David Sekera

[music] Hello. I'm Greg Bonnell. Welcome to MoneyTalk Live you by TD Direct Investing.

I want to take updates on the market and answered your questions about investing.

Coming up on today's show, we are joined by Morningstar Research Davidson MoneyTalk report on Canada's labour market.

In today's WebBroker education sector Uno on the options of the platform. Just email moneytalklive@td.com. Or you can feel the response bogs under the video player.

Let's see how things are sharing here at home.

Another down session, a little more modest and the third of a percent.

Among the most actively traded our stocks and technology.

Technology names. She would be one of them.

Technologies under pressure on both sides of the border.

Nothing too dramatic.

Blackberry coming out of the wine for its current quarter things are softening in terms of cybersecurity sales.

The market is not taken kindly the, down.

Perhaps it was that private equity offer on the table by the company.

South of the border, let's check on the S&P 500.

Seeing that there are renewed concerns, perhaps the Fed is not done with hikes, the market seems to think that this month things will stay where they had.

A bit of a tough going in the past couple of days.

Be 500 has been about half of the percent.

Some of the border, you can see hundred and 61 points more than the full percent.

Nvidia has had a big run last year.

That's your market update.

What was a choppy summer for the equity markets but the S&P 500 is close to being up 60% this year, on the strength of a few big tech stocks. Working things go from here? We are joined by Davidson Cara from Morningstar Research.

We've got some are behind us.

It was a choppy one but still a healthy one for the year. Where do you think we are going from here?

>> Good afternoon, Greg.

It's been a choppy year with through last night, the morning star index went up. I don't know if that is coming off what we thought were very undervalued levels. At this point, we think that the US markets remain slightly undervalued. I do want to caution about the returns of this year which are going to be more muted. There are concerns that we might see volatility, may be beginning of November.

The reason for that is that the US economy has been much stronger-than-expected this year.

Our estimates have ended up a little too low. Tight economic policy is going to take its toll.

Growth in the US will start to grow. My concern is when the team starts giving out their fourth-quarter earnings, the air going to talk about 2024, I think the market might be disappointed.

>> There might be some turbulence ahead.

In the past couple of weeks, there was a lot of talk about the magnificent seven.

Let's go through the magnificent seven in terms of the run that they have had and where they might go from here.

>> Through the end of August, those seven costs account for 60% of the market.

Six of those seven comprised the magnificent seven were very significantly undervalued, coming into the year. All of them have run up very substantially since then. At this point, one of them is undervalued, but looking, as just moved to far to the outside and is now into overvalued territory.

>> Those big tech names can push over the line over the NASDAQ. What about the potential for more breath in the market?

They have accumulated all of the attention from investors. Is there a chance to widen out?

>> I think we have talked about that in our June market rally. It needs to broaden out into the wider market.

From a valuation standpoint, looking at the magnificent seven, for the most part I thinkmost stocks have run their course.

I suspect a lot of those are just running out of steam at this point. I do think we will see an increase in the markets breadth going forward.

>> there was talk that they might be overvalued and overlooked.

>> I would highlight value stocks.

They have significantly lacked in the market rally so far this year. That's where we see the most attractive opportunities for investors today.

We also see good value in the mid-cap and sub- Space.

People that are looking for investments in specific sectors, highlight communications, real estate, financials.

Those all remain undervalued.

There one is utilities.

Utilities got hurt pretty bad last month, with the rise in interest rates.

I think that starting to look attractive as well.

On the other side of the coin, you have technology.

That is a sector we think is a little overvalued.

Take a look to your portfolio.

You will see those stuff that are overvalued and overextended. Now is going to be a good time to lock some profits on those types of name.

Technology is fully valued at this point.

Some of those could be in trouble if we don't have a fourth-quarter selloff.

>> that's interesting because it seems like the sector has went up a lot in the short time.

>> I think you had to look past what oil prices are doing at the present.

What we do agree that the market, oil is tight right now, that is going to keep oil high and the short term.

We think oil prices will be coming down and we do think that toward the lateral half of this decade, with electric vehicles becoming a greater portion of new vehicle sales as well as number of cars on the road, we expected by the end of this decade, we start seeing decreased and the oil demands. We also expect oil supplies to come up.

A lot of companies have been spending too much, sending a lot of money on dividends, on shared buyback.

I think they are a little beat going to be looking more towards growth.

>> you mentioned briefly that we can be in for a little bit of a bumpy ride as we get further into the fall, toward the winter.

Let's talk about the third quarter. With the expectation there?

>> I think things are going to look pretty good.

The economy is going up.

They just bumped up their GDP estimates in our team.

Really, the guidance of the management team will help.

>> Look at the three months that are behind us and we did perhaps better than the market was expecting, but looking ahead, I feel we've been under that narrative for a while.

Companies are looking ahead for this recession that hasn't shown up yet.

>> That's also been our forecast.

We are not in the recess and camp.

Our base is still no recession.

I think towards the end of last year, when you start going thinking about was going on out there, we've had since the global financial crisis, lending… I think that's all really going to combine in order to soften the economy later this year.

In fact, we think there is going to be three sequential quarters of softening over the next three quarters, getting to the second quarter of 2024, which is when we expect the economy to almost all speed would not stall out.

It won't be until the second half of 2024 until the economy starts going upwards ahead again.

>> That's the microeconomic conditions.

What does the Fed do with that information question mark what are the central banks cutting after that?

>> We think the fat is done. They have hiked interest rates and enough. We also think inflation will continue to keep moderating over the course of these years and we think by early next year, the Fed will bring that inflation down to that 2% target.

If we're looking toward 2024, our economics team think they will actually be slightly below their 2% target.

I think the culmination of economy slowing, not only is the Fed not going to raise rates, I think that sets him up for starting to turn around and cut things.

>> A reminder you can email us at any time, moneytalklive@td.com. Or you can feel that your response box under the player on WebBroker.

Let's take a look and arm how the markets are trading.

We have reports that China is targeting iPhone use and government agencies, state owned companies, and that has shares of Apple in the spotlight.

Reports are saying that workers and those organizations are being told to stop Apple devices while on the job. It highlights tensions between Washington and Beijing, particularly in the technology fronts.

Let's look at the shares of BlackBerry.

They had issued a warning that revenue could fall more than 20% of this current quarter.

BlackBerry Mary is pointing to flaw and there is cybersecurity business.

You see right now they are down 16%.

The demand for seed he was an Ski-Doos is increasing. The RP is seeing an increase in the last quarter.

That said, BRP issues a forecast of stock raise of 3%.

Quick check on the main benchmark index based on the TSX compass it index.

South of the border, the S&P 500, you've got 1/4% loss.

David, I know you made the case that the Fed could be cutting.

What sectors would you be looking at?

>> that depends on if rates might stay a lot longer.

were either at or near the peak right now and they should come down by the latter half of this year.

Generally, the one area that would do well with higher rates would be the banks and the brokers.

That was certainly helped increase the market over time.

Generally, value stacks in general which have lower definition than growth stocks would be able to hold their value better.

Lastly, we look for companies that have wide economic mode.

Companies that have a long-term durable competitive advantages, especially those related to power.

>> The Fed may be in positions to start counting rates in the first quarter of next year.

What kinds of sectors should we begin looking at?

>> First, there is real estate.

That actually could improve valuations up to 20% in the real estate sector.

Specifically, I would looked at for those that have long lease assets with long-term finance. Personally, I would still steer clear of office space, urban office space.

I think there is still potential for downward valuation there.

Some other sectors, industrial, healthcare, data centres, those look pretty good in the declining interest rates environment.

The utility sectors, a lot of people use that as a proxy in their portfolios.

I think those would do well.

Homebuilders will also do well.

They would benefit for lower mortgage rates.

>> Send in your questions about the big story of this year, artificial intelligence.

>> I don't think there's too much hi.

I think we are trying to figure out what the play is right now.

We are still trying to understand how artificial intelligence rolls out, how it impacts companies and their margins.

Of course, the market is focused on companies that make GPU's, processing units.

Nvidia still has that first mover advantage.

Investors might want to look at AMD.

That's one we think could be the number two player for GPU. That could be something that over the next couple of years they might be well-positioned.

What are the second derivative plays here?

We've noted that smaller and midsize companies, they are not going to have the capital to build their own AI platforms.

They are going to rely on outside resources, consulting firms that had expertise.

One company that our technology team has highlighted that has that consulting expertise would be cognizant technologies.

I think those are really some of the better ones right now.

>> interesting stuff to look at.

Of course, the risk is that we lose interest in the space.

I am not a nonbeliever in the power of computers, but I feel it may have come at the expense of other place like crypto.

>> I don't really have an opinion on crypto.

We will see.

I think that artificial intelligence is a new paradigm shift and I think it's going to impact a lot of different companies over time.

But again, at this point, it's very difficult really to understand who is going to be the long-term winners and losers.

>> Outlook first cyber security stocks like Palo Alto?

>> I like cyber security.

It was a long-term cycle behind cyber security.

Now, it has an attractive industry dynamic.

When you look at cyber security, it's a very small percentage of overall IT budgets and spending.

There is an huge ratification for companies.

They can't understand in this area.

Even in a slowing economy or if we go into recession, these are companies where we expect those fundamentals to hold up pretty well.

When I look at the space, the stocks of the more well-known players, those seem to have run up pretty far this year.

For investors interested in the space, I would look to this smaller cyber security companies.

A number of those I think are still undervalued.

Specifically, one of those areasI do think it's got an attractive dynamic because you can't understand.

It's just too huge of our negative ramification, both from a fundamental business point of view, as well as a reputational point of view.

If those companies are hacked.

>> As always, make sure you do your own research before making investment decisions.

You can get in touch at any time, sent an email to moneytalklive@td. com.

Let's get to our educational segment of the day.

WebBroker has tools we can help.

Nugwa Haruna has more.

>> typically, when you think about the price drop, you might connect at the technical analyst, but there is something to everyone.

Investors can find information as such as dividends, earnings, as well as deals within WebBroker.

Let's hop onto WebBroker to see where you can find that information.

Once in WebBroker, you're going to click on research beyond their investments, you're going to go stock.

One here, regardless of the stock you have on screen, you will have an option to select charts.

Were going to scroll down.

You get to decide how far back you want to see when it comes to the information you're seeking.

I have this charge based on the five year basis.

What we will add will be things like dividends.

We are going to add dividends to see how often this company has made payments.

We concede that when I hover over each one, I can see that dividend was made and how much that dividend payment was for.

Also, I can add to this chart.

We can see what data happened and how much it was.

Investors are looking for more information can add more information to discharge.

This time this time, we are going to focus on lower indicators. Typically, this is just for technical analyst, but there is something for the fundamental analyst as well food as I scroll down, I will focus on what is important for the financial analyst. I will highlight revenue.

I'm going to highlight rolling dividends.

We are going to scroll down.

I'm looking at everything we added.

Once here, an investor is able to see things like price-earnings ratio and how that fluctuated over the last five years.

Additionally, an investor can look at the rate of revenue for this company and say see how it has fluctuated.

Finally, investors were looking for comparison can do this as well all in the charts tool. This time, I'm going to look click on comparison.

I want to compare this company to one of its closest tears. I can enter the name of that company there and actually, superimposed the performance of that stock onto my current stock charts. Now, I can see in the last five years with the return of the original company was and what it has been in the last five years.

Finally, I can also compare the industry as a whole.

I will look at 60 years because we know that DCE is one of the companies that is in the top 60 when it comes to the Toronto Stock exchange.

I'm just going to highlight that.

Then, you can compare the company itself to the industry as a whole.

This way, even fundamental analyst confined information as part of WebBroker.

>> thanks to Nugwa Haruna,.

Make sure to check out the Learning Center of WebBroker for master classes and upcoming webinars.

Now, before we go back to your questions, a reminder of how you can get in touch with us. Do you have a question about investing always driving the Marcus?

Our guests are eager to hear what's on your mind you there are two ways you can get in touch with us.

You can send us an email at any time at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker.

Just writing your question and hit send.

We'll see if one of our guests can answer you right here on MoneyTalk Live.

We are back with David Sequeira.

How risky is US real estate right now?

Of course, what's going on in the space question mark >> the whole USA real estate territory is under pressure.

You have lower funding from the banks.

I think this is where we can see one of the big valuation declines.

Office utilization has really kind of psych stagnated at about 30%.

A lot of companies are still trying to understand exactly how much real estate they need for their office worker student will probably still seek more companies that are using their space reducing their space instead of increasing it.

I think there's a lot of other areas in real estate that have gotten pulled into the overall sector.

One area I would look at would be retail malls.

We are still seeing foot traffic increase in the higher end malls, considering people are returning to that in person shopping experience.

Data centres, that's another one that could be a good play on artificial intelligence.

All of that AI is going to need a lot more data centre utilization.

On the more defensive sectors, like senior housing, that would be another sector I would look at.

>> What about in terms of what I can think about exposure to residential, apartments?

We do think that the US market has slowed down in terms of homebuying.

>> Home sales haven't fall as much as people were expecting.

We think that in the short term, with higher interest rates that will pressure the residential area, but will physically get through that, we think that we lower interest over all, in the second quarter, we are looking for a much better second half next year for residential.

>> Let's get to another question >> This is one area where she we have, Silicon Valley Bank, both of those failing.

Putting a lot of pressure on the entire sector.

Before the US Regina regional bank specifically, the business model is under stress.

But our now analysts do not think it is broken.

We do think that earnings are projected to decline probably for the next 2 to 3/4 until they bought them out.

Having higher funding costs, but we think the earnings in the second half of next year will start to rebound.

When I think about the health of the sector, could we see other bank failures?

I think it could be the smaller, local banks.

We see a lot of attractive opportunities for investors today and we don't see any failures in the larger part of the space.

>> I remembered the turmoil of the regional, but doesn't really impact investors?

>> It will impact them because they alsohave got higher funding costs.

In that case, it's not nearly as much their earnings because they have a much broader earnings stream across the credit card units and so forth.

Generally, I think one of the more big money centre banks are pretty sure value at this point.

>> if central banks are trying to slow the economy, if the consumer runs out of steam, but does it mean for retail stocks?

>> Consumer spending has been more resilient than we expected that the beginning of the year.

I think we need to look at some of the different underlying trends and think about why consumer spending will start to slow.

What we are seeing is a combination of of insulation this year that has led to.

. . Lower end and middle range can some consumers have been under pressure.

We are really seeing the lower and consumers having to focus their spending on food and beverage and Staples.

Middle income consumers are very focused on value at this point, whereas the upper end consumer, they are still spending like crazy.

The shift in how money is spent is evolving, following the pandemic.

We did see a big shift back in services and away from goods.

That's also sort starting to subside.

We are looking for more normalization going forward.

I think in the short term, consumer spending will be on the upwards.

Over the medium, the long term, we are seeing wages going up faster than inflation.

I think that will help consumers start to catch back up, specifically getting to your original question on the retail stack.

I would really caution and I think this is going to be for investors that can handle higher risk and volatility.

We see more value among this specialty realty stocks.

The specialty retail stocks, I'm sorry.

They haven't been to heart.

I would caution it might be some time until next year that we can see really those move back up again.

>> I think there's something in the air.

I was trying to say technology and another word was coming up.

As always, make sure you do your own research before you make any investment decisions.

A reminder, you can get in touch with us at any time.

Do you have a question about investing question mark our guests are here to hear what's on your mind.

There are two ways you can get in touch with us.

We can send us an email at any time@moneytalklive@td.

com or you can use the question box right below the screen on WebBroker.

Just writing your question and hit sense.

We'll see if one of our guests can get you the answer right here on MoneyTalk Live.

Here in Canada, the Bank of Canada held their trendsetting meeting.

Perhaps a sign that the labour market is cooling as well.

TD Economics has a report of where we might be heading.

Anthony Okolie is joining us with the details.

>> TD Economics has signs that the labour market is may be starting to cool as a number of employees start to rise.

That indicates a change in terms of unemployed people.

The unemployment has jumped by 5 1/2%.

With these early signs of a slowdown, questions arising about how much further it will do labour markets often.

In my next chart, you can see that TD Economics maps out three scenarios with different speeds and sizes of adjustment.

One is a hard landing.

One is a perfect landing.

And the third one is a baseline forecast.

We can start for the perfect landing scenario.

TD economists believe that the job job market will continue to moderates.

Unemployment rate will hit a peak of 6%.

In the balance market will be reached and meet still firm demand.

In this scenario, balance will be restored by spring 2024.

Wages will move back to a normal level by the end of next year.

There is a chance of a perfect landing before because they feel the hike will have an impact on spending.

The second scenario is a hard landing.

This is where we would see a deep recession with the unemployment rate heading peeks between 6%… Spike 29%, resulting in the widespread job costs.

It will would result in an output contraction.

TD Economics signs of probably of 20 to 30% because they feel that structural factors like excess saving during the pandemic, plus the strong population growth that we've witnessed over the last couple of years, those factors may mitigate against the risk of a hard landing.

The final four hour scenario is the baseline view.

This is where they see, and lands between the two extreme scenarios that would rise to 6%.

That is an overshoot of the labour room balance required for the market.

TD Economics places as 60 to 50% probab claims that efforts to prevent a hard landing, the economy is entering a stage which will require greater Bank of Canada attention in order to land the plane softly as possible.

>> during the pandemic, it was a mass And recovery has been uneven.

We have been hearing about vacancies.

Are there still i >> The accommodation and food services industries have been heavily impacted and have yet to recover in term of employment.

Firms in the sector hav as in the past.

Other industries such as construction, trade and healthcare have a long pipeline of projects in As a result, those are seeing exes of job vacancies and those particular industries.

Firms in these industries are likely to make attempts to retain their workers, if not add to their workforce in the future.

>> Thank We are looking at the Advanced Dashboard feature.

Pretty modest in the energy space and a bit mixed.

We've got some sizable names, like Enbridge.

1/3 for CM queue.

A little bit of lost ground for Amber yesterday.

Some of the smaller bit of real estate is utilities.

If godlike of an FDS.

T there beatin everyone else on this base right now.

We got the big one, Shopify, right now.

South of the is telling workers the governments off and other state backed agencies to leave the iPhones at ho That's reacting in the Apple shares.

in the tech space.

Nvidia, but when a name like Intel, they have interesting market over there.

You can look at the advanced dashboard visiting td.com/Advanced Dashboard.

We are getting back to David Sekeira to answer your questions.

>> we are seeing consumer habits returning to normal The pent-up demand is starting to subside.

We are seeing demand for leisure travel goin but things will be falling beyond this point.

Business travel is actually still below pre-pandemic levels.

We do forecast tha Will probably get back there by the en either cruise lines.

People th Online travel booking should benefit the return for the business traveller.

The gaming area, we still see some opportunities there as well.

>> What really counts is what we might encounter in the fall toward winter.

How is your view of things Chris and Mark >> the market is going to be relatively stable for the next couple of months.

I have concerns when the next quarter earnings, that is potential time t in the market.

Maybe some stocks will be sold off.

Management will have some dire outlook for lead to some sentiment across the market.

A little bit more concerned about what we might s and even going into 2024 with the economy softening.

>> David, we hope to have you back with us in the program to run it all down.

David second, chief marketing executive at Morningstar Research.

Make sure you make your own research before making investing decisions. Stay tuned.

We will have more interesting things about the economy.

Tomorrow, we will have Leslie Preston, senior economist at TD.

We'll talk about the economy.

If you have some questions, send them in@moneytalklive@td.com We will see you tomorrow.

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