Show Transcript
Print Transcript
[theme 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, TD asset management's at Damian Fernandes is going to give us some perspective on the market tell if we have been seeing over the past couple of days. MoneyTalk's Anthony Okolie is going to break down the latest US jobs report and what it's saying about the health of the world's largest economy.
We are going to hear from TD Cowen's Chris Krueger on the potential presidential scenarios he is watching and what it could mean for investors. Plus in today's WebBroker education segment, Jason Hnatyk is going to show us how to use conditional orders 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 our Guest of the day, let's get you an update on the markets. We are going to start with the TSX Composite Index, right now, pull back of nearly 600 points, more than 2.5%. The price of crude is down about 3.5%.
Big gains earlier this week but that trait has been coming off on economic worries.
Among notable movers, the tech so if we are seeing south of the border is affecting is here on Bay Street as well.
Shopify's down 6% to and Cenovus, could've chosen any big energy name show you what's happening in that space, and $24.87, there is a pullback in the oil and gas companies to the tune of about 5%. South of the border, the S&P 500 after yesterday's selloff, we are still to the downside.
Almost a full 2% or 104 points on the S&P 500.
The tech heavy NASDAQ fell into correction territory, 10% or more, of recent highs in a recent session. Right now it's a bit about the line that we need to see for a technical definition of a correction but some interesting moves. I also want to show you some moves happening now including Nvidia. This is coming off of lows of the session. Still in negative territory but a bit of a bounce back there so perhaps some buyers moving in when Nvidia pulled back earlier in the session.
Amazon's earnings not pleasing the street.
It is to the downside as well at this hour.
Amazon down about 9%, $168 and change.
Apple is a bit of green on the screen.
Want to see if it's still holding up.
Indeed, it is up a little more than 2%.
And that is your market update.
If we are looking for reasons for economic concern, the US jobs report is front and centre today. MoneyTalk's Anthony Okolie joins us now with the details. What did we get out of that report?
>> The labour report suggests that higher rates have cooled hiring more than expected.
Both May and June numbers were revised a bit lower, shaving off a combined 29,000 from the job count.
When you take a look at the and employment rate, it did take up from expectations, it is up to 4.3%, the highest level in nearly 3 years. It indicates that more people are looking for jobs versus people losing their jobs. We saw pick up in the participation rate. Absent that participation rate, that was up to 62.7%, the unemployment rate stays at 4.1%. More people coming into the labour market looking for jobs.
When we look at the wage gains, fairly mild, only up .2% month over month, slowly below expectations. We look at the annual wage gains, 3.6% year-over-year.
That is below expectations. Slowest pace of wage growth in three years, indicating that those higher interest rates by the Federal Reserve are working to tamp down wage growth. Let's take a look at the jobs by sector.
As you can see on the chart, healthcare led to gains.
We saw gains in construction, leisure, hospitality and government. Construction was actually down month over month, as you can see. The biggest laggard was the information in this sector, it was down about 27,000 jobs.
Markets are not pleased with this jobs report and we are seeing that in the reaction in the markets right now.
>> Nice break down there. Thanks for that.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
We have seen from the market reaction that the jobs report is weighing on sentiment, there are concerns about the state of the economy sets of the border.
Joining us now to discuss what investors should be keeping in mind during this heightened volatility is Damian Fernandes, managing director and portfolio manager at TD asset management.
Inks for joining us.
Two days of drawdowns. What you make of this market action?
>> Thanks for having me.
As a favour, maybe it when we are in a bull market you also invite me on.
>> I think you've been here in bull markets!
>> I know. We are in a bull market. Let me put some context to that.
We are having a very conventional drawdown and markets. What I mean by that is your today, even including today, the S&P is up 14%. The NASDAQ is off 3% today but it's just back where it was in June, June 8, 60 days ago.
Every year, the markets have these 10% drawdowns at different frequencies.
People have to moderate their expectations and that coincides with what Anthony said, he highlighted some weakness we are seeing in labour.
Now, big picture, we are still on track for, the market is still up double digits.
The TSX is still of 7.5% including today's drawdown and the risk factors at the start of the year, and I could talk about the really hot labour market, wage gains, inflation, a Federal Reserve and central banks that were still applying the brakes in terms of their monetary posture, all of those big macro variables are in reverse.
There is evidence of a soft landing. The Bank of Canada is cutting rates. The Federal Reserve looks to cut 50 Basis Points in September.
Inflation is falling, wage gains, as seen in the implement report today, average hourly earnings, they have a three handle on them. They are close to five handle last year.
I look at it right now and I think we are having a very healthy correction and I don't want to sound blasé when I say this, what I mean by healthy correction is take a picture. If you are underweight equities, these are by opportunities.
We are having a conventional pullback.
Fixed income is providing a ballast. Last year in 2022, equities and fixed income fell. This year, fixed income is doing what it is supposed to do, providing insurance in a drawdown.
I think it's having a conventional pullback exacerbated by some are low liquidity trading.
>> A lot of fascinating things you said there. I want to hone in on one thing you said because I heard rumblings of this the other day as well. I think you said it said September 50 basis points. As the market started to think that perhaps by the time we had that September meeting, it's going to justify Jerome Powell not moving by 25 but by 50 in the first cut?
>> Well, before today's drawdown, there was some probability of 50. Right now after today given the drawdown, we are looking at 50. The market is basically putting the Fed's feet to the fire and saying, this is, what we worry about, and I want to talk about this to you, what you actually have to worry about in the market right now is nonlinear risks where you have a significant drawdown in financial assets. That causes a pause in activity from CEOs, from corporate sand that starts at vicious circle. So the way the Fed insures against that is it provides easing. What does easing do? You reduce financial tightness, you create some confidence in the marketplace. Right now, it's just a sentiment driven again.
The economic situation, we saw this in earnings, we haven't talked about that yet, but earnings we are in the midst of Q2 earnings. Yes, there is been significant price moves in some names but the actual year on year earnings growth is positive. The S&P X Mag 7 for the first time since 2022 was actually having positive earnings growth. I think there are a lot of things happening under the surface that are not being fully appreciated and I think the Federal Reserve is now on an easing path and that too is supportive for risk assets and for investors.
>> Let's talk about putting that in context for investors in terms of a strategy. I believe your mantra, I don't know if you say this every morning when you wake up, but I've been told your mentor is a keep calm and compound on.
Explain that to us.
>> The day-to-day the volatility in the market should be viewed by investors as opportunities. What do I mean by that?
I fully believe that if the evidence as we are going, we are convinced we are going into a recession, you should take corrective action. We are not there yet so the idea of keep calm and compound on is when the market is throwing out opportunities like today where it's off two or 3%, significant names are all flat, if you have done your fundamental research, if you feel comfortable with the free cash flows that these companies are generating, if you believe we are not going to go into a recession but have a soft landing with Fed cuts, the mantra means you have a chance to buy and get into the market now and potentially add a good entry level.
I think everyone should do their own fundamental research on individual names but we try not to panic. Our desk tries not to panic.
Has the fundamental thesis change? Are we moving to recession?
The big picture things, I just don't see it.
>> Let's talk about that. The soft landing.
This scenario has been baked into the markets, that we will be able to get inflation under control, it's moving the right way, as a central banker, you getting a soft landing. We got economic data, jobs today, manufacturing yesterday, there were some of the street that started to question that soft landing.
Do you still see a path to it?
>> I think the base case is soft landing.
The market is panicking because there is no probability that the soft landing might be somewhat worse but that should not be viewed as the base case.
These things almost have, the markets panicking almost incentivizes the Fed to rethink whether it has to ease faster and more quickly. So these things almost are related but the base case should be a soft landing. Let me put some numbers on the soft landing. Anthony did a great job as mentioned on providing context on the jobs numbers but we created 114,000 jobs.
Pre-pandemic, that was a good number. We have hourly earnings right now, 3.7% year on year. That's not inflationary, especially yesterday nonfarm productivity was out and that was very supportive.
The fly in the ointment that we will need more corroboration on his yesterday you had the ISM manufacturing index and that was actually pretty weak, but I'm not sure if something has changed because when you compare jobs to the ISM, jobs data is hard data. You count the number of people who are unemployed, the employment rate. The ISM is sentiment. You ask purchasing managers how they are thinking about their order books and I don't know how to explain this but since the pandemic, there has been a general negativity in the sentiment data that has not been corroborated by the hard data and I think there's something here, I will look at the ISM next month to see if there is some degree bounce back but we are having a very conventional-- at the start of the year, people wanted jobs to come off the red-hot PC were growing at and now we are here and people are like, oh, my God! We are panicking! It's going to fall off a cliff! The economy does not work that way.
We are in the midst of earnings releases.
The only sour point is that the consumer companies, particularly the low-end consumer, looks to be challenged but whether it's industrials or even to a certain degree tech, they have all pointed to, they have all had upward revisions, they have all raised guidance, so they are not raising guidance if they are seeing the economy deteriorating in real time.
>> Final thought.
I want to ask you, as you mentioned, August is a month of low liquidity. We have already had some volatility and excitement to start the month. What should investors be thinking?
>> We are in Toronto. It's really nice outside. Maybe stop staring at the screens and pick up a book or listen to the nearest podcast.
August and September, historically, are very volatile months and that just a combination of low liquidity through the summer coupled with events risk like we had today with the jobs number, it's magnified. That's really what's happening here.
Yes, we can point to geopolitical things that are happening with those are always present. What would normally happen is the seasonality improves as we move through the year. October, November, December are actually strong months. Getting back to what we are talking about, overall allocation and positioning.
I actually do think right now that if you were, if you are underweight equities and your overall allocation is where they keep calm and compound on of where you want to get to, you are getting a chance to start dipping your toe. If you are underweight fixed income and you were overweight equities, you are seeing evidence that fixed income is providing you some comfort right now.
The incentive to panic is right there and right now today people are like, oh my God, we are on the cusp of recession, but to repeat, there were 114,000 jobs created.
Affirming the jobs number today, there is a metric called the diffusion index, that's the number of industries that are hiring, expanding employment, less the number of industries that are reducing, firing, reducing implement. That's a 53%.
There is still more industries expanding employment than our cutting workers. I just think that we are in a seasonally illiquid..
Not everyone is there and people are, we have had a huge run in markets so it's very, very consistent that we will see a pullback and that could be a few percent lower but depending on your positioning and if you have done the work, you might find opportunities that are interesting here companies can grow cash flow. That's what were looking for.
>> Always great to get your insights, particularly on days like these. Thanks for joining us. Always a pleasure. Thank you.
>> Damian Fernandes, managing director and portfolio manager with TD asset management.
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.
Shares of Amazon are in the spotlight today. The e-commerce giant missed sales expect stations for the most recent quarter and is providing a disappointing forecast for the current quarter. Will Amazon's retail businesses facing competition from companies such as Teemu and Sheehan, the cloud-based business, Amazon Web Services, beat estimates.
Currently, Amazon is down a little bit more than 9%. I want to check in on Intel.
They are under significant pressure today.
The chipmaker handing in a sizable earnings miss and announced plans to lay off 15% of its workers as part of a $10 billion cost cutting plan.
Intel is also telling investors it will not be paying a dividend for its fiscal fourth quarter. The news is not being received well. Intel is down about 27%.
One headline I saw heading in their, we haven't seen a drawdown in Intel like this since the early 1970s.
Closer to home, Magna's earnings came in slightly below expectations for its most recent quarter. The Canadian auto parts manufacturer is also lowering guidance out to 2026. TD Cowen called the release slightly negative but it did note the forecast for margin improvement for the second half of this year.
It gives investors like to look at. $56.57 on Magna, you are down about 5% on the stock. Quick check in on those benchmark indices. We will start on Bay Street with the TSX Composite Index. A sizable pullback in the price of crude oil today.
An overall market drawdown has is down 582 points, about 2.5%.
South of the border, the S&P 500. As investors I just some of the economic news of the past couple of days, a little bit concerned, down about 2%. There is pressure on the NASDAQ as well.
16,819 or a 10% pullback is a bit below that. We are off the lows of the session.
We dipped into correction territory with the NASDAQ earlier in the session but a bit off those lows. Still down 374 points, more than 2%.
A lot has happened. If you dial all the way back to Wednesday, two days ago, we had the Fed, it was supposed to be the big story of the week. They delivered the hint that investors were expecting. If inflation remains on trend, a September cut is on the table. I spoke with Hafiz Noordin, VP and Dir. of active fixed income portfolio management at TD Asset Management.
>> There is no expectation to make changes in the policy rate yesterday but looking for that change in the language in the statement and the press conference. The reality was that a rate cut in September was already 100% priced in by the market going and so the Fed did not have to do a lot, but essentially did not push back on that market pricing and when that happens, and is giving a green light to the market to say a September cut make sense. Powell could not say that outright but the shift in the language around the statement definitely got a lot more balanced around the risks to inflation versus the risks to employment and so from that perspective, September looks quite likely for the first rate cut.
>> As I was saying, if we were talking about risks to employment, if the Fed is changing its linkage in the statement, we out jobless claims today, manufacturing information that told us about the labour market. This was not positive news in the market is not taking it positively.
>> No, yeah. It's very much a true risk off move in that bond yields have come down to reflect the fact that jobless claims were higher-than-expected. That's a very important data point because it's weekly, it's high-frequency. You don't have to wait for those at one month nonfarm payroll numbers.
We will get that tomorrow.
Ahead of that, we have seen a number of different labour market data points starting to weaken. Even in survey data like the quick rate is now below pre-pandemic levels.
All in all, what that means is now maybe bad news is actually bad news for equity markets as well so we are seeing that today.
Going back to the Fed, I think they saw this coming. I think it would really take a dramatic shift in the data away from this weakening labour market and weakening inflation cannot get that rate cut and so it looks like the market is really looking to get that going.
>> Once we get past this week on the jobs data and the Fed behind us, August is considered by some accounts to be a bit of a sleepy month, especially for data, before that September meeting. What are the chances that by the time they had September, they see substantial we can, perhaps more than expected?
>> I think that could happen. What's really interesting when we look at market pricing for September, before this week's meeting, 25 basis point cut was already 100% priced and, if we get more weekday like what we are seeing today, we potentially could be seeing a pricing and of a meaningful probability of a 50 be put rate cut. Chair Powell was asked about this yesterday because there was a small percentage of that, five, 10%, even today it still about 10% chance of a 50 beat rate cut. He was asked about it and he really pushed back saying, no, we have not discussed it. But the market is the market. It is going to price in what he thinks makes sense. If we see a really weak jobs data tomorrow, there could be many investors thinking, maybe the Fed should have cut this week. So we will see.
The data will dominate. The Fed does always say that they are data dependent and we will let that play out and by the end of August, we will have the Jackson Hole meetings and that's going to be an opportunity for Powell to come back and provide more refined guidance on September.
>> The September, market is pricing and fully. Whatever we get in September and if that's the beginning of the rate cutting cycle, how do you think it plays on after that?
>> As it stands now with the evolution of the last couple of weeks, November and December, the other two meetings for this year for the Fed, also are fully priced and for rate cuts. Right now, the market is expecting three rate cuts at each of the three total meetings this year.
Getting into 2025 and 26, another five rate cuts are priced in so, in total, about eight rate cuts priced in over the next couple of years so that would take their policy rate from 5.52 around 3.5.
It really goes from that restrictive level to what is, right now, the markets estimate of neutral going forward.
Meaningful cuts priced in.
But I think what could change that is are we still in a soft landing redeemer could actually get a little worse than what's expected? I think that's now going to be the debate going forward.
>> That's the United States, the Federal Reserve, arguably the most influential central bank on the planet but there are other central banks making news today, including the bank of England. What's happening?
>> The bank of England cut as well, their first cut of the cycle. What was interesting was not so much the rate cut itself but the fact that it was a 54 split in terms of the vote. I think that was interesting in that inflation expectations have been a little bit more sticky in the UK compared to some other developed markets so I think it was expected that it wouldn't be a clear-cut case and that got confirmed by their voting.
Going forward, I think it's still the same broad level trend of softening labour market, softening inflation data so Europe, UK, Canada, US, we are all going in that direction with timing differences and that has been affirmed from what we are seeing from those central banks.
>> That's the action we are seeing. What does it mean for the fixed income, bond market? Investors have been waiting on the fixed income side for quite some time to see what we are seeing now.
>> It has been a bit of a patient trade, so to speak, in terms of being, expecting a decline in bond yields, but it's definitely playing out and it was already starting with the data itself pointing in that direction, where we have seen higher short and yields, to your yields, compared to 10 year yields. You have seen an inversion of the yield curve. We are now seeing that steepening trend come into play which tends to happen as part of the economic cycle when we can more comfortably and confidently expect that central banks will be cutting. What's interesting, you mentioned of the central banks, is that there is one exception which is Japan which this week actually hiked for the second time this cycle. We want to March, they had only just exited negative interest rate policy and this week they did their second rate hike so we are seeing in some focus markets like that where yields could still go up and it doesn't look like it's going to do real what's going on in the US and Canada. It's causing a contagion of higher bond yields in the US or Canada.
I think we can continue to expect domestic economic data is driving the bus and bonds are definitely helping from that perspective.
>> That was Hafiz Noordin, VP and Dir. of active fixed income or flu management at TD Asset Management. We had the conversation on yesterday's show. We have since had that jobs data, obviously it was a disappointment and the market is reacting pretty much in line with what he was saying.
Now, let's get our educational segment of the day.
Conditional orders are one trade strategy you may consider using and joining us now to discuss how they work and how we can use them on the platform is Jason Natyk, Senior client education instructor with TD Direct Investing. Always great to see you.
Walk us through it.
>> Great to be here, as always.
Conditional orders are very useful and I think it's an important tool in all investors toolkit.
A couple of really key usages that really stand out to me. One allows you to automate the process. We don't always need to be at our computer or on our phones. We can set of actions to take place if certain things transpire in the market and then second of all, it allows us to remove a motion from our trading. It can be an opportunity for us to follow in more rules-based approach so we can capture gains, limit losses through risk management by having conditional orders in place. Let's jump to the platform and take a look at conditional orders. You can see up on the screen there are four different conditional orders that we can use on the platform. We are focusing on the one cancels other order, second from the left here on the screen. More commonly known as OCO. The little picture as well is the description that is because they are really spell out this particular order.
It's got many different uses. This is an order where you are essentially setting up to orders. With the first order executes, it will cancel the second order that is there. It's as simple as that. I've got a chart behind our order entry screen here to lay out the most common use case for this type of order. This is a chart of SPY. The blue line I got on the chart, we can use that to signify an entry point.
Here's where the OCO comes in. We've got to orders. We can use one to capture extra profit if it goes up like we are expecting it to you in our example or secondly we can place a stop order below the market to get us out and limit our losses. Let's demonstrate that there are a couple of lines that we can draw on our chart.
Let's open our profit-taking order. We got into the position at 540. We are looking to get out with $10 worth of gain and draw a second line, that would be our limit order. We are setting a price point, the least I am willing to sell for if the position goes up. That's level I of our OCO. The second order comes in next. This is going to be the stop order portion for this use case. This would be as the order goes down or the stock goes down, we can go ahead and limit our losses so we are not going to be holding a falling knife.
We think the asset is going to go down. We want to limit our losses to a particular percentage based on that rules-based approach were talking about earlier.
The first order would be limit and the second would be a stop.
Really easy to understand and executed something that can be useful in everybody's trading experience.
>> We are having slight technical glitches with you. We will have you back when we get that sorted out on a later show because then you're going to show us how to enter the OCO order in my broker. Thank you for that rundown of the rationale.
>> My pleasure, Greg.
>> Our thanks to Jason Natyk, Senior client education instructor with TD Direct Investing.
I bet if I ask him that question and it would've been just fine. You never know with technical glitches. For more educational resources, you can check out the educational Centre on WebBroker or you can use this QR code to navigate to more informative videos.
Now, let's get you an update on the markets.
We are having a look at TD's Advanced Dashboard, a platform designed for active traders available through TD Direct Investing.
Taking a look at the heat map function here, gives us a nice view of the market movers. We are moving today. The TSX 60, let's hone in on this. We know that on the top line TSX, we are having a sizable pullback today, about 2.2%. We have the price of American benchmark crude under $74 per barrel.
Remember the big spike earlier this week?
That is coming on wound, pulling some of the big energy names. Suncor is down more than 5%. Cenovus right beside it down 5% as well.
Not just about oil and gas, there is Cameco, the uranium play. It had a tough couple of days, down 6.5% today. Some rate sensitives are modestly positive. We saw big pullback and yields today in the bond market. That can be favourable for the rate sensitives, whether it's a BCE or tell us, it's modest green on the screen, or the utility plays like Fordist or Hydro One.
You have those up a little more than 1%.
South of the border, we are a little off the lows of the session but we had some economic data yesterday including jobless claims and manufacturing data that set off that selloff we saw. They were built on today by that labour report in the state's, that was a disappointment. Intel is his own story. It's about the quarter that it had and their sizable pullback.
They are taking a big hit, down 27%.
Apple is up almost 3%, AMD up 1.5%.
US personal digital election is under 100 days away in the next few weeks and months will be critical for the campaigns of both Kamala Harris and Donald Trump.
Earlier, my colleague Kim Parlee spoke with Chris Krueger, managing director of the TD Cowen Washington Group, about the sudden momentum behind the Harris campaign and whether it can last into November.
>> It's pretty much unprecedented. The big narrative going just 10 days ago was the massive enthusiasm gap between the two campaigns, the Trump campaign and the biting campaign, particularly post-assassination attempt of former Pres.
Trump. And now, what you have seen with Harris being the presumptive nominee is that that enthusiasm chasm has basically been eliminated. Now, for the first time, you have Democratic base voters enthusiastic about voting. You have seen record and fundraising numbers, these records zoom calls where you are getting record participation, volunteer sign-ups.
A lot of those states that at one point in sort of the weeks after that historic June debate, you had Democrats pretty much across the board in panic states like Maine and New Mexico look like they might be in play, the hose candidates down ballot, the Senate candidates down ballot, really concerned and now, for the first time in the cycle, you might have greater enthusiasm on the Democratic side than on the Republican side, at least coming into the Democratic convention, we are seeing sort of this hair is honeymoon polling buffet. We will see how long that lasts but right now, without question, the race has been transformed.
>> I think it's, again, I want to credit your no, I think you said before, 25% of voters had an unfavourable view of both Biden and Trump and you called it an unpopularity contest I think in a podcast.
Is that newfound popularity or momentum you're talking about a tip towards Kamala Harris or do we have a neck and neck race?
>> It's pretty neck and neck.
That poll, 25% of Americans having an unfavourable view of both Biden and Trump, these are the so-called double haters, that's the highest metric in modern American history and it's not particularly close.
The only time it was even approaching 25% was in 2016 when that was Hillary Clinton versus Donald Trump.
Those numbers were also pre-assassination attempt. I think those numbers are now probably single digits but it's really a story thus far of previously a lot of sort of soft Democrats, even soft Nikki Haley voters from the primaries were voting for Biden because he wasn't Donald Trump, right? You are voting basically because you don't like the other candidate. But now it's more of a positive vote for Harris. Again, we will see if this is a sprint versus a marathon, we will see if that enthusiasm can continue, but all signs point to it continuing on the eve of the Democratic convention a couple of weeks from now.
>> The news cycle in this time is insane.
In terms of what happens, how quickly it happens, what can happen. What are you gonna be watching when you think out over the next few weeks and months?
I'm sure there will be lots of unexpected surprises but where will you be critical?
>> One of the things we try to do at the Washington research group with TD Cowen is what are the scheduled catalysts? To your point, so many things happen that are not scheduled but we see at least four big catalysts in the next call at 7 to 8 weeks. You have the Harris VP pick. That's probably number one. Number two will be the Democratic convention that begins in Chicago on August 19. Sometime in September, probably the first half of September, we might have a presidential debate between Harris and Trump. Right now, that's probably either September 10, the ABC News day, or perhaps September 17-18, that's the Fox News day. And then a few days after that, September 18, we, in theory, have former Pres. Trump's sentencing in the New York courthouse almost 34 felony accounts. That's a little bit unclear considering the Supreme Court's decision on the immunity case, it's already been delayed because of that, but those are kind of the big four that we are watching that are scheduled and, yes, the election day is not until November 5, but early voting begins in some places in mid-September. As much as 80% of the vote might be cast by November 5. When you think about October surprises, in reality, it might be more of a September surprise this time around because so many states vote early and vote by mail now.
>> We heard the president Biden was looking to make some changes, a constitutional amendment with regards to presidential immunity. How does that play into this? Is this another X factor we have to watch?
>> I think it's a little bit underscored with the Harris campaigns freedom messaging. That's really underlying both abortion-rights as well as democracy etc.
Long story short, a constitutional amendment is unbelievably difficult to get done. You need two thirds of the vote in both the House and Senate as well as three fourths of all state legislatures so it's a long question but I'll give you the short answer, it's almost impossible to get done.
>> I want to shift gears a bit as we think about the longer term implications as we think about who is elected, the makeup of Congress and those type of things.
Maybe let's start with let's say that former Pres. Trump wins the presidential election and maybe you could take us through what we should think about in terms of if we get a Republican Congress or if we get a split Congress.
>> Yeah, I think that's the best way to frame the discussion. It's not just who wins the White House but sort of the undercard here is the House and the Senate. So right now, the house is 5149 Democratic control, the 435 member house, depending on the date, is a two or three seat Republican majority.
This is super important next year because you have the debt ceiling returning next summer and then you have a 4 1/2 trillion dollar tax and fiscal cliff next year with the expiration of all those 2017 individual tax cuts as well as what are called the Obama care subsidies. So right now, Pres. Trump has said he would want to extend all of those tax rates where they are if not cut further. The presumptive nominee Kamala Harris, we presume, will continue Biden's campaign pledge of extending current rates for those making under $500,000. With a split Congress, Trump can't do anything or Harris couldn't do anything unilaterally on tax policy so a split Congress with the White House could mean a pretty messy year on tax and fiscal policy, probably without really knowing what's going to happen until late December of next year.
>> I know that sometimes we hear from market strategists, they get more comfortable with the split Congress because then less wild swings can happen in any one direction but if we pull up your no, you mentioned about the 2017 tax cuts, but even on tariffs and immigration, 10% tariff on all imports, Canada's ears perked up and we want to understand what that means, 60% tariffs on China and then I think there's an interesting thing, likely lower after negotiation, and then the deportation of up to 7 million undocumented immigrants. These are big shifts. When you are thinking about this and working with your team, how you price the sin, the probabilities of these things happen?
>> Look, we think particularly in a divided government situation, if we are in a world in which Trump has one, our expectation is he would probably lean in to the policies where he has near unilateral power in his authority as president of the United States and to areas unlike tax policy our trade and immigration policies where the office of the president of the United States has pretty tremendous powers. Trump has been pretty clear on the trade front on two things. The first would be a 10% across-the-board tariffs on all imported goods. Announced on day one, he can do that without Congress. Our expectation is that Canada would get a carveout in that, mainly because of USMCA, one of the signature trade achievements of Trump's first term. It USMCA review process is also underway with a deadline of July 1, 2026. I want to be clear though, there is no certainty that Canada and Mexico would get carveouts on that 10% tariffs. And then the second one on the trade front would be the repeal of permanent normal trade relations with China. That does require Congress, although the votes, candidly, are probably there. He could also institute the tariff changes unilaterally and that would take the blended rate on Chinese, the blended tariff rate on Chinese imports from about 20% to 60%, and then you add in that 10, so you're talking an increase of 20% tariffs to 70% tariffs.
>> I want to ask it, I apologize for the lack of time, next time I'm getting at here for an hour so we can talk longer.
Would the expectation with a Democrat White House and a Democrat Congress, which I don't think is probably very likely, would it be more of the same? There are no massive changes in policy direction?
>> I think that's right.
Just because of the geography and the arithmetic in the Senate races, it's pretty hard to see how the Democrats could hold but it's possible. But it's still going to be by the narrowest of margins so you're probably talking something middle-of-the-road on taxes which candidly might cool down inflation, might calm down the bond market a tiny bit and also if you have a Republican Senate with a Democratic president, the Senate confirms the cabinet and the regulators so you kind of have a bit of a hedge there on policy.
You don't have to worry about the inflationary aspects of tariffs and certainly not the inflationary potential for a labour supply shock with the deportation efforts.
>> I've only got about 45 seconds. He mentioned Canada in terms of a carveout, one would hope, with USMCA. Anything else that you think from a Canadian perspective that people should be watching?
>> The USMCA review process will certainly be a big topic regardless of election outcome, whether it is Biden, sorry, whether it's Harris, whether it's Trump.
All things being equal, Canada should be in a pretty good spot regardless, but we will have to stay tuned.
>> That was Chris Krueger, managing director of the TD Cowen Washington Group search group.
We will leave you with a final look at the markets. It's been a very interesting week. It was only two days ago that we had the Fed coming out and dropping a pretty big hint that if inflation continues on the path that it's on, they would start cutting rates in September. Market rally off of that and then some economic data both yesterday and today, yesterday was manufacturing, factory activity, jobless claims today, the US big one, the labour report.
It sparked a bit of a selloff. The TSX Composite Index right now down 530 points, little more than 2%. The price of crude is pulling back almost economic concerns after getting a big boost earlier this week. The S&P 500 also pulling back for a second session, we are down 98 points right now, 1.8%.
And the NASDAQ, we will leave you with a look at that. It drifted into correction territory earlier in the session. It's just above that line right now in terms of a pullback from recent highs. It's been off the lows of the session at 16,821, but still a pullback of more than 2%.
As always, make sure you do your own research before making any investment decisions. on a programming no, we are going to be on summer hiatus next week but will be back on Monday, August 12. Colin Lynch, managing Dir. and head of alternative investments will be our guest from TD asset management and he will talk about global real estate. You can get a head start with the questions. We will take a look at them all week. There will be people here, they just won't be in front of the camera. Email moneytalklive@td.com. That's all the time we have the show today. On behalf of me and Anthony and Kim Parlee in front of the camera and everyone behind the scenes, thanks for watching and we will see you in a weekend a bit.
[theme music]
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, TD asset management's at Damian Fernandes is going to give us some perspective on the market tell if we have been seeing over the past couple of days. MoneyTalk's Anthony Okolie is going to break down the latest US jobs report and what it's saying about the health of the world's largest economy.
We are going to hear from TD Cowen's Chris Krueger on the potential presidential scenarios he is watching and what it could mean for investors. Plus in today's WebBroker education segment, Jason Hnatyk is going to show us how to use conditional orders 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 our Guest of the day, let's get you an update on the markets. We are going to start with the TSX Composite Index, right now, pull back of nearly 600 points, more than 2.5%. The price of crude is down about 3.5%.
Big gains earlier this week but that trait has been coming off on economic worries.
Among notable movers, the tech so if we are seeing south of the border is affecting is here on Bay Street as well.
Shopify's down 6% to and Cenovus, could've chosen any big energy name show you what's happening in that space, and $24.87, there is a pullback in the oil and gas companies to the tune of about 5%. South of the border, the S&P 500 after yesterday's selloff, we are still to the downside.
Almost a full 2% or 104 points on the S&P 500.
The tech heavy NASDAQ fell into correction territory, 10% or more, of recent highs in a recent session. Right now it's a bit about the line that we need to see for a technical definition of a correction but some interesting moves. I also want to show you some moves happening now including Nvidia. This is coming off of lows of the session. Still in negative territory but a bit of a bounce back there so perhaps some buyers moving in when Nvidia pulled back earlier in the session.
Amazon's earnings not pleasing the street.
It is to the downside as well at this hour.
Amazon down about 9%, $168 and change.
Apple is a bit of green on the screen.
Want to see if it's still holding up.
Indeed, it is up a little more than 2%.
And that is your market update.
If we are looking for reasons for economic concern, the US jobs report is front and centre today. MoneyTalk's Anthony Okolie joins us now with the details. What did we get out of that report?
>> The labour report suggests that higher rates have cooled hiring more than expected.
Both May and June numbers were revised a bit lower, shaving off a combined 29,000 from the job count.
When you take a look at the and employment rate, it did take up from expectations, it is up to 4.3%, the highest level in nearly 3 years. It indicates that more people are looking for jobs versus people losing their jobs. We saw pick up in the participation rate. Absent that participation rate, that was up to 62.7%, the unemployment rate stays at 4.1%. More people coming into the labour market looking for jobs.
When we look at the wage gains, fairly mild, only up .2% month over month, slowly below expectations. We look at the annual wage gains, 3.6% year-over-year.
That is below expectations. Slowest pace of wage growth in three years, indicating that those higher interest rates by the Federal Reserve are working to tamp down wage growth. Let's take a look at the jobs by sector.
As you can see on the chart, healthcare led to gains.
We saw gains in construction, leisure, hospitality and government. Construction was actually down month over month, as you can see. The biggest laggard was the information in this sector, it was down about 27,000 jobs.
Markets are not pleased with this jobs report and we are seeing that in the reaction in the markets right now.
>> Nice break down there. Thanks for that.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
We have seen from the market reaction that the jobs report is weighing on sentiment, there are concerns about the state of the economy sets of the border.
Joining us now to discuss what investors should be keeping in mind during this heightened volatility is Damian Fernandes, managing director and portfolio manager at TD asset management.
Inks for joining us.
Two days of drawdowns. What you make of this market action?
>> Thanks for having me.
As a favour, maybe it when we are in a bull market you also invite me on.
>> I think you've been here in bull markets!
>> I know. We are in a bull market. Let me put some context to that.
We are having a very conventional drawdown and markets. What I mean by that is your today, even including today, the S&P is up 14%. The NASDAQ is off 3% today but it's just back where it was in June, June 8, 60 days ago.
Every year, the markets have these 10% drawdowns at different frequencies.
People have to moderate their expectations and that coincides with what Anthony said, he highlighted some weakness we are seeing in labour.
Now, big picture, we are still on track for, the market is still up double digits.
The TSX is still of 7.5% including today's drawdown and the risk factors at the start of the year, and I could talk about the really hot labour market, wage gains, inflation, a Federal Reserve and central banks that were still applying the brakes in terms of their monetary posture, all of those big macro variables are in reverse.
There is evidence of a soft landing. The Bank of Canada is cutting rates. The Federal Reserve looks to cut 50 Basis Points in September.
Inflation is falling, wage gains, as seen in the implement report today, average hourly earnings, they have a three handle on them. They are close to five handle last year.
I look at it right now and I think we are having a very healthy correction and I don't want to sound blasé when I say this, what I mean by healthy correction is take a picture. If you are underweight equities, these are by opportunities.
We are having a conventional pullback.
Fixed income is providing a ballast. Last year in 2022, equities and fixed income fell. This year, fixed income is doing what it is supposed to do, providing insurance in a drawdown.
I think it's having a conventional pullback exacerbated by some are low liquidity trading.
>> A lot of fascinating things you said there. I want to hone in on one thing you said because I heard rumblings of this the other day as well. I think you said it said September 50 basis points. As the market started to think that perhaps by the time we had that September meeting, it's going to justify Jerome Powell not moving by 25 but by 50 in the first cut?
>> Well, before today's drawdown, there was some probability of 50. Right now after today given the drawdown, we are looking at 50. The market is basically putting the Fed's feet to the fire and saying, this is, what we worry about, and I want to talk about this to you, what you actually have to worry about in the market right now is nonlinear risks where you have a significant drawdown in financial assets. That causes a pause in activity from CEOs, from corporate sand that starts at vicious circle. So the way the Fed insures against that is it provides easing. What does easing do? You reduce financial tightness, you create some confidence in the marketplace. Right now, it's just a sentiment driven again.
The economic situation, we saw this in earnings, we haven't talked about that yet, but earnings we are in the midst of Q2 earnings. Yes, there is been significant price moves in some names but the actual year on year earnings growth is positive. The S&P X Mag 7 for the first time since 2022 was actually having positive earnings growth. I think there are a lot of things happening under the surface that are not being fully appreciated and I think the Federal Reserve is now on an easing path and that too is supportive for risk assets and for investors.
>> Let's talk about putting that in context for investors in terms of a strategy. I believe your mantra, I don't know if you say this every morning when you wake up, but I've been told your mentor is a keep calm and compound on.
Explain that to us.
>> The day-to-day the volatility in the market should be viewed by investors as opportunities. What do I mean by that?
I fully believe that if the evidence as we are going, we are convinced we are going into a recession, you should take corrective action. We are not there yet so the idea of keep calm and compound on is when the market is throwing out opportunities like today where it's off two or 3%, significant names are all flat, if you have done your fundamental research, if you feel comfortable with the free cash flows that these companies are generating, if you believe we are not going to go into a recession but have a soft landing with Fed cuts, the mantra means you have a chance to buy and get into the market now and potentially add a good entry level.
I think everyone should do their own fundamental research on individual names but we try not to panic. Our desk tries not to panic.
Has the fundamental thesis change? Are we moving to recession?
The big picture things, I just don't see it.
>> Let's talk about that. The soft landing.
This scenario has been baked into the markets, that we will be able to get inflation under control, it's moving the right way, as a central banker, you getting a soft landing. We got economic data, jobs today, manufacturing yesterday, there were some of the street that started to question that soft landing.
Do you still see a path to it?
>> I think the base case is soft landing.
The market is panicking because there is no probability that the soft landing might be somewhat worse but that should not be viewed as the base case.
These things almost have, the markets panicking almost incentivizes the Fed to rethink whether it has to ease faster and more quickly. So these things almost are related but the base case should be a soft landing. Let me put some numbers on the soft landing. Anthony did a great job as mentioned on providing context on the jobs numbers but we created 114,000 jobs.
Pre-pandemic, that was a good number. We have hourly earnings right now, 3.7% year on year. That's not inflationary, especially yesterday nonfarm productivity was out and that was very supportive.
The fly in the ointment that we will need more corroboration on his yesterday you had the ISM manufacturing index and that was actually pretty weak, but I'm not sure if something has changed because when you compare jobs to the ISM, jobs data is hard data. You count the number of people who are unemployed, the employment rate. The ISM is sentiment. You ask purchasing managers how they are thinking about their order books and I don't know how to explain this but since the pandemic, there has been a general negativity in the sentiment data that has not been corroborated by the hard data and I think there's something here, I will look at the ISM next month to see if there is some degree bounce back but we are having a very conventional-- at the start of the year, people wanted jobs to come off the red-hot PC were growing at and now we are here and people are like, oh, my God! We are panicking! It's going to fall off a cliff! The economy does not work that way.
We are in the midst of earnings releases.
The only sour point is that the consumer companies, particularly the low-end consumer, looks to be challenged but whether it's industrials or even to a certain degree tech, they have all pointed to, they have all had upward revisions, they have all raised guidance, so they are not raising guidance if they are seeing the economy deteriorating in real time.
>> Final thought.
I want to ask you, as you mentioned, August is a month of low liquidity. We have already had some volatility and excitement to start the month. What should investors be thinking?
>> We are in Toronto. It's really nice outside. Maybe stop staring at the screens and pick up a book or listen to the nearest podcast.
August and September, historically, are very volatile months and that just a combination of low liquidity through the summer coupled with events risk like we had today with the jobs number, it's magnified. That's really what's happening here.
Yes, we can point to geopolitical things that are happening with those are always present. What would normally happen is the seasonality improves as we move through the year. October, November, December are actually strong months. Getting back to what we are talking about, overall allocation and positioning.
I actually do think right now that if you were, if you are underweight equities and your overall allocation is where they keep calm and compound on of where you want to get to, you are getting a chance to start dipping your toe. If you are underweight fixed income and you were overweight equities, you are seeing evidence that fixed income is providing you some comfort right now.
The incentive to panic is right there and right now today people are like, oh my God, we are on the cusp of recession, but to repeat, there were 114,000 jobs created.
Affirming the jobs number today, there is a metric called the diffusion index, that's the number of industries that are hiring, expanding employment, less the number of industries that are reducing, firing, reducing implement. That's a 53%.
There is still more industries expanding employment than our cutting workers. I just think that we are in a seasonally illiquid..
Not everyone is there and people are, we have had a huge run in markets so it's very, very consistent that we will see a pullback and that could be a few percent lower but depending on your positioning and if you have done the work, you might find opportunities that are interesting here companies can grow cash flow. That's what were looking for.
>> Always great to get your insights, particularly on days like these. Thanks for joining us. Always a pleasure. Thank you.
>> Damian Fernandes, managing director and portfolio manager with TD asset management.
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.
Shares of Amazon are in the spotlight today. The e-commerce giant missed sales expect stations for the most recent quarter and is providing a disappointing forecast for the current quarter. Will Amazon's retail businesses facing competition from companies such as Teemu and Sheehan, the cloud-based business, Amazon Web Services, beat estimates.
Currently, Amazon is down a little bit more than 9%. I want to check in on Intel.
They are under significant pressure today.
The chipmaker handing in a sizable earnings miss and announced plans to lay off 15% of its workers as part of a $10 billion cost cutting plan.
Intel is also telling investors it will not be paying a dividend for its fiscal fourth quarter. The news is not being received well. Intel is down about 27%.
One headline I saw heading in their, we haven't seen a drawdown in Intel like this since the early 1970s.
Closer to home, Magna's earnings came in slightly below expectations for its most recent quarter. The Canadian auto parts manufacturer is also lowering guidance out to 2026. TD Cowen called the release slightly negative but it did note the forecast for margin improvement for the second half of this year.
It gives investors like to look at. $56.57 on Magna, you are down about 5% on the stock. Quick check in on those benchmark indices. We will start on Bay Street with the TSX Composite Index. A sizable pullback in the price of crude oil today.
An overall market drawdown has is down 582 points, about 2.5%.
South of the border, the S&P 500. As investors I just some of the economic news of the past couple of days, a little bit concerned, down about 2%. There is pressure on the NASDAQ as well.
16,819 or a 10% pullback is a bit below that. We are off the lows of the session.
We dipped into correction territory with the NASDAQ earlier in the session but a bit off those lows. Still down 374 points, more than 2%.
A lot has happened. If you dial all the way back to Wednesday, two days ago, we had the Fed, it was supposed to be the big story of the week. They delivered the hint that investors were expecting. If inflation remains on trend, a September cut is on the table. I spoke with Hafiz Noordin, VP and Dir. of active fixed income portfolio management at TD Asset Management.
>> There is no expectation to make changes in the policy rate yesterday but looking for that change in the language in the statement and the press conference. The reality was that a rate cut in September was already 100% priced in by the market going and so the Fed did not have to do a lot, but essentially did not push back on that market pricing and when that happens, and is giving a green light to the market to say a September cut make sense. Powell could not say that outright but the shift in the language around the statement definitely got a lot more balanced around the risks to inflation versus the risks to employment and so from that perspective, September looks quite likely for the first rate cut.
>> As I was saying, if we were talking about risks to employment, if the Fed is changing its linkage in the statement, we out jobless claims today, manufacturing information that told us about the labour market. This was not positive news in the market is not taking it positively.
>> No, yeah. It's very much a true risk off move in that bond yields have come down to reflect the fact that jobless claims were higher-than-expected. That's a very important data point because it's weekly, it's high-frequency. You don't have to wait for those at one month nonfarm payroll numbers.
We will get that tomorrow.
Ahead of that, we have seen a number of different labour market data points starting to weaken. Even in survey data like the quick rate is now below pre-pandemic levels.
All in all, what that means is now maybe bad news is actually bad news for equity markets as well so we are seeing that today.
Going back to the Fed, I think they saw this coming. I think it would really take a dramatic shift in the data away from this weakening labour market and weakening inflation cannot get that rate cut and so it looks like the market is really looking to get that going.
>> Once we get past this week on the jobs data and the Fed behind us, August is considered by some accounts to be a bit of a sleepy month, especially for data, before that September meeting. What are the chances that by the time they had September, they see substantial we can, perhaps more than expected?
>> I think that could happen. What's really interesting when we look at market pricing for September, before this week's meeting, 25 basis point cut was already 100% priced and, if we get more weekday like what we are seeing today, we potentially could be seeing a pricing and of a meaningful probability of a 50 be put rate cut. Chair Powell was asked about this yesterday because there was a small percentage of that, five, 10%, even today it still about 10% chance of a 50 beat rate cut. He was asked about it and he really pushed back saying, no, we have not discussed it. But the market is the market. It is going to price in what he thinks makes sense. If we see a really weak jobs data tomorrow, there could be many investors thinking, maybe the Fed should have cut this week. So we will see.
The data will dominate. The Fed does always say that they are data dependent and we will let that play out and by the end of August, we will have the Jackson Hole meetings and that's going to be an opportunity for Powell to come back and provide more refined guidance on September.
>> The September, market is pricing and fully. Whatever we get in September and if that's the beginning of the rate cutting cycle, how do you think it plays on after that?
>> As it stands now with the evolution of the last couple of weeks, November and December, the other two meetings for this year for the Fed, also are fully priced and for rate cuts. Right now, the market is expecting three rate cuts at each of the three total meetings this year.
Getting into 2025 and 26, another five rate cuts are priced in so, in total, about eight rate cuts priced in over the next couple of years so that would take their policy rate from 5.52 around 3.5.
It really goes from that restrictive level to what is, right now, the markets estimate of neutral going forward.
Meaningful cuts priced in.
But I think what could change that is are we still in a soft landing redeemer could actually get a little worse than what's expected? I think that's now going to be the debate going forward.
>> That's the United States, the Federal Reserve, arguably the most influential central bank on the planet but there are other central banks making news today, including the bank of England. What's happening?
>> The bank of England cut as well, their first cut of the cycle. What was interesting was not so much the rate cut itself but the fact that it was a 54 split in terms of the vote. I think that was interesting in that inflation expectations have been a little bit more sticky in the UK compared to some other developed markets so I think it was expected that it wouldn't be a clear-cut case and that got confirmed by their voting.
Going forward, I think it's still the same broad level trend of softening labour market, softening inflation data so Europe, UK, Canada, US, we are all going in that direction with timing differences and that has been affirmed from what we are seeing from those central banks.
>> That's the action we are seeing. What does it mean for the fixed income, bond market? Investors have been waiting on the fixed income side for quite some time to see what we are seeing now.
>> It has been a bit of a patient trade, so to speak, in terms of being, expecting a decline in bond yields, but it's definitely playing out and it was already starting with the data itself pointing in that direction, where we have seen higher short and yields, to your yields, compared to 10 year yields. You have seen an inversion of the yield curve. We are now seeing that steepening trend come into play which tends to happen as part of the economic cycle when we can more comfortably and confidently expect that central banks will be cutting. What's interesting, you mentioned of the central banks, is that there is one exception which is Japan which this week actually hiked for the second time this cycle. We want to March, they had only just exited negative interest rate policy and this week they did their second rate hike so we are seeing in some focus markets like that where yields could still go up and it doesn't look like it's going to do real what's going on in the US and Canada. It's causing a contagion of higher bond yields in the US or Canada.
I think we can continue to expect domestic economic data is driving the bus and bonds are definitely helping from that perspective.
>> That was Hafiz Noordin, VP and Dir. of active fixed income or flu management at TD Asset Management. We had the conversation on yesterday's show. We have since had that jobs data, obviously it was a disappointment and the market is reacting pretty much in line with what he was saying.
Now, let's get our educational segment of the day.
Conditional orders are one trade strategy you may consider using and joining us now to discuss how they work and how we can use them on the platform is Jason Natyk, Senior client education instructor with TD Direct Investing. Always great to see you.
Walk us through it.
>> Great to be here, as always.
Conditional orders are very useful and I think it's an important tool in all investors toolkit.
A couple of really key usages that really stand out to me. One allows you to automate the process. We don't always need to be at our computer or on our phones. We can set of actions to take place if certain things transpire in the market and then second of all, it allows us to remove a motion from our trading. It can be an opportunity for us to follow in more rules-based approach so we can capture gains, limit losses through risk management by having conditional orders in place. Let's jump to the platform and take a look at conditional orders. You can see up on the screen there are four different conditional orders that we can use on the platform. We are focusing on the one cancels other order, second from the left here on the screen. More commonly known as OCO. The little picture as well is the description that is because they are really spell out this particular order.
It's got many different uses. This is an order where you are essentially setting up to orders. With the first order executes, it will cancel the second order that is there. It's as simple as that. I've got a chart behind our order entry screen here to lay out the most common use case for this type of order. This is a chart of SPY. The blue line I got on the chart, we can use that to signify an entry point.
Here's where the OCO comes in. We've got to orders. We can use one to capture extra profit if it goes up like we are expecting it to you in our example or secondly we can place a stop order below the market to get us out and limit our losses. Let's demonstrate that there are a couple of lines that we can draw on our chart.
Let's open our profit-taking order. We got into the position at 540. We are looking to get out with $10 worth of gain and draw a second line, that would be our limit order. We are setting a price point, the least I am willing to sell for if the position goes up. That's level I of our OCO. The second order comes in next. This is going to be the stop order portion for this use case. This would be as the order goes down or the stock goes down, we can go ahead and limit our losses so we are not going to be holding a falling knife.
We think the asset is going to go down. We want to limit our losses to a particular percentage based on that rules-based approach were talking about earlier.
The first order would be limit and the second would be a stop.
Really easy to understand and executed something that can be useful in everybody's trading experience.
>> We are having slight technical glitches with you. We will have you back when we get that sorted out on a later show because then you're going to show us how to enter the OCO order in my broker. Thank you for that rundown of the rationale.
>> My pleasure, Greg.
>> Our thanks to Jason Natyk, Senior client education instructor with TD Direct Investing.
I bet if I ask him that question and it would've been just fine. You never know with technical glitches. For more educational resources, you can check out the educational Centre on WebBroker or you can use this QR code to navigate to more informative videos.
Now, let's get you an update on the markets.
We are having a look at TD's Advanced Dashboard, a platform designed for active traders available through TD Direct Investing.
Taking a look at the heat map function here, gives us a nice view of the market movers. We are moving today. The TSX 60, let's hone in on this. We know that on the top line TSX, we are having a sizable pullback today, about 2.2%. We have the price of American benchmark crude under $74 per barrel.
Remember the big spike earlier this week?
That is coming on wound, pulling some of the big energy names. Suncor is down more than 5%. Cenovus right beside it down 5% as well.
Not just about oil and gas, there is Cameco, the uranium play. It had a tough couple of days, down 6.5% today. Some rate sensitives are modestly positive. We saw big pullback and yields today in the bond market. That can be favourable for the rate sensitives, whether it's a BCE or tell us, it's modest green on the screen, or the utility plays like Fordist or Hydro One.
You have those up a little more than 1%.
South of the border, we are a little off the lows of the session but we had some economic data yesterday including jobless claims and manufacturing data that set off that selloff we saw. They were built on today by that labour report in the state's, that was a disappointment. Intel is his own story. It's about the quarter that it had and their sizable pullback.
They are taking a big hit, down 27%.
Apple is up almost 3%, AMD up 1.5%.
US personal digital election is under 100 days away in the next few weeks and months will be critical for the campaigns of both Kamala Harris and Donald Trump.
Earlier, my colleague Kim Parlee spoke with Chris Krueger, managing director of the TD Cowen Washington Group, about the sudden momentum behind the Harris campaign and whether it can last into November.
>> It's pretty much unprecedented. The big narrative going just 10 days ago was the massive enthusiasm gap between the two campaigns, the Trump campaign and the biting campaign, particularly post-assassination attempt of former Pres.
Trump. And now, what you have seen with Harris being the presumptive nominee is that that enthusiasm chasm has basically been eliminated. Now, for the first time, you have Democratic base voters enthusiastic about voting. You have seen record and fundraising numbers, these records zoom calls where you are getting record participation, volunteer sign-ups.
A lot of those states that at one point in sort of the weeks after that historic June debate, you had Democrats pretty much across the board in panic states like Maine and New Mexico look like they might be in play, the hose candidates down ballot, the Senate candidates down ballot, really concerned and now, for the first time in the cycle, you might have greater enthusiasm on the Democratic side than on the Republican side, at least coming into the Democratic convention, we are seeing sort of this hair is honeymoon polling buffet. We will see how long that lasts but right now, without question, the race has been transformed.
>> I think it's, again, I want to credit your no, I think you said before, 25% of voters had an unfavourable view of both Biden and Trump and you called it an unpopularity contest I think in a podcast.
Is that newfound popularity or momentum you're talking about a tip towards Kamala Harris or do we have a neck and neck race?
>> It's pretty neck and neck.
That poll, 25% of Americans having an unfavourable view of both Biden and Trump, these are the so-called double haters, that's the highest metric in modern American history and it's not particularly close.
The only time it was even approaching 25% was in 2016 when that was Hillary Clinton versus Donald Trump.
Those numbers were also pre-assassination attempt. I think those numbers are now probably single digits but it's really a story thus far of previously a lot of sort of soft Democrats, even soft Nikki Haley voters from the primaries were voting for Biden because he wasn't Donald Trump, right? You are voting basically because you don't like the other candidate. But now it's more of a positive vote for Harris. Again, we will see if this is a sprint versus a marathon, we will see if that enthusiasm can continue, but all signs point to it continuing on the eve of the Democratic convention a couple of weeks from now.
>> The news cycle in this time is insane.
In terms of what happens, how quickly it happens, what can happen. What are you gonna be watching when you think out over the next few weeks and months?
I'm sure there will be lots of unexpected surprises but where will you be critical?
>> One of the things we try to do at the Washington research group with TD Cowen is what are the scheduled catalysts? To your point, so many things happen that are not scheduled but we see at least four big catalysts in the next call at 7 to 8 weeks. You have the Harris VP pick. That's probably number one. Number two will be the Democratic convention that begins in Chicago on August 19. Sometime in September, probably the first half of September, we might have a presidential debate between Harris and Trump. Right now, that's probably either September 10, the ABC News day, or perhaps September 17-18, that's the Fox News day. And then a few days after that, September 18, we, in theory, have former Pres. Trump's sentencing in the New York courthouse almost 34 felony accounts. That's a little bit unclear considering the Supreme Court's decision on the immunity case, it's already been delayed because of that, but those are kind of the big four that we are watching that are scheduled and, yes, the election day is not until November 5, but early voting begins in some places in mid-September. As much as 80% of the vote might be cast by November 5. When you think about October surprises, in reality, it might be more of a September surprise this time around because so many states vote early and vote by mail now.
>> We heard the president Biden was looking to make some changes, a constitutional amendment with regards to presidential immunity. How does that play into this? Is this another X factor we have to watch?
>> I think it's a little bit underscored with the Harris campaigns freedom messaging. That's really underlying both abortion-rights as well as democracy etc.
Long story short, a constitutional amendment is unbelievably difficult to get done. You need two thirds of the vote in both the House and Senate as well as three fourths of all state legislatures so it's a long question but I'll give you the short answer, it's almost impossible to get done.
>> I want to shift gears a bit as we think about the longer term implications as we think about who is elected, the makeup of Congress and those type of things.
Maybe let's start with let's say that former Pres. Trump wins the presidential election and maybe you could take us through what we should think about in terms of if we get a Republican Congress or if we get a split Congress.
>> Yeah, I think that's the best way to frame the discussion. It's not just who wins the White House but sort of the undercard here is the House and the Senate. So right now, the house is 5149 Democratic control, the 435 member house, depending on the date, is a two or three seat Republican majority.
This is super important next year because you have the debt ceiling returning next summer and then you have a 4 1/2 trillion dollar tax and fiscal cliff next year with the expiration of all those 2017 individual tax cuts as well as what are called the Obama care subsidies. So right now, Pres. Trump has said he would want to extend all of those tax rates where they are if not cut further. The presumptive nominee Kamala Harris, we presume, will continue Biden's campaign pledge of extending current rates for those making under $500,000. With a split Congress, Trump can't do anything or Harris couldn't do anything unilaterally on tax policy so a split Congress with the White House could mean a pretty messy year on tax and fiscal policy, probably without really knowing what's going to happen until late December of next year.
>> I know that sometimes we hear from market strategists, they get more comfortable with the split Congress because then less wild swings can happen in any one direction but if we pull up your no, you mentioned about the 2017 tax cuts, but even on tariffs and immigration, 10% tariff on all imports, Canada's ears perked up and we want to understand what that means, 60% tariffs on China and then I think there's an interesting thing, likely lower after negotiation, and then the deportation of up to 7 million undocumented immigrants. These are big shifts. When you are thinking about this and working with your team, how you price the sin, the probabilities of these things happen?
>> Look, we think particularly in a divided government situation, if we are in a world in which Trump has one, our expectation is he would probably lean in to the policies where he has near unilateral power in his authority as president of the United States and to areas unlike tax policy our trade and immigration policies where the office of the president of the United States has pretty tremendous powers. Trump has been pretty clear on the trade front on two things. The first would be a 10% across-the-board tariffs on all imported goods. Announced on day one, he can do that without Congress. Our expectation is that Canada would get a carveout in that, mainly because of USMCA, one of the signature trade achievements of Trump's first term. It USMCA review process is also underway with a deadline of July 1, 2026. I want to be clear though, there is no certainty that Canada and Mexico would get carveouts on that 10% tariffs. And then the second one on the trade front would be the repeal of permanent normal trade relations with China. That does require Congress, although the votes, candidly, are probably there. He could also institute the tariff changes unilaterally and that would take the blended rate on Chinese, the blended tariff rate on Chinese imports from about 20% to 60%, and then you add in that 10, so you're talking an increase of 20% tariffs to 70% tariffs.
>> I want to ask it, I apologize for the lack of time, next time I'm getting at here for an hour so we can talk longer.
Would the expectation with a Democrat White House and a Democrat Congress, which I don't think is probably very likely, would it be more of the same? There are no massive changes in policy direction?
>> I think that's right.
Just because of the geography and the arithmetic in the Senate races, it's pretty hard to see how the Democrats could hold but it's possible. But it's still going to be by the narrowest of margins so you're probably talking something middle-of-the-road on taxes which candidly might cool down inflation, might calm down the bond market a tiny bit and also if you have a Republican Senate with a Democratic president, the Senate confirms the cabinet and the regulators so you kind of have a bit of a hedge there on policy.
You don't have to worry about the inflationary aspects of tariffs and certainly not the inflationary potential for a labour supply shock with the deportation efforts.
>> I've only got about 45 seconds. He mentioned Canada in terms of a carveout, one would hope, with USMCA. Anything else that you think from a Canadian perspective that people should be watching?
>> The USMCA review process will certainly be a big topic regardless of election outcome, whether it is Biden, sorry, whether it's Harris, whether it's Trump.
All things being equal, Canada should be in a pretty good spot regardless, but we will have to stay tuned.
>> That was Chris Krueger, managing director of the TD Cowen Washington Group search group.
We will leave you with a final look at the markets. It's been a very interesting week. It was only two days ago that we had the Fed coming out and dropping a pretty big hint that if inflation continues on the path that it's on, they would start cutting rates in September. Market rally off of that and then some economic data both yesterday and today, yesterday was manufacturing, factory activity, jobless claims today, the US big one, the labour report.
It sparked a bit of a selloff. The TSX Composite Index right now down 530 points, little more than 2%. The price of crude is pulling back almost economic concerns after getting a big boost earlier this week. The S&P 500 also pulling back for a second session, we are down 98 points right now, 1.8%.
And the NASDAQ, we will leave you with a look at that. It drifted into correction territory earlier in the session. It's just above that line right now in terms of a pullback from recent highs. It's been off the lows of the session at 16,821, but still a pullback of more than 2%.
As always, make sure you do your own research before making any investment decisions. on a programming no, we are going to be on summer hiatus next week but will be back on Monday, August 12. Colin Lynch, managing Dir. and head of alternative investments will be our guest from TD asset management and he will talk about global real estate. You can get a head start with the questions. We will take a look at them all week. There will be people here, they just won't be in front of the camera. Email moneytalklive@td.com. That's all the time we have the show today. On behalf of me and Anthony and Kim Parlee in front of the camera and everyone behind the scenes, thanks for watching and we will see you in a weekend a bit.
[theme music]
