David Sekera

[music] >>Hello I'm Greg Bonnell and welcome to MoneyTalk Live, brought to you by TD Direct Investing.

Every day I'll be joined by guests from across TD, many of whom you will only see here. We'll take you through it's moving the markets and answer your questions about investing.

Today's show is the market rebound from September's rush start will discuss whether the AI trade has run… David Sekera from MorningStar research joins us.

MoneyTalk's Anthony Okolie will give us a preview of what to expect from Wednesday's US inflation report.

Today's WebBroker education segment, Caitlin Cormier will take us through how partial shares work on the platform. Here's I can get in touch with us.

Just email moneytalklive@td.com or use the viewer response box under the video player and WebBroker.

Let's get you an update on the markets. Last week, first week of September, it was a rough one for equities. A bit of a bounce back today, getting its mojo back, starting on Bay Street with the TSX Composite Index 237 points, a solid 1% of the upside.

Some of the broad-based as well, so the names on the move include the CN Rail.

Later on the program. As part of our discussion about industrials. About 59 bucks and change of almost 2% on the session.

Also looking at a modest bounce back at the price of crude right now just north of $68 a barrel for the American benchmark.

Some of the energy names on the move, to Nate Canadian Natural Ressources also standing out today. You have a full percent on that one about 45 to 56.

Now south of the border, jobs, what does it mean for the Fed and the economy of the inflation coming this weekend?

Investors weighing out a lot of stuff and it was a tough one on Wall Street last week. No doubt whatsoever. I'm in a bounce back today, 58 point to the upside a full percent of the S&P 500, the tech heavy NASDAQ, let's check in on that. Pretty much keeping pace with the broader market. Lagging a bit now. Three quarters of a percent of the upside.

A nice club of 499 of the S&P 500 news coming after the close on Friday, Palantir up 13%.

An answer market update.

Markets are trying to recover some of the ground they lost since the start of September.

But as the momentum and those big tech names like Nvidia begins to stall, we ask ourselves is the AI trade running out of steam? Joining us now to discuss his David Sekera, chief US market strategist with MorningStar research. David always great to see you!

>> Good to see you David. Have you been?

>> Not too bad.

You and I have a discussions of the past two years about the drivers in the market.

We cannot ignore the technology trade, the AI trade.

Been interesting lately. We've seen this pullback. Is it done?

>> This is one of those instances where you really need to separate the stocks from the fundamentals.

From a fundamental point of view, yes AI in and of itself still is a long pathway of growth ahead of it.

But according to our evaluations, we think the outperformance of AI stocks over the broad market is probably behind us. In fact, on our third quarter of Outlook, we noted that as compared to our evaluations, a lot of those AI stocks, most closely tied to the fundamentals were at that point kind of getting to be fully if not overvalued and in that Outlook we've reviewed why we expected market return to really start broadening out specifically into value stocks and small-cap stocks. So with the market just so hyper focused on AI, not only last year but the for the first half of this year, both the value and the small caps have been left behind that rally but both very undervalued both from an absolute point of view as well as relative point of view.

>> Let's talk about that rotation because that war started cropping up over the Summer.

Some of the big tech names slowed down their furious pace to the upside and people were asking "is this a true rotation?" What's your take on it?

>> I think towards July, the valiant category in the small caps, both were very undervalued both in absolute basis when we looked at it as compared to our long-term intrinsic valuations of those stocks. But also on a relative value basis.

So if you look at composites of our evaluations going all the way back to 2010, both value and small caps work… Compared to the broad market.

So here from here even though they have out promoted outperform both in July and August we still think they have a long runway of outperformance ahead of them.

Of course you know, the real recession risk here is, you know, probably putting pressure on those small-cap earnings. In the short term or if we saw AI having another big growth then we can see people moving back into those large-cap growth stocks but you know, irrespective of those happening we do think that both the value stocks and the small-cap stocks look pretty attractive here.

On >> Now we did see in August a bit of turmoil and then we came back and had a rough start to September.

September doesn't have a great reputation anyway for stocks. Definitely showing us what that's all about.

Last week. Some people may be thinking "are we getting into another environment like 2022?" That was a rough one for stocks. Wise's environment not like that?

>> We actually put out an article in the beginning of August we had that brief market selloff. How now is different than 2022.

In our 2022 Outlook and that point in time, we actually advocated for investors to underway equities.

So from a fundamental point of view, stocks were overvalued at that point in time. There are also four headwinds that we identified in the market would have to contend with in 2022.

The first being rising inflation, the second was increasingly expected and long-term interest rates. You know, tightening monetary policy at the slowing rate of economic growth.

Fast forward to today, we think the market is pretty close to fair value as compared to our evaluations.

Three of those four headwinds are actually no tailwinds. So we look for inflation to continue moderating over the course of the remainder of this year and going into next year.

We expect that we are on a multi-year path of decreasing long-term interest rates.

And of course we expect the Fed will start easing monetary policy next week when they meet.

So really, the only headwind right now is that slowing rate of economic growth.

We are in the soft landing camp. We are not looking for a recession our base case. So I think right now those tailwinds are going to be enough to be able to offset the only headwind which is that slowing waiter rate of economic growth.

>> You said you were not in that camp of our landing or soft landing looking towards a recession.

Market volatility in August and recently to you get a piece of economic data.

The market was waiting so long for the data to soften so the Fed could cut. You know? The economy gets softer now the market is worried it's going to get too soft.

And you start throwing around 50 basis points.

At a Fed meeting.

Maybe even from liftoff. What's your take on that?

>> Our base case from economics seems to be cut by 25 basis points at that meeting and they cut 25 again each of the next two meetings. Over the course of 2025 we expect them to continue cutting to the point that we will get to the 3 to 3 1/4% range.

By the end of next year. Now when I think about the Fed's mentality, they were definitely too late to start increasing the Fed funds rate when inflation was going up.

They thought inflation was transitory and was not.

They've really been focused on fighting inflation ever since.

So I know the market is right now pricing in a much higher probability that they may cut by 50 basis points.

In my opinion, I actually think that would be negative.

So yes, inflation is on a downward trend but it is still above the 2% target.

So I think the Fed still needs to focus to some degree on inflation. If they were cutting by 50 basis points, that would tell me that the Fed is actually much more concerned about the economy slipping into a recession in the near term than they are worried about inflation remaining on the downward path. In my opinion I think if they cut by 50 basis points, market can actually sell off on that news and maybe even have, you know, a pretty good selloff in the case. It just like at the beginning of August we had the jobs report that came out and everyone was fearing recession and heightening in that same thing beginning of September here at the markets selling off on some relatively dour economic news as well.

>> That's what that altogether and take a look at some of these sectors in your outlook.

Let's start with the ones that you are more constructive on.

> Yes oregano Communications still looks pretty undervalued to us compared to our evaluations. Of course you have to look at Alphabet and met of the two largest MegaCap stocks and the communication sector.

Alphabet for example, still just hitting on all cylinders.

That is a stock that we think looks relatively attractive here.

But also the traditional Communications providers also look undervalued to us. For example the US wireless carriers. We foresee that industry really starting to morph into more of an Outlook meaning they will compete less on price over time. That's going to have a lot of margins to rise. A number of those stocks, we think are undervalued and in the meantime pay relatively high dividend yields. So really the risk in that sector is going to be if we see a slowdown in growth and Alphabet's business or a return of price competition both in the wireless as well as some of the traditional media areas.

The other two sectors on highlighter to be energy in real estate. Energy, I still find particularly interesting.

I think energy provides that good natural hedge in your portfolio just in case inflation were to come back or if we see you know, heightened geopolitical risk. What I like about energy to, and our models, we used a two-year forward strip price for oil but then we bring it down over time.

In our forecast for WTI or West Texas intermediate, is $55 a barrel in the long term.

Yet, even using that long term bearish view, we still find a lot of these oil companies are attractively priced. Of course the risk here, the short-term if economic growth comes under more pressure than what we expect or potential recession, you know, that could lower oil prices here in the short term.

And that real estate, real estate was up 7 1/2% in July.

It's up another 5.4% in August.

So it's actually now getting to be fairly valued in our view. It had been one of the most hated classes on Wall Street.

Personally I would still steer clear of office space but we see a lot of undervalued opportunities in real estate specifically real estate with defensive types of characteristics such as healthcare, medical offices or personal storage space.

>> I get the benefit of knowing some of your thoughts ahead of time. I find this intriguing. The areas you are not as constructive on, and declining interest rate environment people talk about utilities.

Why are you not on utilities?

>> Utilities were hit especially hard in 2023 when interest rates were rising. Again, people might use utilities as a fixed income substitute.

But a drop so far, so fast last year than actually, utilities and our team called this out, utility sector was as undervalued last October as I'd ever seen it over the course of the past decade as compared to our evaluations.

Now the story this year on utilities has been all about AI.

Utilities really being that second record derivative trade on artificial intelligence. That AI computing requires multiple times more electricity than traditional computers. So everyone is now increasing that long-term forecast for electric demand.

We agree.

But we've already model that in. Utilities are now up over 22% year to date.

Sectors now started trade at a premium. So now, I think it's really good time not only to maybe think about profit-taking or if you want to keep exposure, look to swap out of those they ran up too far, too fast and those who have lagged and still have pretty decent dividend yields.

>> Alright quickly I'll ask you with the last two spaces that you are not constructive on. Consumer defensive intact.

>> Consumer defence, that sector is had a very strong year thus far this year.

It's up I think almost 17%.

But I would note within the consumer defence, there are several large MegaCap stocks that we think are significantly overvalued. So that is skewing the entire consumer defensive sector on a valuation basis. Too high to the upside. But, from a stock pick point of view we still see a lot of names and their like the food names we think are undervalued.

So a good time that, if you are an investor in that space, maybe instead of investing in ETF's, look at some of these undervalued stocks individually. And of course text, tech was undervalued in the beginning of 2023. It was up 59% last year. It's up another 17% thus far this year.

At this point we do think that the sector is overvalued. Especially a lot of these AI names.

The concern here is that AI looks like it's our to kind of run its race.

The fundamentals are still growing a lot.

But that growth, what we are seeing in the past quarter or so, is no longer outpacing expectations and when I'm thinking about earnings, this quarter and guidance into the end of the year, you know, just meeting guidance for the third quarter may not necessarily be enough to keep those stocks up and of course the risk is that if they are not providing ever higher guidance going forward, I think that with current valuations where they are, there is some downside you know potentially those stocks for later this year specifically mid-October.

>> Fascinating stuff. We will get to your questions about US stocks with David Sekera and just a moment's time. A reminder of course it you can email us anytime at MoneyTalk Live or Philip that viewer response box on WebBroker.

Now let's get you updated and some of the top stories in business.

Air Canada says wages remained a key sticking point in contract talks with its pilots. In a statement today, the airline said it's making contingency plans to suspend its nearly 670 daily flights if a strike or lockout notices issued.

Either party could issue notice as early as this Sunday.

Boeing has reached a tentative labour deal to potentially avert a strike for 33,000 of its workers.

The agreement includes a 25% pay raise over four years among other things I will put two workers for a vote this Thursday.

It will be a win for the new CEO Kelly Ortberg who is working through safety and quality control issues.

Palantir technologies and Dell are in the spotlight today. The two companies are being added to the S&P 500 prior to opening of trading on September 23.… The ETF's and mutual funds that track the S&P 500 update their portfolios.

A nice bounce back on the markets to start the week from the selling pressure of last week. The TSX Composite Index up 254 points more than a full percent and south of the border, that broader REIT of the American market, the S&P 500, also coming back some of the lost last week.

62, almost 63 points more than one full percent.

We are back now with David Sekera from MorningStar research taking your questions about US stocks.

First 14 you hear David this is been an interesting space for the past several weeks.

What you make of the weak earnings we saw from the dollar stores?

>> I think there's a lot of broader implications as well for the economy so of course he of low income consumers. The ones that were hit hardest when inflation was rising in the past couple of years.

We continue to see the compound impact of inflation still keeping low income consumers under a lot of pressure. So if you look at the results and listen to the conference call from both Dollar Tree and Dollar General, they noted that their customers were still spending an increasing amount of food offerings and away from discretionary items. Of course old stocks sold off and sold pretty hard just because those discretionary products to have higher margins than food.

People are bringing their expectations for those two companies down but you know, it's not just the low income consumer that's under pressure anymore. The past couple of quarters we really noted how middle income consumers have also been changing their spending habits. So for example, Walmart reported that they are seeing a lot of new customers coming in as they are trading out more from traditional supermarkets. But then also within the discretionary spending category, we are seeing people pull back on those items that are considered to be more extravagant.

We did highlight earlier this year that Starbucks reported a decline of store sales in the first quarter.

Really because traffic fell by 7%. A big decrease in the number coming into their stores. Then another 2% D Street decrease in store sales in the second quarter.

So really think about this from an economic perspective, this slowing spending in the shift in spending, our US economics team is taking that into consideration in their forecast for the economic slowdown. For this quarter going into the next and even into build the first quarter of next year. However, I don't want to sound too negative here.

It's not like spending is falling off a cliff.

Unemployment remains low, wage growth is still positive.

Our work is still increasing. So personally I'm really keeping a close eye on jobs.

Not only payrolls but also the unemployment rate. If the unemployment rate were to ratchet up quite quickly, I would probably be much more concerned about the downside and we are right now.

>> Great breakdown of the dollars dollar stores there.

Let's move on to the medical space. For animals. I would like your thoughts on Zoetis.

>> I mean fundamentally the company is performing very well. It's a high-quality company.

We rate it with a wide economic mode.

That leads me to think the company does have long-term durable competitive advantages. We expect they will be able to return excess returns over the weighted average cost of capital for at least the next 20 years.

It's also a company we rate with only immediate uncertainty.

I opened up and took a look at our model here.

Forecasting a 6% topline growth of the next five years, some additional operating margin expansion so earnings growth on average, 12%. And it looks like to us, the market agrees with our point of view. Stock is probably pretty fully valued here, probably pretty close to fair value.

So I think the risks here would be if there's any new or expanded regular regulation on the antibiotic use of animals or if we saw high margins of this company currently able to produce, bringing in new competition which of course that could lead to price pressure.

> My dog, had an appointment today with the vet.

When he comes back perfectly healthy, I'm surprised on how much money we's and on medications.

I think he has an ear infection so waiting for the bill on that one. We'll see how it works out. But we want them to get better right? That's what we all want.

>> Of course!

>> Let's take another question. What you think about the outlook for Stryker in the near future?

>> Another company was fundamentals are very strong in the near term.

Another company we rate the wide economic mode. It might be getting a little head of itself and the stocks from an long-term investor's point of view. We are forecasting almost 9% revenue growth. This year we are looking for improved operating leverage and margins to expand over 20%. But from there we are looking for revenue to start growing you know at a slower basis each year thereafter probably slowing down to a 6% growth rate. And that earnings growth rate to slow as well. So it looks like that stock is trading at about 30 times forward right now.

In my mind that seems pretty high for a company whose growth rate and earnings rate are probably in the process of peeking out at least according to our forecast right now. So unless they can keep kind of this short-term growth rate up longer than what we are forecasting, it probably doesn't necessarily justify the elevated P/E ratio.

>> Is that the other side of the argument then? Do you find a way to keep growing that market?

>> I mean the 30 times forward PE may not be that high if they can keep almost double digit topline revenue number up and especially if they are able to keep these kinds of operating margins or maybe even get some better out margins to the upside, and that case yeah, probably can justify 30 times PE but that is on our base case.

>> Interesting stuff is always and as always make sure you do your own research at home.

Before making investment decisions.

We will get back to your questions in just a moment's time for David Sekera.

You can email us your questions anytime at moneytalklive@td.com.

Now let's get to her educational segment of the day.

Fractional shares are a new offering on WebBroker and Caitlin Cormier, Senior Client Education Instructor with TD Direct Investing has this look on how they work.

>> You may be wondering what fractional shares are and you may have noticed a little icon within the order entry screen. Let me just tell you a little bit more about the benefits of fractional shares. One of the first benefits as you can invest more of your dollars right away. You can invest in a dollar amount as opposed to a certain number of shares. Meaning that if you want to invest $1000, the full 1000 can get invested as opposed to only is the amount that you could purchase in order to buy shares.

It also allows you to purchase a fraction of a share in a company that perhaps has a very strong stock value.

Perhaps the share is the cost of $1000 and you wanted to purchase $800 worth of that share, you could do that through fractional shares.

The cost to do a fractional share trade where you're just buying less than one share would be 199.

If you're adding a fraction to a full amount of shares, for example you're buying 10 1/2 shares, then the cost will still be 999. There is no additional cost to add the fraction.

Let's hop into WebBroker to see where we can find the list of fractional eligible shares.

We will look on "trading" under "buy and sell".

Under fractional stocks and ETF's.

You can either scroll through this information or you can type in a company to see if there fractional eligible. So for example, if I type in Apple… We can see that it is fractional eligible.

If I want to buy the stock I can simply click "buy".

It will take me to the order ticket.

We will notice, of course, that fractional notification here, to confirm that it is fractional eligible, were only able to do "market orders". You'll notice if I choose "limit". The fraction gets crossed out and we are not able to enter that type of trade anymore.

We will stick with market and I can choose the dollar amount. For example, if I want to put $1000 into Apple shares, it will show me that I can get 4.

5905 shares and we are taking it to five decimal places for this order.

Other than that, everything else is pretty much the same with this order entry. So once I'm ready I can go ahead and click "preview and submit" and then I got ahead and purchased my fractional shares.

So just another way to make trading a little easier and get more of your dollars invested right away.

>> Our thanks to Caitlin Cormier, Senior Client Education Instructor a TD Direct Investing. For more educational resources you can check the Learning Center on WebBroker or use this QR code to navigate TD to direct investors you to page where there more informative videos.

Before we get back to questions about US stocks with David Sekera a reminder of how you can get in touch with us.

>> Well our message was cut sore short but you know you can send your questions at moneytalklive@td.com. Back now with David Sekera taking your questions about US stocks. David, next one for you here (Greg reads out of the question)I'm not familiar with the same so I will pull it up on my screen.

>> That's a spice company.

The market trading near fair value is increasingly harder to find what we consider to be high quality companies that are still trading at levels that are undervalued. So we rate this company in the wide economic moat.

We believe they have long-term durable competitive advantages that will allow them to generate excess returns on invested capital over the rated over the average customer capital for the next 20 years. Taking a look at our forecast here were looking for top lit line growth.

Keeping up with inflation, a little bit over 2% per year.

We do think there is some opportunity to expand margins and earnings growth. So overall, just a very strong company fundamentally but the stock trades about 30 times or forecasted earnings for this year.

Seems pretty richly valued as compared to our earnings forecast.

So I think unless you're really expecting this company to generate higher growth on the topline, or start getting to new historical high for operating margins, we think this one is pretty full.

>> That's a lot of allspice you have to sell for the valuation of that!

Now I know a little more about the company.

Next question for you. The makers of mighty machines.

What is your outlook for Caterpillar?

>> Our outlook is a bit mixed to us. The revenue declined last quarter that was, you know, fortunately offset by some operating margin expansion. So I think really the difference between us on the market is that, you know, we expect to adjust the operating margin over the next couple of years and will probably start to decline towards where they've been historically, really just to account for kind of the typical industry cyclicality.

So our estimate for this year's operating margin is 21.

8%.

That's about 600 basis points higher than their historical average you know, for the past five years.

So when we are forecasting our margin going forward we do expect over the next five years it will contract more towards those historical averages. Now, when you take a look at the stock, it's trading about 15 times this year's earnings forecast it may sound a bit more reasonable but when we forecast earnings to decline this year and really over the next five years, as margins contract, at 15 times that may be a little full if not overvalued in our mind. So unless Caterpillar can maintain these kind of margins are really start bringing revenue back up again, it doesn't seem like that really justifies today's multiple.

>> Caterpillar is one of those names that I've always looked at it as a global bellwether. If you're worried about the global economy, companies like this, the average person doesn't go and buy themselves a Caterpillar product all that often. But you watch them to see what's happening with the global economy.

>> It's also one of those names over the past couple of years that is beneficiary of a lot of government spending and infrastructure and I think part of the difference between our view and maybe the markets he was the market is forecasting a lot more infrastructure spending from the government over the next couple of years where is a lot of those programs, unless they get renewed, will probably start to teeter out to three or four years from now.

>> Alright nice review of Caterpillar there appeared back on something we touched on at the top of the show, someone wants to know what's the potential for US recession for a hard landing?

I know it's your base case old enough to happen?

>> I talked to our chief US economist and he thinks that probability is actually really pretty low.

He is only at about 10% right now with it. In his view, if we do have a recession, he's not looking for a hard landing.

He thinks any recession would be relatively short and shallow.

So our base case is still most likely for that soft landing.

You know, right now his forecast is for annualized GDP in the US to slow to 1.

7% here in the third quarter down to 1.2% of the fourth quarter. But I consider to be just about 1% of the first quarter of 2025. But then we do expect that the US rate of economic growth will start to reaccelerate and slowly over the course of 2025. Once the Fed cuts really start flowing into the real economy.

>> We might as well bring in the Fed again.

We have an announcement not this Wednesday with the following Wednesday.

How do you see all that playing out?

>> We are looking for the Fed to cut by 25 basis points of this next meeting, starting that monetary easing policy cycle looking for 25 basis point cuts over the next two meetings thereafter.

And then cutting more often than not over the course of next year, getting down to a 3 to 3 1/4% level by the end of next year.

My concern is whether or not they potentially cut by 50 basis points.

If they do cut by 50 basis points, in my mind, I think that sends the wrong signal to the market.

That tells me that the Fed might be seeing something out there that they are much more concerned about the economy, maybe they're concerned about the economy slipping into a recession. If they cut by 50 basis points, we will see what happens but in my mind, I actually think of that sends a negative market signal up there, you can see stocks actually sell off in the case.

>> Definitely want to watch this week. We'll get back to your questions with David Sekera on US stocks in just a moment's time. As always, make sure you do your own research before making investment decisions and a reminder you can get in touch with us at any time.

>>Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live!

>> When we are thinking about the feds and the decisions they need to make in the subsequent meetings going forward, the talk of inflation remains relatively subdued in July. This gives support for the Fed to start dialling back its policy rate at that meeting.

What's the outlook for TD Securities?

Our Anthony Okolie has been digging in and has all the details. What you see there?

>> TD Securities expects headline inflation to lose steam and come in at .1% in August. That follows again a similar, subdued increase of 22% in July.

Their expectations coming slightly below consensus for core inflation. They also expect to remain largely under control as well.

They have an ungrounded forecast which hovers around 0.14%.

Suggesting that there is a risk tilted towards an upside surprise to a round 02 points and increase. When you look at the details, TD Securities says that core goods prices are likely to remain a drag on inflation for the sixth consecutive month. Really led by loose cars which will be a key downside driver for inflation.

Housing, they expect a monetary rebound after a big jump in July. They also see rents cooling in August as well. When it comes to headline inflation, they believe that lower gas prices will be a drag on the headline number. They seafood gaining modest momentum in the month of August.

Looking ahead, as the next chart shows, on a year-over-year basis, they believe that both core and headline inflation in the US will drop below 3% year-over-year by the end of 2024. Part of that is due to just a loss of momentum and housing inflation. But overall, TD Securities expects that the data will support the view that inflation is eventually tracking to the path consistent with the Fed's 2% target.

>> Interesting chart because once we get past the moment we are living in now we will see those broken dots going further and further. What is a forecast going forward?

>> They believe that the softened labour market has less to do with the size of the rate cut.

TD Securities believes the Fed will quicken its path to neutral. They see September having a cut of 25 basis points and they see the Fed cutting in consecutive meetings. The last cut being in November 2025 or they see a neutral policy stance between 2.75% to 3%.

>> So it it begins. The market fully expected that the beginning of next week and will have full cult coverage on it. Thanks Anthony.

>> My pleasure.

>> MoneyTalk Live's Anthony Okolie. Now for an update on the markets.

>> We are having a look at Tina's advanced dashboard. A platform designed for active traders in TD Direct Investing. This is the heat map function. A nice view of the market movers. Starting the second week of trading for September, last week was not kind to people in the equity markets. A little green of the screen today starting with the TSX 60 by price and volume.

TSX Composite Index number is firmly in positive territory. Up more than a full percent.

1.2%. So what is driving that? You can see in the energy space, narrowly outsized movers in terms of some of the biggest names what you have the energy names putting on a percent or so across the board. You have the financials, the heavyweights when it comes to the TSX comps of number, all showing some strength as well.

Some of the mining stocks technology.

Everything is working together today in favour of some upside.

Now, south of the border, the S&P 500 also a rally on its hands with a… To the upside. Some of the loss nevertheless we, we dig into the S&P 100, you can see, Nvidia, a lot of space on the screen. That is indicative of volume.

About 2.6% on Nvidia. Google is not really taking part with the rest but a lot of green across the screen again if you're talking about the financials, the Bank of America as well as Fargo's, firmly to the upside and energy names, broad-based rally south of the border.

>> Back there was David Sekera from MorningStar research.

More questions on US stocks. David someone wants to get your thoughts on Intel.

>> When I think about tech stocks I categorize them in my own head in three different buckets. The growth tech stocks, all the AI stocks, for example right now, a bunch of more traditional tech, hardware, software and services and so forth and that I think about what I consider to be the "legacy tech." Those companies that really haven't tech kept up with the cycle and are falling further and further behind their competitors. Unfortunately, I really have to think Intel is starting to fall into that "legacy tech" bucket at this time.

It does appear they are falling behind some of their competitors. Their products are just not keeping up with the technology.

They're not necessarily in the AI space like they should be. So I think Intel is enough to spend a lot of money on Over the next couple years.

Just to be able to catch up, much less trying to get back to being a leader in the semi space. So I can see why Intel has been talking about looking at Strategic alternatives here in the short term. I just kind of notice, companies on the right path usually earn out there evaluating Strategic alternatives. So unless they are really able to get themselves back on track, this is one long-term investment point of view I'd be pretty concerned about.

>> Indeed and you talked about if they do want to get back on track it will be expensive. That something investors need to keep their eye on.

>> Exactly. They will have to spend a lot of money on X and be successful with that money that they're spending too.

>> Okay so lots of stuff there on Intel. I had a question would gold here. Someone wants to know should gold producers and gold royalty companies be considered right now?

>> Everyone's portfolio should have some small percentage of assets in the gold of the gold miners.

I think it's just a good long term hedge against inflation or risks for additional geopolitical risk out there.

And then with the Fed, poised to start bringing the federal funds rate down that's gonna decrease the opportunity cost of holding gold and real interest rates coming down.

Usually it's helpful for the gold market in the short term. Taking a look at the miners this year, they've done very well.

I think… Up 40%, Kinross up 38%.

But when I look at our coverage at this point I think they are probably pretty fairly valued. Looking at our assumptions here, we actually have a pretty bearish view on the long-term price of gold when we put our supply and demand forecast out there.

I think that long-term price target is a little under $1800 per ounce. So if your opinion is that gold prices have to stay here or even have further to rise, than the gold miner is probably looking at pretty undervalued. But of gold prices are peeking and coming down, then generally I say the gold miners look fairly valued at this point.

>> One thing about the gold miners compared to the actual price of gold, it really seems to me like a place where you need to do your homework on because jurisdictional risk always comes to mind for me.

>> Exactly. But a lot of these miners are now are getting to be large enough and diversified enough unless they're really going down to the junior miners were the only have a couple of minds. The larger ones I think, have that diversity in geographic locations where you probably don't have to be as concerned about that as he used to have to be.

>> All right.

Before we let you go David, we want around back to the top of the discussion. Artificial intelligence, sucking up all the option of the room for so long the Summer.

We did see a shift. How do you see the AI trade playing out of the pockets of opportunity?

>> The AI guys have really kind of run the race and review. We take a look at our valuations, some of them are pretty fully valued and some are getting to be overvalued at this point in time. And I think that's really why we are seeing this market rotation really start to adhere in July and to value*stocks and into small-cap stocks. We have to also know to that not only our valuations for those two different areas much more attractive in our mind but for example, small-cap stocks typically do pretty well in interest rates coming down and the Fed is starting to ease and since we do expect a soft landing in the economy with the rate of economic growth to slow, I think value stocks probably hold their value much better than growth stocks. At least for the next couple of quarters until that rate of economic growth starts to move back up again, probably in the first half or middle of next year.

On >> David always great to get your insights and a pleasure to have you.

Looking forward to the next time.

>> My pleasure Greg.

>> Our thanks to David Sekera, chief US market strategist with MorningStar research.

As always, be sure to do your own research before making any investment decisions and if we didn't have a time to get to your question today, will aim to get it into future shows.

Stay tuned on Tuesday show, David Toung, Senior analyst medical devices and healthcare services will be our guest taking your questions about healthcare stocks.

A reminder to get a head start by emailing us your questions at moneytalklive@td.com. That's all for our show today, take care and we will see you tomorrow!

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