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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 show, we are going to discuss whether earnings season is telling us about the state of the markets with TD Asset Management's Damian Fernandes.
MoneyTalk's Anthony Okolie is going to have a look at what's weighing on the price of gold the past couple of sessions.
And in today's a broker education segment, Hiren Amin is going to shows how you can find global exchange traded funds on the WebBroker 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.
Another down session for the TSX Composite Index. Got the price of crude oil continuing to pull back, the price of gold continuing under pressure. Not great for the two biggest sectors in terms of weighing on topline, materials and energy.
It's not too dramatic but we are down 56 points, a little shy of 1/3 of a percent.
West Texas intermediate on my screen at 75 bucks and change, steps back more than 4% today and 2% to the downside today. Seeing some pressure in the energy space. God Cenovus at 2409, down a little more than 2%. Fortune a silver mine coming out with its latest earnings and investors seem to like what they are seeing. At four bucks and $0.13, the stock is up about 4 1/2%.
South of the border, the S&P 500 has been on a winning streak. It hasn't been on a streak this long and about two years. We got Jerome Powell speaking today. A bit of caution in the trade. Your dad about seven points or offensive a percent.
Can they shake that often shows some green before the end of the session? The NASDAQ has been on a hot streak as well. How is it trying right now? Pretty much in line with the broader market, down 19 points are a little more than 1/10 of a percent.
Let's check in on Rivian, they are out with earnings as well. It's been choppy but right now at 1678, you got Rivian down 3 1/2%.
And that's your market update.
While many companies have largely delivered positive earnings results this quarter, many have also provided guidance that suggest tougher days may be ahead.
What does this mean for market opportunity going forward? Joining us now to discuss his Damian Fernandes, managing director and portfolio manager at TD Asset Management trade welcome back to the show.
>> Always a pleasure.
>> What is the market telling us about the road ahead?
>> Is a less bad than feared.
We spent the last 18 months with everyone expecting for a recession, we've been calling for an economic recession and slow down. It's been doom and gloom. We've had that in US earnings.
There were three quarters, Q4 last year, Q1 this year and Q2 earnings this year, they were negative. You had practically speaking in earnings recession.
Better than feared was my prognosis because Q3, this is going to be the first quarter since last year were earnings have been positive. Like most things, with momentum, as these things start, they continue. The headline numbers aren't a barnburner. Revenues are up 2%, earnings or up a little bit more than that. When you look under the service and take out things like energy, but I should start by saying this.
Close to 90% of companies have reported.
If you take out energy stocks and material stocks, earnings are actually of close to 10%, 9%. Revenues are up close to five. So a lot of good things at the service and the reason why I exclude energies because last year, energy earnings were buoyed by geopolitical risk and high energy prices.
Even including energy, we move into positive. When you look at the history of earnings, they continue to do so until they are interrupted. Right?
So the fact that we have inflected positive, if we have a soft issue landing, if you don't collapse into an economic recession, coming out of this earnings recession, that'll be good.
Earnings are ultimately at the drivers of stock and if they have inflected positive, it's probably a sign that we shouldn't be too bearish on stocks going forward.
>> Let's talk about some examples from earnings season. Let's take away energy and materials but take a look at big Tech, Meta and some of the others. What are we seeing?
>> They have had, when you think about the Magnificent Seven, the moniker that people use, it is well-deserved to a certain degree.
The Magnificent Seven came out with magnificent earnings. The stock prices were already pricing a lot of that in so the stock price moved ahead, he talked about Meta, Meta revenues were up 25%, earnings were up over 100 year on year.
So the difference obviously is that Meta last year seeing the slowdown coming, they actually took steps. They lowered their Acts, they cut By about $3 billion, that's free cash flow, what ultimately drives value for business, that improved. They cut expenses.
We heard about changes to their workforce.
They laid off a lot of people.
They actually fronts-- almost in anticipation of a slowdown, an economic slowdown, they took steps. The slowdown didn't materialize. Revenues are up 25%.
You have this massive operating leverage.
Not just Meta but more conventional companies like Microsoft. Micro soft is reporting 13% topline growth, 25% EPS growth. That's even before its implement thing it's AI offering, copilot.
Microsoft will have its own AI assistant.
That's before this. There are already reporting. Amazon really good numbers there.
It's cloud business was up 12%. I found something really interesting and Amazon.
We think of Amazon, we think about cloud and conventional retail, the Amazon e-commerce site. Amazon's e-commerce in North America, the margins there are close to 5%.
That's in line with Walmart. Amazon, which has this huge logistics platform, is earning basically the same profitability as you and I walking into a Walmart store and picking it up off the shelf.
These things are… When you talk about… I find the moniker sometimes misleading.
People like to pick on winners. But to be clear… >> I want to pick on the winners a little bit. We've been showing one-year stock charts. They gone up quite a bit. The market is a forward-looking instrument.
Had they had their run even though they have had these stellar results?
>> These charts are manifestations of the underlying fundamentals. When people look at stock runs, they love charts that go from the bottom left of the top right.
But generally with stocks, unless we are in almost a market where investor sentiment is aggressive, the reason stock prices go from the bottom left of the top right is because fundamentals are improving. When you have companies delivering double-digit revenue growth and high, 20% plus EPS and cash flow growth, that's in the stock price. The better question is, have they had their day in the sun?
They've all come out with guidance that has been generally I would say conservative. So if they keep beating, the stock prices will continue doing well.
What's more interesting for these companies is the case of names like Meta is the regulatory risk.
Do the regulations or the regulatory backdrop around providing advertising services through social media, do the regulators finally… Those things are existential and I can't price but the actual core businesses are doing fine.
>> Let's talk about the big or were hangs for the market. We looked at fundamentals during earnings season, companies are turning away based on their merits. But inflation, the economy, rate hikes, everything that's been dominating the conversation for a year and 1/2, where do we feel that we are in that story? A lot of people want to put it behind us, obviously.
>> It's not even… Of inflation, aggressive rate hikes, a slowdown, there's the hope that these things would eventually be behind us. We are at the end, I said that I think the Fed is done. I think the Fed has been done since July. They haven't raised rate since July. Same with Bank of Canada. Last week which I found interesting was that the Fed, either Jerome Powell or communications from Fed board members, they were talking about how the recent increase in long-term rates has tightened financial conditions, basically done the job for them.
They want to increase the price and make it more expensive with interest costs rising. They do that by raising short-term rates but the long-term rates have risen up more so when you've tightened financial conditions and so by the way while this is happening, inflation is coming down. We had a job number last week that was in my mind almost Goldilocks.
It was still positive, wasn't too hot.
>> Americans got jobs but not too many.
>> The wage numbers were not too hot.
So your seeing evidence that we are at the end of this rate hiking campaign, that inflation is going to slow and will continue to slow for the next few months, if inflation continues to slow you can actually have rate cuts because the current rate hiking environment is too tight. And so these things, let's put it this way. The reason investors reached for her, had indigestion last year and reach for the Pepto-Bismol is because of aggressive rate hikes. It was because inflation was at its fastest level since the 70s. We are on the other side of that mountain.
Inflation is falling. It looks like rates have peaked and they might come down.
That's what the market is pricing in.
These macro variables are positive. As long as, I should have a provision here.
>> There is always a but.
What if. What if. about soft landing, hard landing. What we want or slow down or no landing. What we really want is you can afford a mediocre recession or slowdown.
The difference between -1 and +0.5% is… What we don't want is a much more significant slowdown.
We don't want the current rate hikes that have been put in place to actually lead to a significant credit event that actually weighs on the consumer. If we have a soft issue landing or a mild slowdown, a mild recession, things will be fine. The markets will price that. What the market has not priced for is a much deeper recession. To be clear, or a stand today, from looking at the variables I look at, I don't know if we have enough evidence to say that things are going to be materially worse. Things are going to slow for sure.
Q4 will be slower than Q3. That's just my feeling.
>> Always interesting views with Damian Fernandes. We are going to get your questions for Damian on global stocks and just about'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.
Higher demand for liquefied natural gas help the bottom line at TC Energy in its third quarter. Earnings from the LNG division were up almost 10% compared to the same period last year. That was a mid increased shipments to several big American facilities during the quarter.
Right now the stock bucking the trend in the energy space, up a modest 1%. Let's check in on shares of gaming company Roblox. I never got this one but let's try to explain it. They are moving higher.
Up 14%. It was a beat on the top and bottom lines. Their daily active users are up 20% compared to the same period last year.
Hourly user engagement was also higher.
They sell virtual currency to gamers to buy in game features including dressing up their avatars. I don't get it but the market does. Let's talk about a company that I understand a little bit better.
Disney, there on deck to report earnings after the closing bell today. Investors have a number of concerns heading into the release, including Disney's unprofitable streaming service and the impact of the ongoing Hollywood actors strike on content.
The shares are down modestly at this moment.
Let's get you on the markets, we will start with the TSX Composite Index. A down day for oil and gold. Not great for the top line on the TSX. 86 point deficit, down about half a percent.
South of the border, the S&P 500, that brought a read of the American market has been on a hot straight.
Right now it is in modestly in negative territory. Jerome Powell's going to have a little more to say and investors are waiting carefully on that one.
We are back with Damian Fernandes, we are taking your questions on global stocks, so let's get to them. The first one off the top, the second largest economy in the world.
How worried should we be about slowing growth in China?
>> That is almost a question that answers itself. The second largest economy in the world is slowing, we should be worried.
But remember there used to be in adage, when the US sneezes, the world catches a cold.
That qualifies now for the world's second-largest economy, China. When China sneezes, particularly emerging markets tied to the supply chains, they catch a cold.
For European companies that cater to the Chinese consumer, luxury names, they catch a cold. So a slowdown in the world's second-largest economy does have direct impacts to production lines, to consumption behaviour, for a lot of companies.
But I want to separate levels from rate of change.
This is something in markets that we should do more of. So China is slowing.
The level slowed. But the rate of change has actually improved. What I mean by that is in the last few months, we've seen the slowing bottom out. We've seen a host of different measures from the government… They are not gargantuan.
>> They are flying under the radar.
>> Exactly. We ease leading Saturn rodents, we've ease capital requirements.
We pays it easier to access funds. At the margin, you are seeing the government, they don't want to have a big problem.
It led to a massive inflation bull. So they want to avoid that and they don't… They might actually have to have more increase.
The reason we are talking about levels and change is while the level of growth is slow, if the rate of change is not getting worse and all of the stimulus measures we've announced these past few months, to your point, that have gone under the radar, can we see a bottoming of growth and maybe some improvement next year? I think that has to be in the cards. The outside risks are that the property crisis there.
The Chinese property market is the second most important asset in the world after US treasuries because so much of it is leveraged.
If we don't see some level of normalization there, if it doesn't get worse for these developers and they don't pull the economy down, I think that next year we could see some positive things happening in China. So I'm more looking at the rate of change. If you see some improvements there. And then are we seeing a bottoming of growth? To be clear, China has slowed.
And it has slowed much worse than people's expectations at the start of this year.
That is why European companies are showing decrease earnings, that's a big customer for them.
Has the slowdown abated?
We don't know.
>> This is closer to home. If you want to get your Outlook for Shopify. The street seemed please last week.
>> I think on the day it was up 14% or something, maybe even more.
>> I remember it was up something like 20%.
>> There was a big jump. Shopify, we were talking earlier about the Magnificent Seven and these companies in the US that have cost cut and benefited. Shopify finally did that.
Earnings are 25% but more importantly, they guided that going forward, the trajectory of revenues will be fine.
Revenue is going to grow 20+. But they said that they are actually gonna be profitable. Free cash flow margin, how much cash they generate from revenues is going to be I think 14 or 15%.
So revenues are growing and they are actually extracting cash from that. So Shopify is a business.
Shopify was an unprofitable business that was chasing, going after these ventures like logistics that were money-losing, they didn't have a payback period.
They got over all of that. They just said, we are going to be a pure e-commerce platform now, allowing companies to build great websites, provide payment services, help small businesses grow without the capital-intensive logistics network.
It's easier for profitability. We have been talking about rates.
Shopify's net cash doesn't care about higher rates.
There is cash in the bank. It has more cash than debt. 5% of the company is sitting in cash. So you have a high-growth company that is now generating, that is now focused on free cash flow, where margins are improving. I actually think it's totally fine in its had its brush with death, the fact that it was unprofitable and high rates affected the valuation. That's last year. This year, the question is can it execute and can e-commerce for small businesses continue to grow?
>> Some positive things there for Shopify.
There is always the what if. What could get in its way?
>> The problem with a lot of these companies is that success almost breeds complacency. If you have another competitor, I don't see it given their scale right now, but if another competitor comes into try to dislodge them as the best in class e-commerce service for small businesses, that's a risk. There is also what happened last year. It was pummelled because it tried to build logistics platform that was money-losing. They could try another venture like that where they start losing money again because they are trying to do something that is tangential doesn't have a good payback period.
I think that's a risk to the stock.
>> Listing another question here.
This one is about the insurance base.
Someone is looking for a breakdown here.
Which of the group, we are talking about life, PNC, reinsurance and insurance brokers within the insurance industry have a positive outlook in today's economy?
That's like a master class.
>> I'm thinking that some very sophisticated viewer question who understands the different verticals in the insurance industry. Let's take a step back. If you asked me, and I think my colleague was speaking with you, Ben Gossack, about this, we like, I like insurance better than banking for the sole reason that this year, the scare would have been, let's separate these financial things, insurance companies and banks.
This year, the scare and banking, with SVB, was deposit outflows deposit outflows and then obviously questions about credit.
In a slowing economy and with low losses.
With insurance, the deposits are policyholders paying a monthly premium.
That is how insurers have capital. Higher rates don't necessarily mean that you will stop paying your policy benefits because if you are in personal and commercial, you still need to be insured. If you are life insurance, you are not just immediately going to switch because rates are higher.
The funding base for insurance company is structurally better than a banking business right now in this current rate environment where deposits are more flexible. The second thing to you is with insurance companies, there is less regulatory risk.
You hear about the regulators every month talking about increasing capital requirements, for some reason inference companies have done a good job of flying under the radar. They are not beholden to these negative things. So you have, and then, the last thing where the positive is that insurance companies, especially PNC companies, Intact reported today, they can reprice every year, their liabilities, they reprice them every year.
And so they benefit from higher rates because a lot of their assets are held in the short term. And they don't have a lot of long-term liabilities because they have been reprice.
The insurance industry, we talked about the different things, like companies benefit because they have stable deposits, PNC's are benefiting because of higher rate stability and brokers are consolidating the industry and consolidating with the smaller brokers and so they have pretty decent revenue growth without taking any capital.
I like all of those businesses and I think they are all very interesting places in the fact that they fly under the radar is probably contrarian to a degree. Even though the socks of done well, no one talks about them.
>> I have to ask you about the risks.
>> The risk to the industry, the big risk is If there are changes in regulation.
If you followed insurance companies for a while, especially life insurance companies, in PNC insurance, its catastrophe risk and them doing a bad job on pricing, but for life insurance companies, the biggest risk has always been what they've done on the asset side.
So you get policy premiums every month, invest them in assets, but sometimes the life insurance companies have invested in the wrong assets. In the financial crisis, they had a lot of CEOs and commercial owned obligations. We know what happened to that. Those had to be marked down and then you have a whole. The risk for these insurance companies is not really on the funding side and what the policyholders are doing but how they are investing those assets. I think they've had, to a certain degree, they are a bit more aware of what happens when they try and go up the credit risk curve. That's the big risk for them.
>> As always at home, make sure you do your own research before making any investment decisions.
We will get back to your question for Damian Fernandes on global stocks in just a moment's 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.
If you're looking for investment options outside of the Canadian market, WebBroker has tools which can help. Joining us now for more, Hiren Amin, senior client education sector with TD Direct Investing.
Always great to see you. Let's talk about searching for global investments using the platform.
>> Great to be back. Let's talk about global stocks. One of the things you wanted to mention is when you're trying to trade online, they're going to be barriers to access those international markets directly. While you can do it at TD Direct Investing by phoning in and speaking to the international desk if you wanted to invest in specific stocks, it may not be as efficient, and we are talking from a cost point, it may not be as efficient. In that case, investors may want to turn towards looking towards fund specifically ETFs that give you that diversification exposure.
We are on WebBroker. Let's show you how you can actually find some of those funds.
But we are going to do is bring up our research have over here. In the tool section, we are going to head over to screeners.
This is going to allow us to filter the universe of ETFs that exist and pinpoint some of the global ones we are looking for.
I'm going to head over to the ETFs tab right over here.
We are going to create a custom screen over here. Let's go ahead and do that.
We are going to keep our search very broad-based.
What I'm going to do first is plop in the fund category filter. Any of these filters that you choose, if you are unfamiliar what they are, you can click on it and it's going to give you a quick explainer on exactly what that does. Let's go ahead and add this one in.
We will go ahead and also add in the one that's part of this list as well, index because that will help choose passive versus active or maybe they just want to see the whole gamut of ETFs under that group.
From here, we will go to performance and we are going to head over to one that says tracking error. We will get to that when we chose the criteria.
And then finally, we are going to go on to our… Portfolio. Fund inception. I want to see how long that fund or ETF provider has been in existence on this particular one.
So this is our broad-based criteria that we are going to select. Under the fund category, is going to be a whole host of choices. We are going to keep it simple.
It's alphabetically organized.
We are going to go and head onto the G for global.
We are going to land on global equity, Canadian domestic issuers. And there's one other what I'm going to show.
It would be an interesting conversation point because it might confuse investors to see what the differences between the two. Let's head on down here and we are going to pull up under the high section, it should be coming up here, international equity. So we've chosen these so far.
We've got 602 matches. The index we can choose, either show only index funds which are using those more passive based funds.
We can't turn that on or off.
This is an important one if you are looking for those investments that are passive and really try to mimic the performance of the index. We want to be able to make that performance as close to the value of the index, so for that reason, for the tracking error, we wanted to be low or below average when you're looking at it there.
Let's pick our below average as well and add that in.
The final thing we are going to add is we want to see a fund that has been in existence, has a bit of a track record, 1 to 5 years, we will go with the full spiel and show all of these out there. Within this year, we have this narrowed down. I'm going to turn index for a second.
We are going to explain just global versus international equity. What does that mean?
It comes down to the exposure you are getting.
When you are looking at global equity funds, these are all full gamut of all the countries in the world essentially, including our domestic markets. So for investors who might be a little bit underweight on the domestic side in Canada with some of those issues, they may want to just get more exposure through taking a global ETF. If you choose an international one, the main option is going to be international equity. It will not give you exposure to Canadian stocks, it will be everything else besides Canadian markets.
Once we have that, all you have to do is run the match there.
>> We did some work there to set up our screens. Now we got our screen. There has to be a way to save it, maybe even edit it later on. How do we do that?
>> Yes, absolutely. What we are going to do here is once you have everything in place, we will hit view matches and see all of those matches.
If you want to tweak it or keep this for the next time you want to come in, what you're going to notice is once you produce the results towards the top, it has all the credentials, all you're going to use enter screen name. I'm going to type in global ETF's.
Then all you do is hit save screen here and so the next time I come into my ETF screeners page, you will see there is a saved screen section right over here and you can come down and see there should be a global ETF screeners that we just saved and you can just loaded up, fire it up and edit it if you need to from here.
>> Thanks for that. Good stuff as always.
>> Your welcome, Greg.
>> Hiren Amin, senior client education sector at TD Direct Investing. And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
We are back with Damian Fernandes, taking your questions about global stocks, plenty coming in the past couple of moments.
Let's take this one. What is your view on luxury companies like LVMH?
Can they keep raising prices for their goods to boost operating margins?
>> Great question.
Since time immemorial, they have continued to raise prices. Luxury companies are in a special position. You raise prices and demand increases. Unconventional wisdom.
Let separate luxury from LVMH. Louis Vuitton.
And luxury, the model is, you keep raising prices, you restrict supply, more fruitful want your product and that's how, and margins increase. That's the genesis of that question from the viewer. The biggest thing though is that people have to want the product.
You can have a luxury moniker but if people do not, if you do not have that brand prestige or for some reason you have fallen off for your advertising campaign has been that great or it's not resonating, then you can't raise prices.
So what I want to say is that luxury as a category is great but you want to be the winners in that category. LVMH, to your viewers question, continues to have that ability to price.
The risk for those stocks is that we talked earlier about the slowdown in China, a lot of their businesses tied to consumption in China. If there is a slowdown in consumption spending, that will affect the stocks. But broadly, the core reason these stocks are strong is that they can price, it and that means they can extract margin, reinvested in the business to build up more cachet, and LVMH in terms of brand equity fit that model.
>> I think if you are doing research in the space you have to keep on top of all the young musicians and actors, what are they wearing in carrying?
>> That's right. You have to see how the influences are, how they are resonating.
Ideally with these luxury goods, the worst part for them is if you have access to the products. If you can actually access their products, you can buy them or it's available, that's your big warning sign that it's losing its cachet.
>> You should be on a waiting list.
>> Yeah.
>> Another question just came in the past couple of moments. Damian, they want to get your view on the Canadian dollar versus the US dollar.
>> Another question, Greg.
Ultimately, the Canadian and US dollars are driven by interest rate differentials, fancy way of saying our rates higher in the US versus Canada and where is going?
Are rates going to move persistently higher, is Canada going to cut rates faster?
Uniquely to the Canadian US dollar relationship is the price of our main export commodity prices. We started the show by talking about the weakness in oil.
That has a direct impact for the Canadian dollar because it means the value for exports is going down, major exports of commodities.
Both these things are working against the Canadian dollar.
It looks like the US economy is well both the US economy in Canada are slowing, the US economy is slowing less, Canada is much more invested in the housing market and interest rates affect that.
Interest rates are working against the Canadian dollar because Canadian rates might be cut faster than the US and secondly the other weight on the Canadian dollar is commodity prices are actually, W BTI, I looked this morning, it's the lowest level since July this year.
We are in the midst of these multiple geopolitical conflicts that should have a premium but yet oil prices are lower. So the outlook is in grade for the Canadian dollar until those two things change.
>> Here is an interesting one to you. You have your wants to know, how can he play the rise of weight-loss drugs like Ozempic? I think the market has been thinking they will never eat another bag of chips again.
>> Not me personally.
Ozempic and Bonjour from Eli Lilly, I mean this truly, life-changing, society changing drugs. Life-changing for the person who uses them because you were able to reduce your weight and improve your own, your health benefits, but also just your own attitude.
For society, life-changing because weights or obesity has a whole bunch of comorbidities associated with it, like high blood pressure and a whole host, diabetes. So having something, having drugs that should reduce it is actually great for the individual and for society.
There is a long tail of benefits.
Battir question of chips and pop and fast food, a lot of those stocks, the success of these drugs and Eli Lilly have become mainstream, these companies immediately investors were guns out, oh my God, no one's ever going to consume another big Mac again.
No one is ever going to consume another bag of lace chips.
There is almost like an overblown reaction to this.
It's not like it's going to happen immediately.
More importantly, how are these companies, whether it's Pepsi who make snack foods, they'd be making money by pricing.
They actually reduce the amount of quantity in your bag of chips and increase the price.
>> And we still buy them.
>> And you still buy them!
There's this indulgent behaviour. I think so far, there has been significant price drawdowns. They have derated a lot on the stocks for consumers snacking food categories, they have derated a lot on these drugs but I also think about it like, as an investor, I always think about what is the market not imagining? We've priced in that no one is going to buy a bag of chips again, but if you have weight loss, who benefits?
>> Maybe suits a little bit too big for me.
>> Maybe buy a new suit. Maybe Hugo Boss is… You look at lululemon. This whole category. You decide to have more Instagram or social media pictures.
You decide to get an Adobe platform to improve your pictures.
So trying to think about where… Don't think about what is happening with the market is pricing in, but what has not been pricing? I think people are pricing in the positive tale of these weight-loss drugs and we are exploring where that is.
Whether it's clothing companies, social media, all of that.
>> We will get back to your question for Damian Fernandes in a moment 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 talked about oil prices under tension recently, same thing with gold. Anthony Okolie digs into the latest TD Security support throughout their outlook on the precious metal.
>> Made to ease tension fears have ease somewhat. Also weighing on gold, fading fears over market volatility. This is in sharp contrast with last month's make a rally where we sell prices were past the $2000 per hour once barrier following and this came despite the fact that we saw surging US bond yields. It gold prices have since come back down to earth. Today, gold is sitting at roughly $1960 per ounce. TD Security says that the price action in gold following the Israeli Hamas conflict created the illusion of strong apparent demand. Fuelling the resurgence in gold, investors motivated by geopolitical tensions and buying pressure from fund shifted from short to net long positions. TD Security says that this buying exhaustion we've seen in gold markets has morphed into selling activity.
As the chart shows, we've seen evidence of this buying exhaustion materialize after previous confidence crisis like the Ukraine Russia conflict and the US regional bank crisis earlier this year. TD Securities now estimates the prices will need to break well about the $2000 per ounce range to spark large-scale lying again. Barring a severe escalation at this point, it opens the door to potential selling under 1945 selling marks. TD Securities believes that buying activity may return and coming sessions as medium to long downward trend signals from gold prices are set to weaken.
TD Securities also expects this to be more pronounced in the very near future in the near term, potentially supporting prices.
Of course, great, you will have Bart Melek from TD Securities on the show tomorrow, talking about this commodity outlook and his outlook for gold as well.
>> We will deftly get Barth's views on gold.
Thanks for that, Anthony.
>> My pleasure.
>> Now for an update on the markets.
We are looking at TD's advanced dashboard, a platform designed for active traders available to the TD Direct Investing. We are looking at the heat map function here, screening to the TSX 60. With the prices of gold and oil continuing to pull back, you are seeing some pressure on some of the big names.
We can start in the energy space. We can choose any of them off the screen. Cenovus Energy down to the tune of about 3%.
Suncor, another major down, 2 1/2%. CNQ.
TRP, TC Energy, it had results that the market is reacting to. You move over to basic materials there and you find pressure on the gold miners, bear down about 3% as well. South of the border, I want to check in on the S&P 100. We have a nice rally, a hot streak we haven't seen in two years in terms of its duration south of the border. It is being put to the test to day. On a headlight basis, the S&P 500 is down by a fit of a percent.
We can see where the weak points are. We are seeing names like Tesla and Amazon to the downside.
Also the financials appear to be under pressure and no surprise.
And US energy heavyweights or to the downside. I just wanted to share one piece of information with you because we were just talking about the obesity drugs, the FDA has approved Eli Lilly's treatment for weight loss, gaining wider use of that blockbuster drug. You can get more information on TD advanced dashboard by visiting TD.com/Advanced Dashboard.
We are back with Damian Fernandes from TD Asset Management, Baltimore questions here. Who wants to know your real asset management.
>> I think Brookfield is a place for the medium-term horizon. When you think about Brookfield, it's an alternative asset manager. Every single insurance company, pension fund, endowment, personal clients, high net worth individuals, are looking to increase their investments in alternative assets. This is Brookfield's bread and butter. This is what they do.
They just reported and fundraising is going on track. They're going to have 150 billion in funds raised that they will learn premiums from but more interestingly a few years ago they bought Oaktree, the largest player, one of the largest renown players and private debt investing.
We were talking about rates being high.
Private debt is one of the more attractive places right now.
So inadvertently, Brookfield is known for its and for structure projects and real estate and now you also have this other roast Avenue in private debt.
When we look at the stock, it's a Catholic business with an asset manager, it's paying a 4% dividend yield, that's growing nicely and its fees that it learns to pay those dividends have secular growth tied to investors looking for the space, a major player to actually help. There are good tailwinds in his favour.
>> Want to ask you about risks before I let you go.
>> Just rates.
Brookfield or its subsidiaries and businesses, they've been walloped on rising rates. The risk from the stocks is that, we talked earlier about the outlook, if I'm wrong and rates continue to increase, why do you buy alternatives?
Because you want to earn yields that are better than the public market.
If rates keep moving higher, you don't need to buy alternatives because you just earn those yields in the public market.
That's the overriding risk.
It's a big risk.
>> Always a pleasure to have you on the show. It was a fascinating conversation.
>> Likewise.
>> 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.
do stay tuned for tomorrow show. As Anthony was saying, Bart Melek will be here, global head of commodity strategy with TD Securities. I've got a lot of questions for him and I know you do too.
Oil, gold, what's going on? You can get those questions in ahead of time. Just email moneytalklive@td.com.
That's all the time you have the show today. Thanks for watching. We will see you tomorrow.
[music]
We're going to take you through what's moving the markets and answer your questions about investing.
Coming up on today show, we are going to discuss whether earnings season is telling us about the state of the markets with TD Asset Management's Damian Fernandes.
MoneyTalk's Anthony Okolie is going to have a look at what's weighing on the price of gold the past couple of sessions.
And in today's a broker education segment, Hiren Amin is going to shows how you can find global exchange traded funds on the WebBroker 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.
Another down session for the TSX Composite Index. Got the price of crude oil continuing to pull back, the price of gold continuing under pressure. Not great for the two biggest sectors in terms of weighing on topline, materials and energy.
It's not too dramatic but we are down 56 points, a little shy of 1/3 of a percent.
West Texas intermediate on my screen at 75 bucks and change, steps back more than 4% today and 2% to the downside today. Seeing some pressure in the energy space. God Cenovus at 2409, down a little more than 2%. Fortune a silver mine coming out with its latest earnings and investors seem to like what they are seeing. At four bucks and $0.13, the stock is up about 4 1/2%.
South of the border, the S&P 500 has been on a winning streak. It hasn't been on a streak this long and about two years. We got Jerome Powell speaking today. A bit of caution in the trade. Your dad about seven points or offensive a percent.
Can they shake that often shows some green before the end of the session? The NASDAQ has been on a hot streak as well. How is it trying right now? Pretty much in line with the broader market, down 19 points are a little more than 1/10 of a percent.
Let's check in on Rivian, they are out with earnings as well. It's been choppy but right now at 1678, you got Rivian down 3 1/2%.
And that's your market update.
While many companies have largely delivered positive earnings results this quarter, many have also provided guidance that suggest tougher days may be ahead.
What does this mean for market opportunity going forward? Joining us now to discuss his Damian Fernandes, managing director and portfolio manager at TD Asset Management trade welcome back to the show.
>> Always a pleasure.
>> What is the market telling us about the road ahead?
>> Is a less bad than feared.
We spent the last 18 months with everyone expecting for a recession, we've been calling for an economic recession and slow down. It's been doom and gloom. We've had that in US earnings.
There were three quarters, Q4 last year, Q1 this year and Q2 earnings this year, they were negative. You had practically speaking in earnings recession.
Better than feared was my prognosis because Q3, this is going to be the first quarter since last year were earnings have been positive. Like most things, with momentum, as these things start, they continue. The headline numbers aren't a barnburner. Revenues are up 2%, earnings or up a little bit more than that. When you look under the service and take out things like energy, but I should start by saying this.
Close to 90% of companies have reported.
If you take out energy stocks and material stocks, earnings are actually of close to 10%, 9%. Revenues are up close to five. So a lot of good things at the service and the reason why I exclude energies because last year, energy earnings were buoyed by geopolitical risk and high energy prices.
Even including energy, we move into positive. When you look at the history of earnings, they continue to do so until they are interrupted. Right?
So the fact that we have inflected positive, if we have a soft issue landing, if you don't collapse into an economic recession, coming out of this earnings recession, that'll be good.
Earnings are ultimately at the drivers of stock and if they have inflected positive, it's probably a sign that we shouldn't be too bearish on stocks going forward.
>> Let's talk about some examples from earnings season. Let's take away energy and materials but take a look at big Tech, Meta and some of the others. What are we seeing?
>> They have had, when you think about the Magnificent Seven, the moniker that people use, it is well-deserved to a certain degree.
The Magnificent Seven came out with magnificent earnings. The stock prices were already pricing a lot of that in so the stock price moved ahead, he talked about Meta, Meta revenues were up 25%, earnings were up over 100 year on year.
So the difference obviously is that Meta last year seeing the slowdown coming, they actually took steps. They lowered their Acts, they cut By about $3 billion, that's free cash flow, what ultimately drives value for business, that improved. They cut expenses.
We heard about changes to their workforce.
They laid off a lot of people.
They actually fronts-- almost in anticipation of a slowdown, an economic slowdown, they took steps. The slowdown didn't materialize. Revenues are up 25%.
You have this massive operating leverage.
Not just Meta but more conventional companies like Microsoft. Micro soft is reporting 13% topline growth, 25% EPS growth. That's even before its implement thing it's AI offering, copilot.
Microsoft will have its own AI assistant.
That's before this. There are already reporting. Amazon really good numbers there.
It's cloud business was up 12%. I found something really interesting and Amazon.
We think of Amazon, we think about cloud and conventional retail, the Amazon e-commerce site. Amazon's e-commerce in North America, the margins there are close to 5%.
That's in line with Walmart. Amazon, which has this huge logistics platform, is earning basically the same profitability as you and I walking into a Walmart store and picking it up off the shelf.
These things are… When you talk about… I find the moniker sometimes misleading.
People like to pick on winners. But to be clear… >> I want to pick on the winners a little bit. We've been showing one-year stock charts. They gone up quite a bit. The market is a forward-looking instrument.
Had they had their run even though they have had these stellar results?
>> These charts are manifestations of the underlying fundamentals. When people look at stock runs, they love charts that go from the bottom left of the top right.
But generally with stocks, unless we are in almost a market where investor sentiment is aggressive, the reason stock prices go from the bottom left of the top right is because fundamentals are improving. When you have companies delivering double-digit revenue growth and high, 20% plus EPS and cash flow growth, that's in the stock price. The better question is, have they had their day in the sun?
They've all come out with guidance that has been generally I would say conservative. So if they keep beating, the stock prices will continue doing well.
What's more interesting for these companies is the case of names like Meta is the regulatory risk.
Do the regulations or the regulatory backdrop around providing advertising services through social media, do the regulators finally… Those things are existential and I can't price but the actual core businesses are doing fine.
>> Let's talk about the big or were hangs for the market. We looked at fundamentals during earnings season, companies are turning away based on their merits. But inflation, the economy, rate hikes, everything that's been dominating the conversation for a year and 1/2, where do we feel that we are in that story? A lot of people want to put it behind us, obviously.
>> It's not even… Of inflation, aggressive rate hikes, a slowdown, there's the hope that these things would eventually be behind us. We are at the end, I said that I think the Fed is done. I think the Fed has been done since July. They haven't raised rate since July. Same with Bank of Canada. Last week which I found interesting was that the Fed, either Jerome Powell or communications from Fed board members, they were talking about how the recent increase in long-term rates has tightened financial conditions, basically done the job for them.
They want to increase the price and make it more expensive with interest costs rising. They do that by raising short-term rates but the long-term rates have risen up more so when you've tightened financial conditions and so by the way while this is happening, inflation is coming down. We had a job number last week that was in my mind almost Goldilocks.
It was still positive, wasn't too hot.
>> Americans got jobs but not too many.
>> The wage numbers were not too hot.
So your seeing evidence that we are at the end of this rate hiking campaign, that inflation is going to slow and will continue to slow for the next few months, if inflation continues to slow you can actually have rate cuts because the current rate hiking environment is too tight. And so these things, let's put it this way. The reason investors reached for her, had indigestion last year and reach for the Pepto-Bismol is because of aggressive rate hikes. It was because inflation was at its fastest level since the 70s. We are on the other side of that mountain.
Inflation is falling. It looks like rates have peaked and they might come down.
That's what the market is pricing in.
These macro variables are positive. As long as, I should have a provision here.
>> There is always a but.
What if. What if. about soft landing, hard landing. What we want or slow down or no landing. What we really want is you can afford a mediocre recession or slowdown.
The difference between -1 and +0.5% is… What we don't want is a much more significant slowdown.
We don't want the current rate hikes that have been put in place to actually lead to a significant credit event that actually weighs on the consumer. If we have a soft issue landing or a mild slowdown, a mild recession, things will be fine. The markets will price that. What the market has not priced for is a much deeper recession. To be clear, or a stand today, from looking at the variables I look at, I don't know if we have enough evidence to say that things are going to be materially worse. Things are going to slow for sure.
Q4 will be slower than Q3. That's just my feeling.
>> Always interesting views with Damian Fernandes. We are going to get your questions for Damian on global stocks and just about'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.
Higher demand for liquefied natural gas help the bottom line at TC Energy in its third quarter. Earnings from the LNG division were up almost 10% compared to the same period last year. That was a mid increased shipments to several big American facilities during the quarter.
Right now the stock bucking the trend in the energy space, up a modest 1%. Let's check in on shares of gaming company Roblox. I never got this one but let's try to explain it. They are moving higher.
Up 14%. It was a beat on the top and bottom lines. Their daily active users are up 20% compared to the same period last year.
Hourly user engagement was also higher.
They sell virtual currency to gamers to buy in game features including dressing up their avatars. I don't get it but the market does. Let's talk about a company that I understand a little bit better.
Disney, there on deck to report earnings after the closing bell today. Investors have a number of concerns heading into the release, including Disney's unprofitable streaming service and the impact of the ongoing Hollywood actors strike on content.
The shares are down modestly at this moment.
Let's get you on the markets, we will start with the TSX Composite Index. A down day for oil and gold. Not great for the top line on the TSX. 86 point deficit, down about half a percent.
South of the border, the S&P 500, that brought a read of the American market has been on a hot straight.
Right now it is in modestly in negative territory. Jerome Powell's going to have a little more to say and investors are waiting carefully on that one.
We are back with Damian Fernandes, we are taking your questions on global stocks, so let's get to them. The first one off the top, the second largest economy in the world.
How worried should we be about slowing growth in China?
>> That is almost a question that answers itself. The second largest economy in the world is slowing, we should be worried.
But remember there used to be in adage, when the US sneezes, the world catches a cold.
That qualifies now for the world's second-largest economy, China. When China sneezes, particularly emerging markets tied to the supply chains, they catch a cold.
For European companies that cater to the Chinese consumer, luxury names, they catch a cold. So a slowdown in the world's second-largest economy does have direct impacts to production lines, to consumption behaviour, for a lot of companies.
But I want to separate levels from rate of change.
This is something in markets that we should do more of. So China is slowing.
The level slowed. But the rate of change has actually improved. What I mean by that is in the last few months, we've seen the slowing bottom out. We've seen a host of different measures from the government… They are not gargantuan.
>> They are flying under the radar.
>> Exactly. We ease leading Saturn rodents, we've ease capital requirements.
We pays it easier to access funds. At the margin, you are seeing the government, they don't want to have a big problem.
It led to a massive inflation bull. So they want to avoid that and they don't… They might actually have to have more increase.
The reason we are talking about levels and change is while the level of growth is slow, if the rate of change is not getting worse and all of the stimulus measures we've announced these past few months, to your point, that have gone under the radar, can we see a bottoming of growth and maybe some improvement next year? I think that has to be in the cards. The outside risks are that the property crisis there.
The Chinese property market is the second most important asset in the world after US treasuries because so much of it is leveraged.
If we don't see some level of normalization there, if it doesn't get worse for these developers and they don't pull the economy down, I think that next year we could see some positive things happening in China. So I'm more looking at the rate of change. If you see some improvements there. And then are we seeing a bottoming of growth? To be clear, China has slowed.
And it has slowed much worse than people's expectations at the start of this year.
That is why European companies are showing decrease earnings, that's a big customer for them.
Has the slowdown abated?
We don't know.
>> This is closer to home. If you want to get your Outlook for Shopify. The street seemed please last week.
>> I think on the day it was up 14% or something, maybe even more.
>> I remember it was up something like 20%.
>> There was a big jump. Shopify, we were talking earlier about the Magnificent Seven and these companies in the US that have cost cut and benefited. Shopify finally did that.
Earnings are 25% but more importantly, they guided that going forward, the trajectory of revenues will be fine.
Revenue is going to grow 20+. But they said that they are actually gonna be profitable. Free cash flow margin, how much cash they generate from revenues is going to be I think 14 or 15%.
So revenues are growing and they are actually extracting cash from that. So Shopify is a business.
Shopify was an unprofitable business that was chasing, going after these ventures like logistics that were money-losing, they didn't have a payback period.
They got over all of that. They just said, we are going to be a pure e-commerce platform now, allowing companies to build great websites, provide payment services, help small businesses grow without the capital-intensive logistics network.
It's easier for profitability. We have been talking about rates.
Shopify's net cash doesn't care about higher rates.
There is cash in the bank. It has more cash than debt. 5% of the company is sitting in cash. So you have a high-growth company that is now generating, that is now focused on free cash flow, where margins are improving. I actually think it's totally fine in its had its brush with death, the fact that it was unprofitable and high rates affected the valuation. That's last year. This year, the question is can it execute and can e-commerce for small businesses continue to grow?
>> Some positive things there for Shopify.
There is always the what if. What could get in its way?
>> The problem with a lot of these companies is that success almost breeds complacency. If you have another competitor, I don't see it given their scale right now, but if another competitor comes into try to dislodge them as the best in class e-commerce service for small businesses, that's a risk. There is also what happened last year. It was pummelled because it tried to build logistics platform that was money-losing. They could try another venture like that where they start losing money again because they are trying to do something that is tangential doesn't have a good payback period.
I think that's a risk to the stock.
>> Listing another question here.
This one is about the insurance base.
Someone is looking for a breakdown here.
Which of the group, we are talking about life, PNC, reinsurance and insurance brokers within the insurance industry have a positive outlook in today's economy?
That's like a master class.
>> I'm thinking that some very sophisticated viewer question who understands the different verticals in the insurance industry. Let's take a step back. If you asked me, and I think my colleague was speaking with you, Ben Gossack, about this, we like, I like insurance better than banking for the sole reason that this year, the scare would have been, let's separate these financial things, insurance companies and banks.
This year, the scare and banking, with SVB, was deposit outflows deposit outflows and then obviously questions about credit.
In a slowing economy and with low losses.
With insurance, the deposits are policyholders paying a monthly premium.
That is how insurers have capital. Higher rates don't necessarily mean that you will stop paying your policy benefits because if you are in personal and commercial, you still need to be insured. If you are life insurance, you are not just immediately going to switch because rates are higher.
The funding base for insurance company is structurally better than a banking business right now in this current rate environment where deposits are more flexible. The second thing to you is with insurance companies, there is less regulatory risk.
You hear about the regulators every month talking about increasing capital requirements, for some reason inference companies have done a good job of flying under the radar. They are not beholden to these negative things. So you have, and then, the last thing where the positive is that insurance companies, especially PNC companies, Intact reported today, they can reprice every year, their liabilities, they reprice them every year.
And so they benefit from higher rates because a lot of their assets are held in the short term. And they don't have a lot of long-term liabilities because they have been reprice.
The insurance industry, we talked about the different things, like companies benefit because they have stable deposits, PNC's are benefiting because of higher rate stability and brokers are consolidating the industry and consolidating with the smaller brokers and so they have pretty decent revenue growth without taking any capital.
I like all of those businesses and I think they are all very interesting places in the fact that they fly under the radar is probably contrarian to a degree. Even though the socks of done well, no one talks about them.
>> I have to ask you about the risks.
>> The risk to the industry, the big risk is If there are changes in regulation.
If you followed insurance companies for a while, especially life insurance companies, in PNC insurance, its catastrophe risk and them doing a bad job on pricing, but for life insurance companies, the biggest risk has always been what they've done on the asset side.
So you get policy premiums every month, invest them in assets, but sometimes the life insurance companies have invested in the wrong assets. In the financial crisis, they had a lot of CEOs and commercial owned obligations. We know what happened to that. Those had to be marked down and then you have a whole. The risk for these insurance companies is not really on the funding side and what the policyholders are doing but how they are investing those assets. I think they've had, to a certain degree, they are a bit more aware of what happens when they try and go up the credit risk curve. That's the big risk for them.
>> As always at home, make sure you do your own research before making any investment decisions.
We will get back to your question for Damian Fernandes on global stocks in just a moment's 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.
If you're looking for investment options outside of the Canadian market, WebBroker has tools which can help. Joining us now for more, Hiren Amin, senior client education sector with TD Direct Investing.
Always great to see you. Let's talk about searching for global investments using the platform.
>> Great to be back. Let's talk about global stocks. One of the things you wanted to mention is when you're trying to trade online, they're going to be barriers to access those international markets directly. While you can do it at TD Direct Investing by phoning in and speaking to the international desk if you wanted to invest in specific stocks, it may not be as efficient, and we are talking from a cost point, it may not be as efficient. In that case, investors may want to turn towards looking towards fund specifically ETFs that give you that diversification exposure.
We are on WebBroker. Let's show you how you can actually find some of those funds.
But we are going to do is bring up our research have over here. In the tool section, we are going to head over to screeners.
This is going to allow us to filter the universe of ETFs that exist and pinpoint some of the global ones we are looking for.
I'm going to head over to the ETFs tab right over here.
We are going to create a custom screen over here. Let's go ahead and do that.
We are going to keep our search very broad-based.
What I'm going to do first is plop in the fund category filter. Any of these filters that you choose, if you are unfamiliar what they are, you can click on it and it's going to give you a quick explainer on exactly what that does. Let's go ahead and add this one in.
We will go ahead and also add in the one that's part of this list as well, index because that will help choose passive versus active or maybe they just want to see the whole gamut of ETFs under that group.
From here, we will go to performance and we are going to head over to one that says tracking error. We will get to that when we chose the criteria.
And then finally, we are going to go on to our… Portfolio. Fund inception. I want to see how long that fund or ETF provider has been in existence on this particular one.
So this is our broad-based criteria that we are going to select. Under the fund category, is going to be a whole host of choices. We are going to keep it simple.
It's alphabetically organized.
We are going to go and head onto the G for global.
We are going to land on global equity, Canadian domestic issuers. And there's one other what I'm going to show.
It would be an interesting conversation point because it might confuse investors to see what the differences between the two. Let's head on down here and we are going to pull up under the high section, it should be coming up here, international equity. So we've chosen these so far.
We've got 602 matches. The index we can choose, either show only index funds which are using those more passive based funds.
We can't turn that on or off.
This is an important one if you are looking for those investments that are passive and really try to mimic the performance of the index. We want to be able to make that performance as close to the value of the index, so for that reason, for the tracking error, we wanted to be low or below average when you're looking at it there.
Let's pick our below average as well and add that in.
The final thing we are going to add is we want to see a fund that has been in existence, has a bit of a track record, 1 to 5 years, we will go with the full spiel and show all of these out there. Within this year, we have this narrowed down. I'm going to turn index for a second.
We are going to explain just global versus international equity. What does that mean?
It comes down to the exposure you are getting.
When you are looking at global equity funds, these are all full gamut of all the countries in the world essentially, including our domestic markets. So for investors who might be a little bit underweight on the domestic side in Canada with some of those issues, they may want to just get more exposure through taking a global ETF. If you choose an international one, the main option is going to be international equity. It will not give you exposure to Canadian stocks, it will be everything else besides Canadian markets.
Once we have that, all you have to do is run the match there.
>> We did some work there to set up our screens. Now we got our screen. There has to be a way to save it, maybe even edit it later on. How do we do that?
>> Yes, absolutely. What we are going to do here is once you have everything in place, we will hit view matches and see all of those matches.
If you want to tweak it or keep this for the next time you want to come in, what you're going to notice is once you produce the results towards the top, it has all the credentials, all you're going to use enter screen name. I'm going to type in global ETF's.
Then all you do is hit save screen here and so the next time I come into my ETF screeners page, you will see there is a saved screen section right over here and you can come down and see there should be a global ETF screeners that we just saved and you can just loaded up, fire it up and edit it if you need to from here.
>> Thanks for that. Good stuff as always.
>> Your welcome, Greg.
>> Hiren Amin, senior client education sector at TD Direct Investing. And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
We are back with Damian Fernandes, taking your questions about global stocks, plenty coming in the past couple of moments.
Let's take this one. What is your view on luxury companies like LVMH?
Can they keep raising prices for their goods to boost operating margins?
>> Great question.
Since time immemorial, they have continued to raise prices. Luxury companies are in a special position. You raise prices and demand increases. Unconventional wisdom.
Let separate luxury from LVMH. Louis Vuitton.
And luxury, the model is, you keep raising prices, you restrict supply, more fruitful want your product and that's how, and margins increase. That's the genesis of that question from the viewer. The biggest thing though is that people have to want the product.
You can have a luxury moniker but if people do not, if you do not have that brand prestige or for some reason you have fallen off for your advertising campaign has been that great or it's not resonating, then you can't raise prices.
So what I want to say is that luxury as a category is great but you want to be the winners in that category. LVMH, to your viewers question, continues to have that ability to price.
The risk for those stocks is that we talked earlier about the slowdown in China, a lot of their businesses tied to consumption in China. If there is a slowdown in consumption spending, that will affect the stocks. But broadly, the core reason these stocks are strong is that they can price, it and that means they can extract margin, reinvested in the business to build up more cachet, and LVMH in terms of brand equity fit that model.
>> I think if you are doing research in the space you have to keep on top of all the young musicians and actors, what are they wearing in carrying?
>> That's right. You have to see how the influences are, how they are resonating.
Ideally with these luxury goods, the worst part for them is if you have access to the products. If you can actually access their products, you can buy them or it's available, that's your big warning sign that it's losing its cachet.
>> You should be on a waiting list.
>> Yeah.
>> Another question just came in the past couple of moments. Damian, they want to get your view on the Canadian dollar versus the US dollar.
>> Another question, Greg.
Ultimately, the Canadian and US dollars are driven by interest rate differentials, fancy way of saying our rates higher in the US versus Canada and where is going?
Are rates going to move persistently higher, is Canada going to cut rates faster?
Uniquely to the Canadian US dollar relationship is the price of our main export commodity prices. We started the show by talking about the weakness in oil.
That has a direct impact for the Canadian dollar because it means the value for exports is going down, major exports of commodities.
Both these things are working against the Canadian dollar.
It looks like the US economy is well both the US economy in Canada are slowing, the US economy is slowing less, Canada is much more invested in the housing market and interest rates affect that.
Interest rates are working against the Canadian dollar because Canadian rates might be cut faster than the US and secondly the other weight on the Canadian dollar is commodity prices are actually, W BTI, I looked this morning, it's the lowest level since July this year.
We are in the midst of these multiple geopolitical conflicts that should have a premium but yet oil prices are lower. So the outlook is in grade for the Canadian dollar until those two things change.
>> Here is an interesting one to you. You have your wants to know, how can he play the rise of weight-loss drugs like Ozempic? I think the market has been thinking they will never eat another bag of chips again.
>> Not me personally.
Ozempic and Bonjour from Eli Lilly, I mean this truly, life-changing, society changing drugs. Life-changing for the person who uses them because you were able to reduce your weight and improve your own, your health benefits, but also just your own attitude.
For society, life-changing because weights or obesity has a whole bunch of comorbidities associated with it, like high blood pressure and a whole host, diabetes. So having something, having drugs that should reduce it is actually great for the individual and for society.
There is a long tail of benefits.
Battir question of chips and pop and fast food, a lot of those stocks, the success of these drugs and Eli Lilly have become mainstream, these companies immediately investors were guns out, oh my God, no one's ever going to consume another big Mac again.
No one is ever going to consume another bag of lace chips.
There is almost like an overblown reaction to this.
It's not like it's going to happen immediately.
More importantly, how are these companies, whether it's Pepsi who make snack foods, they'd be making money by pricing.
They actually reduce the amount of quantity in your bag of chips and increase the price.
>> And we still buy them.
>> And you still buy them!
There's this indulgent behaviour. I think so far, there has been significant price drawdowns. They have derated a lot on the stocks for consumers snacking food categories, they have derated a lot on these drugs but I also think about it like, as an investor, I always think about what is the market not imagining? We've priced in that no one is going to buy a bag of chips again, but if you have weight loss, who benefits?
>> Maybe suits a little bit too big for me.
>> Maybe buy a new suit. Maybe Hugo Boss is… You look at lululemon. This whole category. You decide to have more Instagram or social media pictures.
You decide to get an Adobe platform to improve your pictures.
So trying to think about where… Don't think about what is happening with the market is pricing in, but what has not been pricing? I think people are pricing in the positive tale of these weight-loss drugs and we are exploring where that is.
Whether it's clothing companies, social media, all of that.
>> We will get back to your question for Damian Fernandes in a moment 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.
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We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
We talked about oil prices under tension recently, same thing with gold. Anthony Okolie digs into the latest TD Security support throughout their outlook on the precious metal.
>> Made to ease tension fears have ease somewhat. Also weighing on gold, fading fears over market volatility. This is in sharp contrast with last month's make a rally where we sell prices were past the $2000 per hour once barrier following and this came despite the fact that we saw surging US bond yields. It gold prices have since come back down to earth. Today, gold is sitting at roughly $1960 per ounce. TD Security says that the price action in gold following the Israeli Hamas conflict created the illusion of strong apparent demand. Fuelling the resurgence in gold, investors motivated by geopolitical tensions and buying pressure from fund shifted from short to net long positions. TD Security says that this buying exhaustion we've seen in gold markets has morphed into selling activity.
As the chart shows, we've seen evidence of this buying exhaustion materialize after previous confidence crisis like the Ukraine Russia conflict and the US regional bank crisis earlier this year. TD Securities now estimates the prices will need to break well about the $2000 per ounce range to spark large-scale lying again. Barring a severe escalation at this point, it opens the door to potential selling under 1945 selling marks. TD Securities believes that buying activity may return and coming sessions as medium to long downward trend signals from gold prices are set to weaken.
TD Securities also expects this to be more pronounced in the very near future in the near term, potentially supporting prices.
Of course, great, you will have Bart Melek from TD Securities on the show tomorrow, talking about this commodity outlook and his outlook for gold as well.
>> We will deftly get Barth's views on gold.
Thanks for that, Anthony.
>> My pleasure.
>> Now for an update on the markets.
We are looking at TD's advanced dashboard, a platform designed for active traders available to the TD Direct Investing. We are looking at the heat map function here, screening to the TSX 60. With the prices of gold and oil continuing to pull back, you are seeing some pressure on some of the big names.
We can start in the energy space. We can choose any of them off the screen. Cenovus Energy down to the tune of about 3%.
Suncor, another major down, 2 1/2%. CNQ.
TRP, TC Energy, it had results that the market is reacting to. You move over to basic materials there and you find pressure on the gold miners, bear down about 3% as well. South of the border, I want to check in on the S&P 100. We have a nice rally, a hot streak we haven't seen in two years in terms of its duration south of the border. It is being put to the test to day. On a headlight basis, the S&P 500 is down by a fit of a percent.
We can see where the weak points are. We are seeing names like Tesla and Amazon to the downside.
Also the financials appear to be under pressure and no surprise.
And US energy heavyweights or to the downside. I just wanted to share one piece of information with you because we were just talking about the obesity drugs, the FDA has approved Eli Lilly's treatment for weight loss, gaining wider use of that blockbuster drug. You can get more information on TD advanced dashboard by visiting TD.com/Advanced Dashboard.
We are back with Damian Fernandes from TD Asset Management, Baltimore questions here. Who wants to know your real asset management.
>> I think Brookfield is a place for the medium-term horizon. When you think about Brookfield, it's an alternative asset manager. Every single insurance company, pension fund, endowment, personal clients, high net worth individuals, are looking to increase their investments in alternative assets. This is Brookfield's bread and butter. This is what they do.
They just reported and fundraising is going on track. They're going to have 150 billion in funds raised that they will learn premiums from but more interestingly a few years ago they bought Oaktree, the largest player, one of the largest renown players and private debt investing.
We were talking about rates being high.
Private debt is one of the more attractive places right now.
So inadvertently, Brookfield is known for its and for structure projects and real estate and now you also have this other roast Avenue in private debt.
When we look at the stock, it's a Catholic business with an asset manager, it's paying a 4% dividend yield, that's growing nicely and its fees that it learns to pay those dividends have secular growth tied to investors looking for the space, a major player to actually help. There are good tailwinds in his favour.
>> Want to ask you about risks before I let you go.
>> Just rates.
Brookfield or its subsidiaries and businesses, they've been walloped on rising rates. The risk from the stocks is that, we talked earlier about the outlook, if I'm wrong and rates continue to increase, why do you buy alternatives?
Because you want to earn yields that are better than the public market.
If rates keep moving higher, you don't need to buy alternatives because you just earn those yields in the public market.
That's the overriding risk.
It's a big risk.
>> Always a pleasure to have you on the show. It was a fascinating conversation.
>> Likewise.
>> 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.
do stay tuned for tomorrow show. As Anthony was saying, Bart Melek will be here, global head of commodity strategy with TD Securities. I've got a lot of questions for him and I know you do too.
Oil, gold, what's going on? You can get those questions in ahead of time. Just email moneytalklive@td.com.
That's all the time you have the show today. Thanks for watching. We will see you tomorrow.
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