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[music] >> Hello, I'm Greg Bonnell. 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're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, we've got markets near all-time highs and we will discuss whether the quality of corporate earnings is backing up the run that we have seen in equities. Damian Fernandes joins us from TD Asset Management.
MoneyTalk's Anthony Okolie will look at a new TD Cowen report available on copper and uranium.
And in today's WebBroker education segment, Hiren Amin is going to take a look at how you can use candlestick charts to analyse potential investments here on the platform.
So here's how you can get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get to all that and our guest of the day, let's get you an update on the markets.
We will start here at home with the TSX Composite Index.
Modestly in negative territory. Your dad about 10 points, just five tics right now.
Among the most actively traded names at this hour include Shopify which, last time I checked, was to the upside. 113 bucks per share, up about 3 1/2%.
Also Finning International, a Caterpillar dealer. Unfavourable foreign exchange hitting them for the quarter and the stock down at 3610 to the tune of 9%.
South of the border, we got fed speakers doing the rounds, talking about the fact that there might not be as many rate cuts as we think this year.
Jerome Powell was beating the drums on Sunday on 60 minutes saying they were in no rush to cut rates. Your 37 points to the upside, three quarters of a percent, on the S&P 500. At 4991, he doesn't have far to go to crack 5000. Let's check out the NASDAQ. Still got earnings rolling in.
Up a solid 108 point gain, your up a little more than half a percent.
Want to check in on Snap so, not going along with the rest of the market to the upside. We are seeing a turnaround in digital advertising. We saw that play out in Meta Platforms. It is not playing out for Snap. 11 bucks and $0.37 per share, the stock is down a pretty significant 35%. That is just today's session alone.
And that is your market update.
We are in the sake of earnings season and US markets are trading in record territory. But as investors pour over the results, they may be asking whether these high valuations are justified.
Joining us now to discuss, Damian Fernandes, Managing Director and portfolio manager at TD Asset Management.
>> Always a pleasure.
>> Let's talk about markets in record territory. Earnings coming in to sift through. Do we think, from what we are seeing, from these corporations, that these market valuations are justified?
>> The market is at record highs, I loved your opening comments about the outlook for the S&P. Global developed markets, the SNP is not at new all-time highs but global developed markets are and there is a level of excitement. People are happy.
This bull market has been a long time coming. What I mean by this is if you look at what's happened, if you rewind to December 2022, almost 2 years ago, that was the high of the market for 250 days, there was this big correction in 2022, and it's the middle of Q3, 2022, markets are moving up, it took over 300 days to get back to where we were two years ago. We are looking at this and right now, the market has rallied in the last few months and that's with captivated people's attention. But this bull market has been coming for a while and we are breaking to new all-time highs but in that whole period, revenues have grown, we haven't had a recession, earnings have improved, inflation has fallen.
If you gave me those variables, if I didn't know anything else and he told me that inflation is no longer giving the Federal Reserve and federal banks agitated, they are at the end of their hiking campaign, we have not been in a recession, we know that earnings continue to expand, they bottomed in Q2 of last year, it's not a surprise that things are doing well.
>> Some names are doing well and some are not. Let's talk about the good and the bad. Meda as an example.
Meda's quarters seemed to impress the street.
>> Mehta was last Friday and it was up 20%. I calculated this. Meda added close to $2 billion in market, $200 billion.
That is a market Or the wealth creation that they, was larger than 435 companies in the S and P. That's just egregious.
It could be a sign of the times but when you look under the hood at the earnings, sales were up 25, earnings were up close to 40, for the first time ever, Meda announced that it's going to pay a dividend on a recurring basis. It's buying back 34% of the shares outstanding.
The underlying business is growing fine.
Margins have moved up.
I worked this out and even though the move of 20%, $200 billion of market cap creation, when you look at next year's numbers, the stock is still trading at 21 times.
The move is egregious but the fundamentals are not.
I'm not saying that Meda is the greatest thing.
>> You run the numbers.
>> This isn't some speculative tax stock.
We are talking about $3 trillion of market cap that is compounding at a very high rate, compared to Snap which disappointed.
>> The numbers are looking good but what do we need to be aware of?
>> The risks for Meta or Alphabet in these businesses is twofold.
Right now, economically, and the data is supports is moving into a soft landing or no landing. But the real risk for them is that if we do see a recession and a reduction in advertising spread, that's their bread and butter. Meta has aspirations for the Meta verse, that doesn't matter. What matters is, are people spending more on engagement for their platforms that they can put ads on?
That's the big risk.
You had their CEO in front of a panel last week, there is always a risk around these things, as these companies get bigger and bigger, there is always significant angst where they feel that companies are exerting too much influence.
Meta is in a bad position because both sides of the political parties hate it for different reasons. One for not enough content moderation and one for too much.
Zuckerberg is sitting there, how can he win?
>> Let's talk about what hasn't been working.
Energy, materials, healthcare, what's going on?
>> There are 11 sectors across the market.
Earnings are actually up 4%. Sales rep three, sales rep for, there is a margin expansion.
It's middling along at 4%, not that great.
But when you break it down by the sectors, it's really interesting because energy and materials are off more than 25%, healthcare is off 15.
We are not trying to have fun with numbers. But if we strip off those sectors, the rest of the market is growing in double digits.
Oil is struggling to break 75 bucks when it was 80 bucks last year. Obviously, energy companies are beholden to the price of oil. That has weighed on the earnings outlook there.
Materials companies, your biggest customer, China, is actually facing inflation. CPI is negative for the past few months there.
Some struggles there on an economic revival.
And then the other sector which is kind of unique is healthcare. When you look at the healthcare earnings, why is healthcare off 15%? That's a pretty big number for what should be a stable sector. It's really one company, it's Pfizer.
Pfizer in Q4 of 2022 generated a buck 10 in earnings. This year, they are generating a little over $0.10 and so the earnings are down hundred and 10%.
They had a big humongous gain from the vaccine and vaccine uptake. As that is out, people have slowly moved from COVID and vaccine uptake has been much lower.
Going forward, the rest of healthcare is doing fine. I actually think the earnings outlook is quite positive when you look at the sectors, we talked about tech but even consumer discretionary and industrial, they are all growing earnings high single digits and it's the sectors that are tied to materials or energy that are pulling down the earnings number. As you talk broadly about risks in the form of a recession that could hit advertising spending in some of these big tech names.
What about on the other side? You said the word no landing. What if there is no landing?
>> Last year, people were pretty occupied, the market climbed the wall. People were waiting for this recession to manifest. It just didn't happen.
Like SV be in March of last year, we didn't have a contraction in lending.
All of these data points were supportive.
What's actually happening, and I know you've been talking about this, the growth that's been coming out has been much better than expectations. We had a blowout job number last week in the US, over 300,000 in payrolls and the estimate was to 50.
Initial jobless claims are sitting at five decade lows. The labour force has grown twice its size. Consumer confidence was that.
The risk I think right now is the market has been very comfortable that inflation is falling and that almost motivates the Fed to stay on hold.
Maybe even cut if inflation is falling.
But the risk right now is if the underlying economy is actually growing much faster than trend and they have this really wonderful, real time estimate, the Atlanta Fed publishes it, real-time GDP point estimate right now, just a month into the quarter, has a forward angle on it.
>> That's not what we were expecting.
>> We were expecting one and 1/2 and it is tracking four.
If we and Q1 with a four and on the GDP, the Fed is not cutting rates. They might be flirting with this is getting too hot we might have to, I'm not advocating that but I think the market, no lending is a worry because of growth continues to grow above trend, that puts pressure on the Federal Reserve keeping rates where they are or whether they are restrictive or cutting rates.
That could be a surprise.
>> A surprise indeed in a great start to the conversation.
You're going to get your questions on global stocks for Damian Fernandes in just a moment's time.
And a reminder that you can get in touch with us any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
Looking at Ford, a little shy 4%. The automaker is announcing a special dividend after beating estimates for its most recent quarter. It is scaling back on you investments in electric vehicles. Seen some shifting demand for the industry at large.
Hybrid vehicles and family size SUVs in Ford's case seem to be getting more interest than their EVs. Alibaba falling short of its revenue expectations for the latest quarter. The Chinese tech giant is reporting slower growth in both its e-commerce business and cloud computing units.
Alibaba is increasing the size of a share buyback program by $25 billion.
They are sort of opposing forces. The stock is been bouncing around. Right now it's down, at 7361, your down 6% on Alibaba.
I also want to check in on shares of Snap.
They are under significant pressure today.
The social media company missing revenue estimates on saving ad sales. It's offering a weaker than expected forecast.
The wider ad industry had a slump in 2022, but other companies have been coming out of that slump like Meta Platforms. At 11 bucks and $0.43 per share, your down 34% in this session alone. Let's check in on the markets. We will start here at home on Bay Street with the TSX Composite Index.
Down a modest 12 points, six ticks.
South of the border, keeping an eye on the S&P 500, it is not that far off from 5000.
4991, a gain of three quarters of a percent today.
We will see if we can break past that, some people called the big round numbers as psychological barriers.
We are back now with Damian Fernandes, taking your questions about global stocks.
I'm here want to get your view of the Canadian railroads this year and longer term?
>> Near term is easy. See PNC and our big rail. CP had a beat if memory serves me it was supposed to have negative earnings per share growth and it came in positive. I think CN was negative but both companies when they reported talked about I think in CP's case because it's with the integration, they are talking about double-digit EPS growth. CN talked about 10% and longer term 10 to 15. I think that's more interesting.
CN reported and raised its dividend 7% in line with where thinks cash will be on a sustainable basis.
Both companies benefit from this. What we are seeing is the North American continent is receiving a reallocation of supply chains from East Asia into North America.
When you think about productive capacity being built in North America, think about what needs to allow that, the goods that need to be produced, the raw materials that need to be transported, all of that activity, it collapses into the oligopoly of the rail network.
Their CSX and UB in the US, CN and CP are the only ones. I think longer term, this is why CN raised its dividend, they feel really confident about the overall long-term growth profile because it's an oligopolistic industry. They have shown discipline and pricing power, they have kept control on cost, they just levered two more capacity being brought on in North America.
>> The risk for them is a broader risk for all companies? You had a session, you are moving goods, people aren't buying as many goods.
>> These are high capital intensity. As soon Ascari loads fall, they disproportionately feel the negative impact of that. They still have to have the trains running, they just have less carloads on them.
>> Let's talk about the agriculture sector. A viewer wants to know about the AG stocks. Both Nutrien and Mosaic are down significantly. You think it's all based on low forward commodity pricing or is there a link to interest rate movements?
>> I don't think it's so linked to interest rate movements. I think there's commodity supply and also commodity demand.
So far, with inflation, the Department of Agriculture actually publishes farm income in the US on an annual basis. Two years ago it was something like 200 billion. We are down to 122.
It's down significantly from where it was in 2021. Dropped in 2022. 2023 and continued to drop. This is because commodity prices, food prices, grain, crops, have fallen.
Farmers, if their main source of income is falling, the demand is also falling for potash, a key input into farmland.
You are seeing issues in demand. You could also say supply. Supplies going the wrong way.
There's too much of it coming on. Russia and Belarus, their amount of potash is actually making its way to the market.
When you look at the price of potash, it was 800 bucks in 22 and it's flirting with 200 now.
Potash Corp. doesn't set the price of potash. If demand is falling, the price takes it.
I think it's the underlying industry which is having both negative impact on supply and on demand which contributes to the lower price.
>> With those factors in play, sounds like if there's going to be a turnaround story for companies dealing in potash, it will be a longer-term story.
>> You need discipline.
Last week, the Saudis were talking about removing a million barrels of oil from the market. You need to supply demand balance.
Ideally you need demand to outstrip supply. For this to work, you need the structure of the industry to get to a more normal level.
>> Interesting stuff to watch for the AG space.
We are going to talk about artificial intelligence.
A viewer wants to know if it's still an investable trend.
>> From potash to AI. We should ask ChatGPT that look for potash.
Right now, we are in the AI builder. Every single company is starting to get a hold of chips as they build and test and learn from building their AI platforms.
CAPEX is accelerating.
Like most cycles, you will probably have overinvestment but we are not there yet because people are still struggling to get the initial chips.
There is still a significant ramp-up. So companies that sell you the tools for your AI capability build out, Nvidia chips, broad calm for routers and switches, all of those will benefit and continue to see, they reported great numbers earlier on.
I think there is still the actual hardware that supports the AI buildout but continues to see we will see until we get to this overcapacity issue.
What we are seeing is that the companies, don't think of it AI company, think of Adobe which is, which helps you with improving your pictures that you post on social media.
>> Photoshop programs.
>> Yeah.
They are going to use AI to improve picture formats.
Companies that already have customers are improving the value proposition for the customers by introducing AI.I use AI. We have financial software. One of the things I do is that after company reports, what we do is if I don't have the time to listen in on the management call, I will read the transcript.
The AI capabilities on our financial service software will summarize that transfer 20 seconds after the call is over and give me the main points. What's the outlook for earnings, capital allocation.
That just freed up 40 minutes of my time.
Not taking away my job at improving my job. Now I consume more transcripts summarized by AI.
The equipment that goes into AI continues to expand. The CAPEX around that. We talked about Meta, Meta and Microsoft and Alphabet, just talked about increasing CAPEX, all that is going towards AI so that's great but what I find more interesting are the financial companies, the credit card companies, the retailers, how they are using AI to improve the value proposition for customers and I think that's interesting.
>> As always, make sure you do your own research before making any investment decisions.
we will get back to questions for Damian Fernandes on global stocks and just moments time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get our educational segment of the day.
Let's talk candlestick charts. One method of technical analysis that investors may want to consider when they are examining a potential stock investment.
Here to give us a rundown, Hiren Amin, senior client education instructor with TD Direct Investing.
>> Candlesticks are the cornerstone of technical analysis. If you are a technician, you are a student of price action and your choice usually is going to be looking at analytics to determine that price action.
Debrief you first on what candlesticks are, they are a style of financial charts that are used to depict the price movements of either security, commonly used across analysing commodity is and also FX. Candlestick charts are thought to have originated in Japan. Timelines have been hazy but about 200 years ago.
Dating back to the 1700s during the feudal area in Japan, there was a rice merchant by the name, I will try not to butcher his name, he is regarded as the father candlestick charts and he discovered that while there was a link between the price and supply and demand of rice, it's commodity commonly and heavily traded across the part of the world, the markets were more influenced by the emotions of traders.
He claims in his book that the psychological aspect of the market is critical to trading success and traders emotions have a significant influence on price. So candlesticks is what he developed to show that emotion by visually representing those price movements. Let's show viewers how you get that set up. In WebBroker, go to research and under the stock section.
I believe I have because like you do. I'm going to bring up the broader market as we were discussing the S&P 500 at the top of the show.
Let's bring up SPY, the ETF that tracks the S&P 500 Index.
We will go to charts.
I've got the candlesticks loaded up. First thing to do is go to chart section over here and amongst the different ones, you want to choose the candlestick chart.
What candlestick chart shows us that's going to be different from let's say a line chart is it shows us five different price indications, sorry, four. It shows us the open, the high, the low and the close. As you can see, as we go into this chart, there are different styles. Let me enlighten you about these candlesticks.
The name comes from the way they visually look. There are two main components. The first thing we are going to look at is what sticks out to us, it's this rectangular box over here.
It's referred to as the real body of the candle. This gives us the price range between the open and close for the time.
We are looking at. I'm looking at a one day application. Each candle represents one day of price action.
Apart from the real body, we also have vertical lines on the top or bottom and those are what we refer to as shadows.
The upper wake and the lower wake.
I zoom into this one a bit more. You can see the tips of the wicks, either the upper wake or the lower wake may represent the high and low price that given day.
One of the things is you don't have to scratch your head and try to visualize on the axis were the prices. You can actually just land right on the candle and there's a legend right at the top over here.
It tells you exactly what the open, high, low and close is.
The colours signify whether it's a bullish or bearish candle.
For any candle that is hollow or whites, don't worry about the colour inside the candle itself, that's what tells us that the close is higher than the open. Vice versa, if the candle is coloured and or solid, it tells us that the close was lower than the open for that day.
Traders look at this to get a sense of the sentiment.
You can adjudicate or see where short-term price indications are headed.
I'm going to look back to a three year window on this.
Most of these candlestick patterns do occur at the bottom or top of trends. If you come to the bottom of a trend over here, I am in October 2022. You can see we were coming off of a major downtrend and we suddenly see this huge large bodied candle, it's hollow which tells us that it was very bullish because you can see the bottom represents the open and the top represents the clothes and they were able to take the prices hi that pretty much enveloped the previous three candles and this is one of the patterns that get colourful names. This is called a bullish engulfing pattern.
This would indicate to traders that there is a potential reversal of a trend and we did kind of see that play out where we saw the S&P rise after that point onwards.
Keep in mind that when you are looking at these patterns, in and of themselves, it's not a crystal ball to tell you what to do.
Please do layer it on with other studies yet further confirmations on the signals that they generate.
>> That's a great primer on candlesticks.
What if viewers want to learn even more about these patterns?
>> Absolutely.
There are a whole bunch of names and patterns that you can identify.
Let me show you a quick way to get those.
As go to those habits as technicals.
Come into the technical section.
Within the technical section, we have a graduation Over here which brings you to our education spot.
Let me open that. On this page, we will go to the short-term category.
You will find the patterns categories set according to whether they are bullish or bearish.
Each will give you a breakdown of what it is, how you can use it for trading purposes. The second last thing I will show us is the search bar. What you say you want to learn more about candlesticks in general.
I type in candlestick right here. It will bring up a whole bunch of videos that I learned about. If I want to learn about different chart patterns, single candlestick formation, I click on this and go to learn more about it and then use it in my trading practice. Those are two avenues I would suggest for people to get started with there.
>> Great stuff as always. Thanks for that.
>> My pleasure.
>> Hiren Amin, Senior client education instructor with TD Direct Investing.
And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
We are back with Damian Fernandes, taking your questions about global stocks. This one just came in.
What's your view on McDonald's after the latest poor earnings results? Is this reflective of fast food industries?
Do you foresee weaker valuations for these companies like Yum Brands and 2024? What can drive growth in this industry?
McDonald's foot traffic has been down in the states recently, Yum Brands is a pointer on its growth for KFC. It is something going on?
>> It's a few things happening. First of all, I think single-handedly my consumption of McDonald's fries is supporting the enterprise, it's not my fault. I think McDonald's is seeing weaker foot traffic in volatile places like the Middle East for reasons we can't fully understand.
Those things are likely temporary.
The fast food industry, whether it's McDonald's or Yum Brands or Burger King and Tim Hortons and stuff, those companies are under pressure last year as we had peak excitement around GLP's. Right, this is like Novo Nordisk and Eli Lilly with their weight loss drugs.
>> The weight loss drugs which work by making you not as hungry.
>> They had peaked excitement where the stocks were moving and all of these indulgences, whether it's Hershey's or Pepsi or McDonald's, what we call indulgences where people are worried about that trend demand would be lowered, I think people since then what's happened is there has been a bifurcation, the restaurant stocks, the QSR's that are doing well, McDonald's could move up from that initial thing where is the package food companies have continued to be in the doldrums and I think that probably makes sense because when you think about McDonald's, yes, foot traffic was down, but McDonald's doesn't sell you, McDonald's is a franchisee, sorry, it's a franchise. It sells its franchises around the world. It is literally is selling you Americana burgers and fries in a convenience fashion with high quality ingredients. As long as you have this movement away from traditional mom and Paul restaurants, I'm talking developing markets, moving toward standardized formats which is happening, you can go to the corner store or McDonald's to get a standardized meal, I feel like that provides a long delay of growth for McDonald's to partner with franchisees to make capital investment. You put the capital, you hire the people, they sell you the fries at a premium.
I think the longer-term story for McDonald's and for these QSR is including Restaurant Brands, quick service restaurants, is actually quite beneficial as they expanded their presence in developing markets.
But I do worry about, and I know that got away from the question, I think McDonald's, it's a dividend grower, it buys back a ton of shares, I wouldn't be in a rush to sell it or take significant action because more recent earnings are a one-off. Longer-term, what I worry about, this is tangential to the question, is what's happening in packaged goods.
Because of our appetite is suppressed, may be we want the indulgence of the fries when we go out, but when we come home we don't consume the Hershey's bar with a chocolate bar.
>> Interesting stuff.
Let's get to another question. This one about geopolitics. Considering the geo-political situation in the Persian Gulf, what are the short-term and potential long-term ramifications? How do we protect and/or profit from this?
I think some assets and commodities haven't moved as people would think if you are in a situation like this.
>> When you think about Canada and the price of oil, we are in the midst of two wars in large purchasing oil regions in the world, Russia and the Middle East, and use all the more recent economic data, it looks like we are, the worst is behind us and economic growth is accelerating. What I find really interesting is why is oil struggling to break 75 bucks? I think it's telling. It's tied to the discussion we had earlier about potash. There is just too much supply. In the near term, there's too much supply, too many barrels entering the market, the second largest company in the world, China, is slowing.
That has been reducing demand. Then there's probably some aspect of longer-term decarbonisation in electric vehicles and those efforts that are waiting on the price. We saw last week that Saudi Arabia said it was cutting In its biggest facilities. Why bring on more capacity when you're struggling to get a higher price recurring there? I think that's a risk.
Geopolitics in general, the market, this year, is going to be an interesting year.
I call it 40, 60, 80:40% of the global population hits the pole booths this year, that 60% of global GDP, that's 80% of market cap.
>> 40, 60, 80. I gotta remember that.
>> I would expect as we progress through the year and get closer to Europe, the European commission will have its elections, there will be bouts of volatility but we are in the business of longer-term investing. Normally the way I think about this is you have this initial, unless it fundamentally changes the cash profiles, most of these political events are flashes in the pan. You hear a lot of noise, he creates opportunity, but you should probably look at the long-term fundamentals.
>> We are going to get back to questions for Damian Fernandes on global stocks and just moments time.
As always, make sure you do your own research before making any investment decisions.
And a reminder that you can get in touch with us at any time.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
We were just talking about commodities.
It's a pretty interesting year in 2023 to talk about the mix performance in the area. Soaring uranium prices benefiting from the idea that nuclear energy perhaps is getting his moment again. But then softening the man from China, that weighs on copper prices. Let's talk about this year and what might be in store.
Anthony Okolie joins us now talking about TD Securities look at the space.
>> TD Cowen came out and said there are several key drivers that could benefit based on prices this year and into 2025, including, we heard about the dovish pivot by the Fed in late 2023 away from hikes to potential cuts this year, there is also a forecast for a weaker US dollar this year, low metal inventories and notable supply disruptions. All of these are supportive of base metal prices according to TD Cowen, particularly copper, in their view.
With a soft landing, a mild recession expected in the US and China's outlook stabilizing after a disappointing growth in 2023, TD Cowen expect stronger prices in the second half of this year and into 2025.
Of course, China continues to be the most important driver behind base metal demand and prices and with Chinese policymakers intent on achieving 5% GDP growth this year, with fiscal stimulus support, TD Cowen sees China as a tailwind for base metal prices this year rather than a headwind. Now, within base metals, TD Cowen says copper and uranium as the bright spots. In their view, the sharply higher spot in uranium price and her market activity in 2023 and earlier this year reflects and improving future global demand as well as signals that elevated prices will be needed to incentivize new supply to the market. For copper, they talk about a mine closer in Chile, the world's largest producer of copper, as well as lower production guidance. That has combined to greatly tighten coppers supply and demand balances with a deficit of roughly 300,000 tons now expected. As the chart shows, TD Cowen has raised the long term copper price forecast to $4.25 US per pound in 2025. For uranium, they have raised their price outlook from $90 US per pound to $116 US and two $130 US per pound for 2025.
Finally, it TD Cowen noticed some key trends or key themes, rather, that they believe will play out this year.
One of them is that TD Cowen expects industry consolidation will remain a strong theme in 2024.
Management team recognizes that large-scale will be needed to assume risks associated with developing next-generation mining projects there. The second theme, the expected upward cost pressure again this year in the order of 3 to 5% year-over-year. Cost pressures have been impacted by labour costs which continue to rise especially in North America and Australia.
>> Interesting calls there. What about the risks?
>> I think some of the main risks include, for base companies, technical, political risks, risks related to uranium, copper, zinc, palladium, platinum and gold prices as well as input costs and fuel prices.
Other risks include governing physical and legislative regimes among others.
>> MoneyTalk's Anthony Okolie.
Now, for an update on the markets.
We are having a look at TD's Advanced Dashboard, platform designed for active traders available through TD Direct Investing.
This is the heat map function, giving you a view of the market movers. We will start on the TSX 60 by Price and volume.
There is not a lot going on to the upside except for a notable stand out, that would be Shopify down there near the bottom, up nearly 3% but a pretty mixed bag across the board for the rest of the space. South of the border, we are keeping our eye on the S&P 500 in terms of being awfully close to 5000. We are going to narrow down to S&P 100 because it gives a cleaner view on what could be happening south of the border. We are still in the thick of earnings season.
You have Ford up to the tune of 4%. The streetlights what they heard on that front.
Some green on the screen across some of the big tech names as well.
You can find more information on TD Advanced Dashboard by visiting TD.com/advanceddashboard.
We are back with Damian Fernandes from TD Asset Management, talking global stocks.
Someone wants to get your take on the energy sector.
>> We were just touching on this. The energy sector right now, we need oil prices that have to be, there has to be a supply response.
They took some arrows off last week. There are probably too many barrels from Russia making it into the market. You probably need some reduction in CAPEX and there's a lot of CAPEX that went postwar and you need demand, you need the second largest economy in the world, China, to start accelerating. I think those two things will be supportive for the price of oil and that's with these energy companies will benefit from. If I look within the energy space, something that is interesting is that the energy service guys, there has been a dearth of CAPEX over the past few years, since basically the shale boom in 2015, 2016.
If you start seeing higher energy prices, you have exhausted inventory level, you would have to start actually replenishing the inventories. I think within the energy space, obviously, the ENTs will participate most does proportionately in the price of oil, the integrated side, the sun pours and exons, they pay a really nice dividend and reduce share accounts, but the servicers, all of them have, if we start to see higher oil prices, we should start seeing an improvement in demand and increases in CAPEX and these energy service names should disproportionally benefit there.
>> Always great insights.
>> Always a pleasure.
>> We will do it again soon. Our thanks to Damian Fernandes, Managing Director and portfolio manager at TD Asset Management.
As always, make sure you do your own research before making any investment decisions.
stay tuned. We will be back for more with Brad Simpson, chief wealth strategist with TD Wealth.
He wants to take your questions and talk about market strategy.
And a reminder that you can get a head start with your questions for Brad. Just email MoneyTalkLive@TD.com. That's all the time we have for the show today. Thanks for watching. We will see you tomorrow.
[music]
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, we've got markets near all-time highs and we will discuss whether the quality of corporate earnings is backing up the run that we have seen in equities. Damian Fernandes joins us from TD Asset Management.
MoneyTalk's Anthony Okolie will look at a new TD Cowen report available on copper and uranium.
And in today's WebBroker education segment, Hiren Amin is going to take a look at how you can use candlestick charts to analyse potential investments here on the platform.
So here's how you can get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get to all that and our guest of the day, let's get you an update on the markets.
We will start here at home with the TSX Composite Index.
Modestly in negative territory. Your dad about 10 points, just five tics right now.
Among the most actively traded names at this hour include Shopify which, last time I checked, was to the upside. 113 bucks per share, up about 3 1/2%.
Also Finning International, a Caterpillar dealer. Unfavourable foreign exchange hitting them for the quarter and the stock down at 3610 to the tune of 9%.
South of the border, we got fed speakers doing the rounds, talking about the fact that there might not be as many rate cuts as we think this year.
Jerome Powell was beating the drums on Sunday on 60 minutes saying they were in no rush to cut rates. Your 37 points to the upside, three quarters of a percent, on the S&P 500. At 4991, he doesn't have far to go to crack 5000. Let's check out the NASDAQ. Still got earnings rolling in.
Up a solid 108 point gain, your up a little more than half a percent.
Want to check in on Snap so, not going along with the rest of the market to the upside. We are seeing a turnaround in digital advertising. We saw that play out in Meta Platforms. It is not playing out for Snap. 11 bucks and $0.37 per share, the stock is down a pretty significant 35%. That is just today's session alone.
And that is your market update.
We are in the sake of earnings season and US markets are trading in record territory. But as investors pour over the results, they may be asking whether these high valuations are justified.
Joining us now to discuss, Damian Fernandes, Managing Director and portfolio manager at TD Asset Management.
>> Always a pleasure.
>> Let's talk about markets in record territory. Earnings coming in to sift through. Do we think, from what we are seeing, from these corporations, that these market valuations are justified?
>> The market is at record highs, I loved your opening comments about the outlook for the S&P. Global developed markets, the SNP is not at new all-time highs but global developed markets are and there is a level of excitement. People are happy.
This bull market has been a long time coming. What I mean by this is if you look at what's happened, if you rewind to December 2022, almost 2 years ago, that was the high of the market for 250 days, there was this big correction in 2022, and it's the middle of Q3, 2022, markets are moving up, it took over 300 days to get back to where we were two years ago. We are looking at this and right now, the market has rallied in the last few months and that's with captivated people's attention. But this bull market has been coming for a while and we are breaking to new all-time highs but in that whole period, revenues have grown, we haven't had a recession, earnings have improved, inflation has fallen.
If you gave me those variables, if I didn't know anything else and he told me that inflation is no longer giving the Federal Reserve and federal banks agitated, they are at the end of their hiking campaign, we have not been in a recession, we know that earnings continue to expand, they bottomed in Q2 of last year, it's not a surprise that things are doing well.
>> Some names are doing well and some are not. Let's talk about the good and the bad. Meda as an example.
Meda's quarters seemed to impress the street.
>> Mehta was last Friday and it was up 20%. I calculated this. Meda added close to $2 billion in market, $200 billion.
That is a market Or the wealth creation that they, was larger than 435 companies in the S and P. That's just egregious.
It could be a sign of the times but when you look under the hood at the earnings, sales were up 25, earnings were up close to 40, for the first time ever, Meda announced that it's going to pay a dividend on a recurring basis. It's buying back 34% of the shares outstanding.
The underlying business is growing fine.
Margins have moved up.
I worked this out and even though the move of 20%, $200 billion of market cap creation, when you look at next year's numbers, the stock is still trading at 21 times.
The move is egregious but the fundamentals are not.
I'm not saying that Meda is the greatest thing.
>> You run the numbers.
>> This isn't some speculative tax stock.
We are talking about $3 trillion of market cap that is compounding at a very high rate, compared to Snap which disappointed.
>> The numbers are looking good but what do we need to be aware of?
>> The risks for Meta or Alphabet in these businesses is twofold.
Right now, economically, and the data is supports is moving into a soft landing or no landing. But the real risk for them is that if we do see a recession and a reduction in advertising spread, that's their bread and butter. Meta has aspirations for the Meta verse, that doesn't matter. What matters is, are people spending more on engagement for their platforms that they can put ads on?
That's the big risk.
You had their CEO in front of a panel last week, there is always a risk around these things, as these companies get bigger and bigger, there is always significant angst where they feel that companies are exerting too much influence.
Meta is in a bad position because both sides of the political parties hate it for different reasons. One for not enough content moderation and one for too much.
Zuckerberg is sitting there, how can he win?
>> Let's talk about what hasn't been working.
Energy, materials, healthcare, what's going on?
>> There are 11 sectors across the market.
Earnings are actually up 4%. Sales rep three, sales rep for, there is a margin expansion.
It's middling along at 4%, not that great.
But when you break it down by the sectors, it's really interesting because energy and materials are off more than 25%, healthcare is off 15.
We are not trying to have fun with numbers. But if we strip off those sectors, the rest of the market is growing in double digits.
Oil is struggling to break 75 bucks when it was 80 bucks last year. Obviously, energy companies are beholden to the price of oil. That has weighed on the earnings outlook there.
Materials companies, your biggest customer, China, is actually facing inflation. CPI is negative for the past few months there.
Some struggles there on an economic revival.
And then the other sector which is kind of unique is healthcare. When you look at the healthcare earnings, why is healthcare off 15%? That's a pretty big number for what should be a stable sector. It's really one company, it's Pfizer.
Pfizer in Q4 of 2022 generated a buck 10 in earnings. This year, they are generating a little over $0.10 and so the earnings are down hundred and 10%.
They had a big humongous gain from the vaccine and vaccine uptake. As that is out, people have slowly moved from COVID and vaccine uptake has been much lower.
Going forward, the rest of healthcare is doing fine. I actually think the earnings outlook is quite positive when you look at the sectors, we talked about tech but even consumer discretionary and industrial, they are all growing earnings high single digits and it's the sectors that are tied to materials or energy that are pulling down the earnings number. As you talk broadly about risks in the form of a recession that could hit advertising spending in some of these big tech names.
What about on the other side? You said the word no landing. What if there is no landing?
>> Last year, people were pretty occupied, the market climbed the wall. People were waiting for this recession to manifest. It just didn't happen.
Like SV be in March of last year, we didn't have a contraction in lending.
All of these data points were supportive.
What's actually happening, and I know you've been talking about this, the growth that's been coming out has been much better than expectations. We had a blowout job number last week in the US, over 300,000 in payrolls and the estimate was to 50.
Initial jobless claims are sitting at five decade lows. The labour force has grown twice its size. Consumer confidence was that.
The risk I think right now is the market has been very comfortable that inflation is falling and that almost motivates the Fed to stay on hold.
Maybe even cut if inflation is falling.
But the risk right now is if the underlying economy is actually growing much faster than trend and they have this really wonderful, real time estimate, the Atlanta Fed publishes it, real-time GDP point estimate right now, just a month into the quarter, has a forward angle on it.
>> That's not what we were expecting.
>> We were expecting one and 1/2 and it is tracking four.
If we and Q1 with a four and on the GDP, the Fed is not cutting rates. They might be flirting with this is getting too hot we might have to, I'm not advocating that but I think the market, no lending is a worry because of growth continues to grow above trend, that puts pressure on the Federal Reserve keeping rates where they are or whether they are restrictive or cutting rates.
That could be a surprise.
>> A surprise indeed in a great start to the conversation.
You're going to get your questions on global stocks for Damian Fernandes in just a moment's time.
And a reminder that you can get in touch with us any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
Looking at Ford, a little shy 4%. The automaker is announcing a special dividend after beating estimates for its most recent quarter. It is scaling back on you investments in electric vehicles. Seen some shifting demand for the industry at large.
Hybrid vehicles and family size SUVs in Ford's case seem to be getting more interest than their EVs. Alibaba falling short of its revenue expectations for the latest quarter. The Chinese tech giant is reporting slower growth in both its e-commerce business and cloud computing units.
Alibaba is increasing the size of a share buyback program by $25 billion.
They are sort of opposing forces. The stock is been bouncing around. Right now it's down, at 7361, your down 6% on Alibaba.
I also want to check in on shares of Snap.
They are under significant pressure today.
The social media company missing revenue estimates on saving ad sales. It's offering a weaker than expected forecast.
The wider ad industry had a slump in 2022, but other companies have been coming out of that slump like Meta Platforms. At 11 bucks and $0.43 per share, your down 34% in this session alone. Let's check in on the markets. We will start here at home on Bay Street with the TSX Composite Index.
Down a modest 12 points, six ticks.
South of the border, keeping an eye on the S&P 500, it is not that far off from 5000.
4991, a gain of three quarters of a percent today.
We will see if we can break past that, some people called the big round numbers as psychological barriers.
We are back now with Damian Fernandes, taking your questions about global stocks.
I'm here want to get your view of the Canadian railroads this year and longer term?
>> Near term is easy. See PNC and our big rail. CP had a beat if memory serves me it was supposed to have negative earnings per share growth and it came in positive. I think CN was negative but both companies when they reported talked about I think in CP's case because it's with the integration, they are talking about double-digit EPS growth. CN talked about 10% and longer term 10 to 15. I think that's more interesting.
CN reported and raised its dividend 7% in line with where thinks cash will be on a sustainable basis.
Both companies benefit from this. What we are seeing is the North American continent is receiving a reallocation of supply chains from East Asia into North America.
When you think about productive capacity being built in North America, think about what needs to allow that, the goods that need to be produced, the raw materials that need to be transported, all of that activity, it collapses into the oligopoly of the rail network.
Their CSX and UB in the US, CN and CP are the only ones. I think longer term, this is why CN raised its dividend, they feel really confident about the overall long-term growth profile because it's an oligopolistic industry. They have shown discipline and pricing power, they have kept control on cost, they just levered two more capacity being brought on in North America.
>> The risk for them is a broader risk for all companies? You had a session, you are moving goods, people aren't buying as many goods.
>> These are high capital intensity. As soon Ascari loads fall, they disproportionately feel the negative impact of that. They still have to have the trains running, they just have less carloads on them.
>> Let's talk about the agriculture sector. A viewer wants to know about the AG stocks. Both Nutrien and Mosaic are down significantly. You think it's all based on low forward commodity pricing or is there a link to interest rate movements?
>> I don't think it's so linked to interest rate movements. I think there's commodity supply and also commodity demand.
So far, with inflation, the Department of Agriculture actually publishes farm income in the US on an annual basis. Two years ago it was something like 200 billion. We are down to 122.
It's down significantly from where it was in 2021. Dropped in 2022. 2023 and continued to drop. This is because commodity prices, food prices, grain, crops, have fallen.
Farmers, if their main source of income is falling, the demand is also falling for potash, a key input into farmland.
You are seeing issues in demand. You could also say supply. Supplies going the wrong way.
There's too much of it coming on. Russia and Belarus, their amount of potash is actually making its way to the market.
When you look at the price of potash, it was 800 bucks in 22 and it's flirting with 200 now.
Potash Corp. doesn't set the price of potash. If demand is falling, the price takes it.
I think it's the underlying industry which is having both negative impact on supply and on demand which contributes to the lower price.
>> With those factors in play, sounds like if there's going to be a turnaround story for companies dealing in potash, it will be a longer-term story.
>> You need discipline.
Last week, the Saudis were talking about removing a million barrels of oil from the market. You need to supply demand balance.
Ideally you need demand to outstrip supply. For this to work, you need the structure of the industry to get to a more normal level.
>> Interesting stuff to watch for the AG space.
We are going to talk about artificial intelligence.
A viewer wants to know if it's still an investable trend.
>> From potash to AI. We should ask ChatGPT that look for potash.
Right now, we are in the AI builder. Every single company is starting to get a hold of chips as they build and test and learn from building their AI platforms.
CAPEX is accelerating.
Like most cycles, you will probably have overinvestment but we are not there yet because people are still struggling to get the initial chips.
There is still a significant ramp-up. So companies that sell you the tools for your AI capability build out, Nvidia chips, broad calm for routers and switches, all of those will benefit and continue to see, they reported great numbers earlier on.
I think there is still the actual hardware that supports the AI buildout but continues to see we will see until we get to this overcapacity issue.
What we are seeing is that the companies, don't think of it AI company, think of Adobe which is, which helps you with improving your pictures that you post on social media.
>> Photoshop programs.
>> Yeah.
They are going to use AI to improve picture formats.
Companies that already have customers are improving the value proposition for the customers by introducing AI.I use AI. We have financial software. One of the things I do is that after company reports, what we do is if I don't have the time to listen in on the management call, I will read the transcript.
The AI capabilities on our financial service software will summarize that transfer 20 seconds after the call is over and give me the main points. What's the outlook for earnings, capital allocation.
That just freed up 40 minutes of my time.
Not taking away my job at improving my job. Now I consume more transcripts summarized by AI.
The equipment that goes into AI continues to expand. The CAPEX around that. We talked about Meta, Meta and Microsoft and Alphabet, just talked about increasing CAPEX, all that is going towards AI so that's great but what I find more interesting are the financial companies, the credit card companies, the retailers, how they are using AI to improve the value proposition for customers and I think that's interesting.
>> As always, make sure you do your own research before making any investment decisions.
we will get back to questions for Damian Fernandes on global stocks and just moments time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get our educational segment of the day.
Let's talk candlestick charts. One method of technical analysis that investors may want to consider when they are examining a potential stock investment.
Here to give us a rundown, Hiren Amin, senior client education instructor with TD Direct Investing.
>> Candlesticks are the cornerstone of technical analysis. If you are a technician, you are a student of price action and your choice usually is going to be looking at analytics to determine that price action.
Debrief you first on what candlesticks are, they are a style of financial charts that are used to depict the price movements of either security, commonly used across analysing commodity is and also FX. Candlestick charts are thought to have originated in Japan. Timelines have been hazy but about 200 years ago.
Dating back to the 1700s during the feudal area in Japan, there was a rice merchant by the name, I will try not to butcher his name, he is regarded as the father candlestick charts and he discovered that while there was a link between the price and supply and demand of rice, it's commodity commonly and heavily traded across the part of the world, the markets were more influenced by the emotions of traders.
He claims in his book that the psychological aspect of the market is critical to trading success and traders emotions have a significant influence on price. So candlesticks is what he developed to show that emotion by visually representing those price movements. Let's show viewers how you get that set up. In WebBroker, go to research and under the stock section.
I believe I have because like you do. I'm going to bring up the broader market as we were discussing the S&P 500 at the top of the show.
Let's bring up SPY, the ETF that tracks the S&P 500 Index.
We will go to charts.
I've got the candlesticks loaded up. First thing to do is go to chart section over here and amongst the different ones, you want to choose the candlestick chart.
What candlestick chart shows us that's going to be different from let's say a line chart is it shows us five different price indications, sorry, four. It shows us the open, the high, the low and the close. As you can see, as we go into this chart, there are different styles. Let me enlighten you about these candlesticks.
The name comes from the way they visually look. There are two main components. The first thing we are going to look at is what sticks out to us, it's this rectangular box over here.
It's referred to as the real body of the candle. This gives us the price range between the open and close for the time.
We are looking at. I'm looking at a one day application. Each candle represents one day of price action.
Apart from the real body, we also have vertical lines on the top or bottom and those are what we refer to as shadows.
The upper wake and the lower wake.
I zoom into this one a bit more. You can see the tips of the wicks, either the upper wake or the lower wake may represent the high and low price that given day.
One of the things is you don't have to scratch your head and try to visualize on the axis were the prices. You can actually just land right on the candle and there's a legend right at the top over here.
It tells you exactly what the open, high, low and close is.
The colours signify whether it's a bullish or bearish candle.
For any candle that is hollow or whites, don't worry about the colour inside the candle itself, that's what tells us that the close is higher than the open. Vice versa, if the candle is coloured and or solid, it tells us that the close was lower than the open for that day.
Traders look at this to get a sense of the sentiment.
You can adjudicate or see where short-term price indications are headed.
I'm going to look back to a three year window on this.
Most of these candlestick patterns do occur at the bottom or top of trends. If you come to the bottom of a trend over here, I am in October 2022. You can see we were coming off of a major downtrend and we suddenly see this huge large bodied candle, it's hollow which tells us that it was very bullish because you can see the bottom represents the open and the top represents the clothes and they were able to take the prices hi that pretty much enveloped the previous three candles and this is one of the patterns that get colourful names. This is called a bullish engulfing pattern.
This would indicate to traders that there is a potential reversal of a trend and we did kind of see that play out where we saw the S&P rise after that point onwards.
Keep in mind that when you are looking at these patterns, in and of themselves, it's not a crystal ball to tell you what to do.
Please do layer it on with other studies yet further confirmations on the signals that they generate.
>> That's a great primer on candlesticks.
What if viewers want to learn even more about these patterns?
>> Absolutely.
There are a whole bunch of names and patterns that you can identify.
Let me show you a quick way to get those.
As go to those habits as technicals.
Come into the technical section.
Within the technical section, we have a graduation Over here which brings you to our education spot.
Let me open that. On this page, we will go to the short-term category.
You will find the patterns categories set according to whether they are bullish or bearish.
Each will give you a breakdown of what it is, how you can use it for trading purposes. The second last thing I will show us is the search bar. What you say you want to learn more about candlesticks in general.
I type in candlestick right here. It will bring up a whole bunch of videos that I learned about. If I want to learn about different chart patterns, single candlestick formation, I click on this and go to learn more about it and then use it in my trading practice. Those are two avenues I would suggest for people to get started with there.
>> Great stuff as always. Thanks for that.
>> My pleasure.
>> Hiren Amin, Senior client education instructor with TD Direct Investing.
And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
We are back with Damian Fernandes, taking your questions about global stocks. This one just came in.
What's your view on McDonald's after the latest poor earnings results? Is this reflective of fast food industries?
Do you foresee weaker valuations for these companies like Yum Brands and 2024? What can drive growth in this industry?
McDonald's foot traffic has been down in the states recently, Yum Brands is a pointer on its growth for KFC. It is something going on?
>> It's a few things happening. First of all, I think single-handedly my consumption of McDonald's fries is supporting the enterprise, it's not my fault. I think McDonald's is seeing weaker foot traffic in volatile places like the Middle East for reasons we can't fully understand.
Those things are likely temporary.
The fast food industry, whether it's McDonald's or Yum Brands or Burger King and Tim Hortons and stuff, those companies are under pressure last year as we had peak excitement around GLP's. Right, this is like Novo Nordisk and Eli Lilly with their weight loss drugs.
>> The weight loss drugs which work by making you not as hungry.
>> They had peaked excitement where the stocks were moving and all of these indulgences, whether it's Hershey's or Pepsi or McDonald's, what we call indulgences where people are worried about that trend demand would be lowered, I think people since then what's happened is there has been a bifurcation, the restaurant stocks, the QSR's that are doing well, McDonald's could move up from that initial thing where is the package food companies have continued to be in the doldrums and I think that probably makes sense because when you think about McDonald's, yes, foot traffic was down, but McDonald's doesn't sell you, McDonald's is a franchisee, sorry, it's a franchise. It sells its franchises around the world. It is literally is selling you Americana burgers and fries in a convenience fashion with high quality ingredients. As long as you have this movement away from traditional mom and Paul restaurants, I'm talking developing markets, moving toward standardized formats which is happening, you can go to the corner store or McDonald's to get a standardized meal, I feel like that provides a long delay of growth for McDonald's to partner with franchisees to make capital investment. You put the capital, you hire the people, they sell you the fries at a premium.
I think the longer-term story for McDonald's and for these QSR is including Restaurant Brands, quick service restaurants, is actually quite beneficial as they expanded their presence in developing markets.
But I do worry about, and I know that got away from the question, I think McDonald's, it's a dividend grower, it buys back a ton of shares, I wouldn't be in a rush to sell it or take significant action because more recent earnings are a one-off. Longer-term, what I worry about, this is tangential to the question, is what's happening in packaged goods.
Because of our appetite is suppressed, may be we want the indulgence of the fries when we go out, but when we come home we don't consume the Hershey's bar with a chocolate bar.
>> Interesting stuff.
Let's get to another question. This one about geopolitics. Considering the geo-political situation in the Persian Gulf, what are the short-term and potential long-term ramifications? How do we protect and/or profit from this?
I think some assets and commodities haven't moved as people would think if you are in a situation like this.
>> When you think about Canada and the price of oil, we are in the midst of two wars in large purchasing oil regions in the world, Russia and the Middle East, and use all the more recent economic data, it looks like we are, the worst is behind us and economic growth is accelerating. What I find really interesting is why is oil struggling to break 75 bucks? I think it's telling. It's tied to the discussion we had earlier about potash. There is just too much supply. In the near term, there's too much supply, too many barrels entering the market, the second largest company in the world, China, is slowing.
That has been reducing demand. Then there's probably some aspect of longer-term decarbonisation in electric vehicles and those efforts that are waiting on the price. We saw last week that Saudi Arabia said it was cutting In its biggest facilities. Why bring on more capacity when you're struggling to get a higher price recurring there? I think that's a risk.
Geopolitics in general, the market, this year, is going to be an interesting year.
I call it 40, 60, 80:40% of the global population hits the pole booths this year, that 60% of global GDP, that's 80% of market cap.
>> 40, 60, 80. I gotta remember that.
>> I would expect as we progress through the year and get closer to Europe, the European commission will have its elections, there will be bouts of volatility but we are in the business of longer-term investing. Normally the way I think about this is you have this initial, unless it fundamentally changes the cash profiles, most of these political events are flashes in the pan. You hear a lot of noise, he creates opportunity, but you should probably look at the long-term fundamentals.
>> We are going to get back to questions for Damian Fernandes on global stocks and just moments time.
As always, make sure you do your own research before making any investment decisions.
And a reminder that you can get in touch with us at any time.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
We were just talking about commodities.
It's a pretty interesting year in 2023 to talk about the mix performance in the area. Soaring uranium prices benefiting from the idea that nuclear energy perhaps is getting his moment again. But then softening the man from China, that weighs on copper prices. Let's talk about this year and what might be in store.
Anthony Okolie joins us now talking about TD Securities look at the space.
>> TD Cowen came out and said there are several key drivers that could benefit based on prices this year and into 2025, including, we heard about the dovish pivot by the Fed in late 2023 away from hikes to potential cuts this year, there is also a forecast for a weaker US dollar this year, low metal inventories and notable supply disruptions. All of these are supportive of base metal prices according to TD Cowen, particularly copper, in their view.
With a soft landing, a mild recession expected in the US and China's outlook stabilizing after a disappointing growth in 2023, TD Cowen expect stronger prices in the second half of this year and into 2025.
Of course, China continues to be the most important driver behind base metal demand and prices and with Chinese policymakers intent on achieving 5% GDP growth this year, with fiscal stimulus support, TD Cowen sees China as a tailwind for base metal prices this year rather than a headwind. Now, within base metals, TD Cowen says copper and uranium as the bright spots. In their view, the sharply higher spot in uranium price and her market activity in 2023 and earlier this year reflects and improving future global demand as well as signals that elevated prices will be needed to incentivize new supply to the market. For copper, they talk about a mine closer in Chile, the world's largest producer of copper, as well as lower production guidance. That has combined to greatly tighten coppers supply and demand balances with a deficit of roughly 300,000 tons now expected. As the chart shows, TD Cowen has raised the long term copper price forecast to $4.25 US per pound in 2025. For uranium, they have raised their price outlook from $90 US per pound to $116 US and two $130 US per pound for 2025.
Finally, it TD Cowen noticed some key trends or key themes, rather, that they believe will play out this year.
One of them is that TD Cowen expects industry consolidation will remain a strong theme in 2024.
Management team recognizes that large-scale will be needed to assume risks associated with developing next-generation mining projects there. The second theme, the expected upward cost pressure again this year in the order of 3 to 5% year-over-year. Cost pressures have been impacted by labour costs which continue to rise especially in North America and Australia.
>> Interesting calls there. What about the risks?
>> I think some of the main risks include, for base companies, technical, political risks, risks related to uranium, copper, zinc, palladium, platinum and gold prices as well as input costs and fuel prices.
Other risks include governing physical and legislative regimes among others.
>> MoneyTalk's Anthony Okolie.
Now, for an update on the markets.
We are having a look at TD's Advanced Dashboard, platform designed for active traders available through TD Direct Investing.
This is the heat map function, giving you a view of the market movers. We will start on the TSX 60 by Price and volume.
There is not a lot going on to the upside except for a notable stand out, that would be Shopify down there near the bottom, up nearly 3% but a pretty mixed bag across the board for the rest of the space. South of the border, we are keeping our eye on the S&P 500 in terms of being awfully close to 5000. We are going to narrow down to S&P 100 because it gives a cleaner view on what could be happening south of the border. We are still in the thick of earnings season.
You have Ford up to the tune of 4%. The streetlights what they heard on that front.
Some green on the screen across some of the big tech names as well.
You can find more information on TD Advanced Dashboard by visiting TD.com/advanceddashboard.
We are back with Damian Fernandes from TD Asset Management, talking global stocks.
Someone wants to get your take on the energy sector.
>> We were just touching on this. The energy sector right now, we need oil prices that have to be, there has to be a supply response.
They took some arrows off last week. There are probably too many barrels from Russia making it into the market. You probably need some reduction in CAPEX and there's a lot of CAPEX that went postwar and you need demand, you need the second largest economy in the world, China, to start accelerating. I think those two things will be supportive for the price of oil and that's with these energy companies will benefit from. If I look within the energy space, something that is interesting is that the energy service guys, there has been a dearth of CAPEX over the past few years, since basically the shale boom in 2015, 2016.
If you start seeing higher energy prices, you have exhausted inventory level, you would have to start actually replenishing the inventories. I think within the energy space, obviously, the ENTs will participate most does proportionately in the price of oil, the integrated side, the sun pours and exons, they pay a really nice dividend and reduce share accounts, but the servicers, all of them have, if we start to see higher oil prices, we should start seeing an improvement in demand and increases in CAPEX and these energy service names should disproportionally benefit there.
>> Always great insights.
>> Always a pleasure.
>> We will do it again soon. Our thanks to Damian Fernandes, Managing Director and portfolio manager at TD Asset Management.
As always, make sure you do your own research before making any investment decisions.
stay tuned. We will be back for more with Brad Simpson, chief wealth strategist with TD Wealth.
He wants to take your questions and talk about market strategy.
And a reminder that you can get a head start with your questions for Brad. Just email MoneyTalkLive@TD.com. That's all the time we have for the show today. Thanks for watching. We will see you tomorrow.
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