banks. What could a knight inflation again?
What's to say our central bank after taking that pause that there might be for them to go?
> I think the economy holding up longer, as the stock market may be nodding towards, is just a general strength in the economy can make it difficult for inflation to push lower. The other thing is the oil story. The oil is a big driver in the inflation equation from not necessarily a big driver on its own but it's tends to be very highly correlated to inflation.
So if there is a larger rally on oil with the China reopening story or the economy holding up longer story or the reserves being drawn down to a large extent, there are a lot of large narratives that are talked about on the show often that could drive that further.
That's kind of your double top in inflation scenario.
I think whether you are confused right now are not, the bond market is getting a sign that it's okay to jump back into bonds. The stock market is liking that yields are starting to get tapped out.
We are unsure about the economy but not overly scared about the economy but that is why I think we are getting the market reaction we are getting.
>> It's fascinating that through this and all these aggressive rate hikes to bring down inflation and cool the economy, so many central bankers have said, we need to see some pain in the labour market. We really haven't seen that pain.
It starts making me think, can we actually get a cooling of inflation, bringing it back to that target range, without severe damage the labour market?
In those two things coexist?
>> That depends. I think that's the question right now.
Can you have this sustained pain in the economy? In the labour market sustain where it's at?
Where are we coming from an overly strong point in the labour market? We have seen some headlines but we are also starting to understand that those laid off are starting to get jobs quite quickly.
And so we have layoffs from this economy slowing or concerns about it, and then you have a tight job market, people can replace their job right away, that's a dynamic we don't have a lot of recent historical precedents on.
So can they coexist?
I mean it's hard to argue that they can't.
And it's hard to see how they can.
> It's a tricky one.
>> I don't think that's an easy question to answer. I can see how they could coexist.
one thing to understand as we are coming from a pretty high level of economic activity.
a recession is a rate of change.
So when you go from a high level to a medium level, you still have a recession.
But I think in that context, why is the stock market so positive right now?
That may be a positioning story and a lot of people may be overly defensive right now, but that also may be telling us that with economic activity might slow, but it's not going to be so dire, deep recession, job losses, that dark looming picture. So maybe they can coexist and maybe it's a decrease, maybe a soft landing is in play and these positive economic trends can go on for a lot longer than we think sometimes.
>> Fascinating stuff and a great start to the show.
We're going to get your questions about the economy and interest rates for Chris Whelan and just moments time.
We will look at his outlook for the Canadian dollar, chances of recession and more.
Get in touch anytime. Email moneytalklive@td.com.
Orville at the viewer response box under that video player on WebBroker.
Now here's an update on the top stories in the world of business and a look at how the markets are trading.
BC is warning investors that higher borrowing costs will hit the bottom line this year. The Telcom giant is forecasting earning per share could fall by as much as 7% in fiscal 2023, due to higher rates and other factors.
BC also announced a more than 5% hike to its dividend.
Shares of Canada Goose are the spotlight today, that's after the high-end parka maker fell short of expectations and place order.
COVID 19 Outbreaks in China in December did hit sales of Canada Goose apparel in that market, pretty important market for them. The companies also cuttings outlook for this fiscal year.
The shares right now are the lows of the session, about 21%.
It appears the parent company of Facebook is primed to be good on its cost-cutting initiatives.
Meta Platforms is/cost by more than $5 billion this year. The social media giant is also providing optimistic sales forecast, lifting Meta Platforms shares to the tune of 24% at this hour, it seems to be injecting a little enthusiasm back into some of the mega-cap Tech names.
A quick check in on the market, we will start here at home with the TSX Composite Index.
We are not faring quite as well as the Americans today.
We have 30 points on the table, just 15 percentage points. South of the border, let's take a look at the… You know what I'm trying to say. You can see on the screen. Let's check in on the S&P 500, south of the border. A little firmer down there.
Up to 1 1/4%. Obviously, Facebook/Meta Platforms is having a bit of an effect on the broader market today.
All right, we are back with Chris Whelan, we are taking your questions about the economy and interest rates.
I'm gonna let you talk, Chris, and give my mouth a break.
If you are wants to know, when will central bank start cutting rates after all this?
>> I think that's the golden question.
I think right now, when did they cut rates?
There is market pricing for cuts to happen as early as this year when we look at market pricing right now.
So if you take what the market is telling you, it's the end of this year.
So we think on our side in Canada we might see cuts, we see them starting early next year.
So it really comes back down to the data and how long we hold up.
You can have your view and then you have with the markets are doing and you need to kind of take stock of where your view is and where the markets are at assess where the risks are to your views.
At the moment, positive stock market is telling us that a positive economy, it probably tells us that cuts come later or if they do come as early as this year or early next year, that they might be less aggressive.
So if we aren't in a stressful economic scenario with job losses spiking monumentally, then we are going to have a very slow cutting cycle.
So it kind of depends on is inflation fallen?
If inflation is falling and growth is getting quite low, then they are going to want to start cutting.
If inflation is stabilizing, they are going to want to stop cutting.
If job losses aren't spiking monumentally and inflation isn't falling like a rock, they don't need to be cutting anywhere near to the degree that they hiked.
I think it's not just about when did they start cutting because at 25, 50 beats cut, it doesn't matter what they have already hiked, four, 4 1/4% off the bottom.
It did agree to how much the cuts come.
>> And why, right? If someone is hoping for an aggressive rate cut for the end of the year, then there also hoping for a little bit of economic calamity.
There is not a good reason why they would do that.
> Yes, so you might get modest cuts at the end of the year based on the market. The current positive backdrop is telling us that we could get cuts and they will start cutting slowly, not aggressively.
If they were cutting aggressively, we are usually not in a great situation.
So we have to think about the degree of the cuts verses when they start.
I would say it's the magnitude more than just getting started.
>> Interesting stuff. Let's get another question in here.
this one is about our economy.
Can Canada avoid a recession?
>>we can totally avoid a recession. It's totally possible.
It seems inevitable that, given our debt sensitivities, we are not going to have substantial economic pain eventually.
It's not about an it's, it's about a one.
However, a soft landing is possible if they start cutting sooner.
I think unequivocally we are in restrictive territory right now. Rates are too high. So if we are going to have a soft landing, they're going need to be brought down, sooner rather than later, to do so.
so if they do cut, and the market is suggesting that they will,then it reduces the chances… Increases the chance of a soft landing.
But at the moment, we are calling for recession so we would say that it is less likely that they avoid one and it's more likely that we do so in.
>> Is our central bank or any central bank really able to react in a timely manner?
Because they think about monetary policy and it does work with a legate, right? We heard that from Jay Powell. We heard that from Tiff Macklem in recent days.
They do all these things and they don't take hold immediately.
We are seeing signs but really it's further down the road. They are laying the groundwork for what the world looks like 12 months from now. If the role changes quickly, can they react quickly enough?
>> We have learned that they can absolutely simulate their economy.
It's just as they're going to be a momentary, is there going to be a moment where that's uncomfortable?
And then, at the same time, are we going to be a little bit more reluctant this time to do that because you don't want to start back up again?
So I think that's going to be a delicate situation and I think we all hope that they take us out of restrictive territory as soon as they can, and hopefully we see that substantial fall in inflation that gives us that ability.
If inflation stays too high for too long, then I think it doesn't matter. The interest rates will have had to stay too high and will put us into a recession.
I think we should all just hope that inflation falls really soon.
>> Definitely, we have to watch that pretty carefully.
This one is about the sort of interplay between housing and all these rate hikes.
The viewer wants to know, how the housing market react to the end of rate hikes?
The Bank of Canada is pausing.
What do you think?
>> I think you're taking a guess that human psychology here, but I think at the margin,but when we see in the media that inflation is falling and rate hikes are pausing, they may even be cutting, I think you have removed, there is definitely a subsetof buyers that are concerned how high interest rates will go and they don't know, which is a very fair feeling.
So when they can see a pause and see a potential for cuts, they can start to have more confidence in their own purchase.
It's hard to know what the subset of numbers is but that shift there will translate into higher sales.
Generally speaking, our demographics are positive.
The positive population growth.
We generally, our sales are generally below trend.
It would probably be a safe assumption that there are people waiting to buy a house and they are nervous.
I think that's going to reduce the amount of people that are nervous. It will give more confidence to homebuyers to come in.
I think that is naturally a bump in sales.
>> Let's talk about one of the important calculations in this for a lot of people. I guess the criticism in the age of low interest rates was people were looking at less at the overall price tag of a house but the carrying costs.
Right now, mortgage rates are very interesting between fixed and floating. What is happening there right now?
There is a difference between yields in the five-year bond market and then we are actually seeing from the prime rate.
>> We talked about this a couple times on the show.
Basically, we are in restrictive territory right now.
It's not the neutral interest rate.
This is not the norm, this is not the going interest rate that the economy now works at.
This is a rate that is designed to restrict our economic activity, reduce our economic activity to bring it down and bring inflation in line.
We are deliberately above our neutral rate.
So what the interest rate curve is telling us right now which is what variable and fixed mortgages are, the two, three, five-year bond market yields and you drive the mortgage from that and the variables are set by the Bank of Canada. Right now the variable is high because we are in restrictive territory.
Further out, the bond market is telling us that restrictive policy will work and that we will return to something more neutral, which is lower, in the future.
So when you get locked into a fixed mortgage, you're getting locked into a more neutral rate further and further out in time.
So we are getting that strong divide.
And I think that variable versus fixed in the interest rate curve is agreeing, the bond market is agreeing with what I just said.
We are in restrictive territory right now and we are moving to neutral.
That does create some relief on the variable payment for someone wanting to lock-in.
I think it's hard for a lot of people to stomach locking into these high levels for five years. I think everyone has their own risk tolerance.
It's nice to have a two-year option that's lower than variable right now and a three-year option.
So there are a lot of options out there. We don't think that it's going to be, in the past, you've generally seen variable or five-year fixed.
I think you're going to see a lot of different flavours across variable two, three, four, five year, we will see a mix of what people decide to do over the next while.
But it is nice to have the two year, three year fixed as a cheaper option to variable right now and that's why that is.
>> A fascinating time in the market.
As always, at home, do your own research before making investment decisions. We'll get back to your questions for Chris Whelan on the economy and interest rates in just a moment's time.
I'll reminder, of course, you can get in touch with us anytime.
Email moneytalklive@td.com.
Now, let's get to our educational segment of the day.
If you're looking to find out information about dividends, the WebBroker platform has tools which can help. Joining us now with Maurice Jason Hnatyk,Senior education instructor at TD Direct Investing.
Let's talk about dividend information that you can find on the platform.
>> Great to be here, as always read the hunt for yield is that age-old discussion that investors are always having and whether or not we are thinking about maybe GICs or other fixed income products. There can be alternatives and let's focus on how to find out dividend information on a particular company.
First of all, we are going to jump to research at the top of the page. We will choose, under investments, stocks. For the stock that I am on here, we are noticing that at the top of the screen we have news and other information.
What I want to focus on is on the right-hand side of the screen.
That's where a lot of the quick hitting fundamental information can be found.
What we are going to focus on here is dividend yield, annual dividend rate, all important information to keep in mind when we are thinking about dividends.
Dividend yield, that is telling us what the percentage of the annual dividend is of the current value of the stock.
It's quoted in a percentage.
So it's easier to compare different stocks with different values. It's an apples to apples comparison we are looking to make.
That annual dividend rate, you have $3.84 on the particular company, that is telling us what that total value of the dividend payment is over the course of the year.
Not all companies pay dividends and those that do decide the schedules they are paying on.
Dividends are going to be the most commonly used schedules that you will see.
Moving down to one you should expect to see your dividend payments or when you need to buy the shares are like the X states and the pay dates. The paydays when you can see the cash that your account but the ex-date determines whether you're eligible for the dividend or not. The most recent dividend for this company was January 5.
That's telling us that if you want to get the dividend paid into your account, you will need to own the stock at any point prior to 5 January.
Conversely, if you hold the stock and you still want to receive that payment, you can sell it on the fifth or any die after and you will still get that dividend paid into your account.
Let's go to the top of the screen briefly here. I want to show everybody the events tab. We will click into this. This is important information.
In the dividends tab, this is going to show us all the history of the dividends.
If we are looking at what the dividend per share is, we will see the different pay dates and get a sense of their structure.
Ultimately, what's nice about this is that we get a larger overview. We get to see how sustainable is this company, are they reducing dividends or are they increasing dividends?
We get a sense of confidence from the company and we know that we are may be in a hopefully more stable environment to receive those dividend payments into the future.
>> Great information there about the dividends and when you are looking at an individual security.
What if someone is just wondering about which stocks pay dividends?
How do you find that a WebBroker?
>> I don't want to say it's a needle in a haystack but let's see if we can narrow it down and find an official way to find some of those companies they can get into some more research on them.
Back in WebBroker, we will go to research at the top of the screen and under tools, we have been here many times on the program, but it's a useful tool that WebBroker offers. This is our screeners tool.
We have the ability to screen for stocks, technical events. If you are looking to identify certain signals for buying and selling. Let's focus on stocks.
I'm going to create a very basic screen here but you have the opportunity to be very specific.
You can cast a narrow net to make sure only stocks that meet your criteria come up or you can make it as broad as possible to get a wide-open list to start narrowing things down from.
Your dividend criteria is going to be located on the top right-hand corner of the screen here.
We go ahead and select dividend yield. Here's where we get the opportunity to kind of identify how much yield we are looking for. Let's say we are looking for something with a minimum of 5%.
We can put that in there and will tell us how many stocks are going to be paying at minimum that percentage of yield.
Let's go in and add in one other piece of criteria.
We've got an opportunity to evaluate and may only find companies that are increasing their dividends over a five-year period.
My apologies here.
I'm just going to go ahead and set this to zero to show that it's only going to display for those companies that are increasing dividends over that timeframe.
Lastly, we will narrow it down, you have to either narrow down by sector or country.
So with the two criteria on the screen, we can see we found 206 companies that have a 5% dividend that have been increasing it over a five year time period.
Down here, we have a list of companies that we can choose to jump right into buy and sell or start creating a watchlist to keep a better eye for the future the time that market and maybe find a good buying opportunity for yourself.
>> Great stuff as always.
Thanks for that.
>> My pleasure.
>> Jason Hnatyk, senior client education structure at TD Direct Investing.
Make sure to check out the Learning Center in WebBroker from our educational videos, live, interactive master classes and upcoming webinars.
Now before we get back to questions about the economy and interest rates for Chris reeling, a reminder with how you get in touch with us.
Do you have a question about investing or what's driving them? Argus her ears to hear what's on your mind. So send us your questions. You can get in touch with us two ways.
Email is any time via moneytalklive@td.com or you can use the question box right below the screen here in WebBroker.
Just read in your question and hit send. Let's see if one of Argus get you your answer right here MoneyTalk Live.
We are back with Chris reeling, we are taking your questions about the economy and interest rates. Let's get back to them.
We have of you are asking, I'd like to know your guests projections for the Canadian dollar versus the US dollar over the next year in light of what we heard from the Fed.
And we heard from the BOC last week.
>> Our team coming out of the Fed yesterday is more biased to see the dollar weaker in the near term.
That's in line with the bond market's reaction. The bond market is moving to lower yield.
The market is taking that as a cue that the Fed is going less hard, less strong as we go forward.
That's less of an interest rate higher pressure on the US. So if you take out of that meeting, bond yields are lower, that means less pressing on the gas by the Fed.
That is dollar negative. Over the next year, we are… It's pressure lower than the interim.
> I think one of the stories, there have been so many things that play of the last couple of years.
Aggressive monetary policy, fiscal stimulus, but a lot of people wondered what happened with the correlation between our Canadian dollar and energy prices because when energy prices were soaring, people were scratching their heads and saying, should we be seeing something in the Canadian dollar?
That was a correlation that worked in the past but doesn't seem to hold up anymore.
>> There are a couple of things. There is a reduced sensitivity economically to the energy sector.
Still absolutely we do benefit from a strong energy sector but there is a reduced sensitivity to it.
At the same time, we have to realize is this time around, we have an inflation driven market regime, so oil pushing higher, a lot of things are pushing higher.
That means US interest rates are pushing higher.
Canadian interest rates are pushing higher. However, Canadians have a higher debt load than the US.
We are more debt sensitive so we may not push interest rates as high as in the US. In that case, curtsies are not just economic sensitivity, well, interest rates are economic sensitivity but they are not just the economic idiosyncrasies that an economy has, there is also other aspects that drive interest rates so the debt sensitivity. Our debt loads are a bigger factor than our energy sensitivity.
So given our higher debt sensitivities, we can't move interest rates as high as the US likely can and we are seeing them play out right now.
So the Canadian dollar can't perform as well even when oil is going strong because you're not going to see interest rates go as high.
Or there is an expectation that interest rates can't go as high. So that explains a lot of that reduce correlation to oil this time around.
We have to take a lot of factors into account and it's primarily squares up to how to the interest rates of the two countries shift and evolve and that is the story.
>> Interesting stuff. How would GEO a prepare forthis year's market volatility? Is it time to buy the long bond?
>> Coming into this year, I think when you look at a lot of institutional money managers last year, that was a very tough year and they think everyone just wanted to… Risk management, we will to a new calendar year and we looked at the market and we can take stock of where we are at.
And equity prices were depressed.
They are not at the lows but they are depressed.
Bond yields are high.
They are not at the highest but they are still quite attractive to where they've been. So are you getting some compensation for taking on risk in bonds and stocks? Yes, you are.
Are you getting a full compensation of a full-blown recession? No.
Generally speaking, there is the age-old wisdom of always being deployed in the market, always having a long-term approach, getting the money to fly.
So I think when you roll forward to January that you are looking to take stock now, is it a reasonable time to have your money in the markets? Yes, because you are getting stocks and bonds at cheaper levels.
Whether we have a recession or not, yes, you may see weaker prices, but if you are committed for the longer term, it's a reasonably attractive long-term level to do so.
I think with an uncertain outlook, you're not certain that it's dire, it makes sense to deploy.
See of equities off the highs, bond yields fairly high, it makes sense to deploy money into both assets. The 6040, there's a lot of talk about 6040, 7040, is a debt.
It was a terrible year for 6040, but maybe now 6040 is on sale. Our bonds which protect you?
If the economy falters, our bonds going to protect you?
Probably.
Bond yields are going to fall, bond yield prices are going to go up, so bonds are going to protect you and provide that diversification benefit that they did not last year but they have the potential to do so now.
So does it make sense to have bonds in the portfolio?
Yes.
Does it make sure, make sense to be fully invested or largely so as we move forward this year?
I think that's what we are seeing in the markets.
So I think it depends on everyone's case and it's unique to them but as we go forward, you're getting a discount versus where we have been and it's an uncertain economic outlook, so it's reasonable to deploy money and bonds will protect going forward.
>> We have another question here that is somewhat similar to the bond space but itis a bit of a different vehicle. GIC rates appear to have peaked, is the run over in GIC rates?
>> So I think now, that depends on if you are locking in.
It depends on if you need the cash shorter-term.
Then that GIC yield is… It goes back to the variable versus fixed mortgages.
So that makes sense. If you are taking a long term investing perspective here, the stock market generally exceeds the overall long-term GIC rate currently.
Our corporate bond yields giving you about what a GIC is? Yes. Is there yield compression potential, can yield go lower just on the government and credit side?
Yes.
We are seeing both of those happen right now.
It's a trade-off between… GIC is overly defensive versus being deployed in the market or locking yourself into by at a more opportunistic time in the market if that's what you're waiting for.
So I think the appeal of GICs is losing its lustre.
Now versus where it was a year ago. The year ago, the stock market was heading down. The play last year was being in cash and now maybe it's a better time to be putting the money to work.
I think that's a story we see.
>> For people who are curious about GIC rates, I think I'm pointing in the right direction in my broker.
If you up around here and look at the research tab and follow that down in the investment column, at the very bottom is the GIC Rate Sheet and you can check out all the rates there and do a little homework for yourself.
We are going to get back your questions for Chris Whelan on the economy and interest rates in a moment.
Make sure you do your own research before you make any investment decisions and a reminder that you can get in touch with us at any time.
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, moneytalklive@td.com.
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Just write in your question and hit send. We will see if one of our guests can get you the answer right here at MoneyTalk Live.
Combination of recession fear is, inflation concerns and steep increase in bond yields weighed on the Canadian real estate market in 2022. But now we have the Bank of CanadaSignalling pretty firmly appalls on further rate hikes. Our real estate investment trust, reads, looking more attractive in this environment?
Anthony Okolie it joins us now and looking at a new TD Securities report on the topic.
>> TD Securities is forecasting the overall real estate sector adjusted funds from… To moderate in the fourth quarter of last year to less than 1%. That's down from just over 2% in the third quarter of 2022.
TD Security says this lower fourth-quarter growth is due to tougher year-over-year comparisons to the fourth quarter in 2021 where Adjusted Funds From Operations per unit growth was just slightly above 6%. They also point to the fact that higher interest expense as well, that is going to weigh on growth despite the fact that we have seen higher year-over-year occupancy and rents.
TD Securities expects fourth-quarter growth to be led by industrial, retail and office followed by declines in residential, and seniors. I'm going to focus on the five sectors here.
We will start off with industrial rates.
They look for the Adjusted Funds From Operations per unit growth of about 11%. They say that the Canadian industrial space leasing market continues to show strong fundamentals in the fourth quarter with vacancy largely unchanged while market rent growth accelerated to 31% year-over-year.
That's compared to 29% year-over-year growth in the third quarter.
The second is retail rates and TD expect solid operation… Really driven by higher year-over-year occupancy, variable revenue, along with continued red growth.
Turning to the office space, they do see slower growth here as both national and downtown Toronto vacancy rates rose in the fourth quarter after holding steady the past two consecutive quarters.
With residential, they expect higher year-over-year interest costs to weigh on fourth-quarter results leading to slightly negative forecasts for the residential REIT sector. For seniors, REI TS, they expect pressure on margins from elevated labour and pandemic related costs.
That said, they believe that the labour and pandemic related costs could moderate as 2022 progresses.
>> As 2023 this year progresses, if we did end up in an economic slowdown, what is TD Securities thinking about REI TS?
> TD Securities expects management teams to provide positive outlook on near-term fundamentals across almost all sectors.
That being said, they believe that the residential and industrial sectors will have the most favourable 2023 outlooks while office REI TS will likely have softness.
>> Fascinating stuff.
Something our viewers are definitely interested in, real estate. Our thanks to money talks Anthony Okolie.
> My pleasure.
>> Let's check in on the markets now.
We will start your own Bay Street with the TSX Composite Index.
Making some gains since the start of the show. It's still pretty modest, about 50 points right now or 1/4 of a percent on the TSX Composite Index.
some of the big energy names were not participating earlier in the session and I want to check in on Suncor and see how it is faring right now it is 44 bucks and $0.
12, based down 3%, some weakness in energy names. A lot of lumber plays are getting a bid today. Fraser Timbers of 3 1/2%.
BCE, wow, got a triple play here on the Canadian stocks.
One author wrote up on the screen? BCE came out today and warned about how higher borrowing costs will pressure the bottom line on earnings per share.
They announced a dividend increased as well.
At $61.36, it BCE is down 3%.
The S&P 500, the broader read of the American market, things are a bit firmer south of the border. Up one and 1/2%.
Some of the mega-cap and tech names getting a bid today in the wake of Meta Platforms pleasing the market.
Let's take a look at the tech heavy NASDAQ. It was faring even better than the broader market, up just a little shy to 3%.
Let's show you Meta, the parent company of Facebook.
Vitali Mossounov was on the program a while ago talking about what you need to see from tech this year, what is the market waiting to see?
They are wanting to see some cost discipline after spending during the pandemic. Definitely hearing overtures from Meta on that front and giving us a pretty good optimistic forecast. Meta shares are at hundred 92 bucks and change, up more than 25% on the day.
We are back now with Chris Whelan from TD Securities.
Let's get back to your questions, this one about China.
The question is about code China's reopening stoke inflation? We have had a reopening.
Are there any signs that perhaps it could?
>> I think that's definitely the risk for now.
That actually could create a lot of awkwardness for developed economies of China is reopening right as we need to bring interest rates down. That could create a soft landing if this China reopening happens, that you could get this inflation pop and hopefully that translates into GDP growth for us so that we can weather the storm.
I think that the China reopening story has both bullish and bearish anecdotes overall in general but for now, the bond market is ignoring it and I think we need to see it show up in the data.
I think we have so much uncertainty in the data that we don't know if these interest-rate effects have even impacted the data right now. We don't know if you're going to need the China reopening just have a soft landing. You don't know if the China reopening is going to pressure things.
I think it is really hard to put any kind of conviction out there. You have to have a large margin for era right now.
It's one of those things you have to be alert to if you want to catch the large moves this year or understand why they are going on. I think you need to be really in tune to how the China reopening story is playing into the economic mosaic in the coming months.
I think that's a really hard one to talk to, and I think it's a really important one to be watching. But I think we are more watch and see right now.
>> Economic mosaic, I like that.
If you ever catch me saying that, you can say it he got it for me. Running out of time for questions from the audience. Any final thoughts on the rate environment this year is a hopefully come around the other side of these aggressive hikes?
>> I think at the end of the day, it just goes back to what I was saying today. We are in restrictive territory.
This is not the neutral interest rate. This is not the interest rate that the economy operates at.
And us moving to a more neutral, lower interest rate in the coming future is, I think… A very reasonable expectation priced into the market, it makes a lot of sense, and that's how we are taking them.
That's how we drive forward in terms of thinking of interest rates in the future, we think of them lower.
>> Always great to have you here. Looking forward to the next time.
Our thanks to Chris Whelan, Senior Canada rate strategist we TD Securities. Stay tuned. We'll be back tomorrow with a reaction to the latest US jobs data.
That's going to be pretty interesting in light of what we heard from the Fed this week.
On Monday, Greg Barnes, mining analyst at TD Securities will be taking your questions about mining stocks. You can get a head start with your questions, just email moneytalklive@td.com.
that's all for our show today.
Thank you for watching, we will see you tomorrow.
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