Derek Burleton

[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'll take you through what's moving the markets and answer your questions about investing. Coming up on today's show, we are going to discuss what we may hear from the Federal Reserve on Wednesday when they release their latest rate decision, Derek Burleton will join us. On today's WebBroker education segment, Caitlin Cormier's gonna take us through how you can stay on top with the markets by using the watchlist will. Here's how you get in touch with us with your questions and your comments. Email moneytalklive@td.com are full of the viewer response box below the video here in WebBroker. Let's get you updated on the markets, first trading day of the week. Of course, this is the end of the month and we had a pretty nice rallyin recent days, a bit calmer on the TSX here at home, 19,483, a modest 12 points, just six ticks. We are seeing some money movement into the energy space but the financials in other parts of the market weighing us down. Noticing weakness among a lot of the lumber plays in Canada right now, we will start with Interfor, down to the tune of about 5%, 24 bucks and change as share. Cargojet out with his latest earnings and the profit line grewin the third quarter, the market rewarding that stock at hundred and $37.53, of almost 6%. South of the border, let's check out the broader read of the American market, the S&P 500. We saw some big gains last week, particularly on Friday to that we, to give off today, 3886, 14 points to the downside, about 1/3 of a percent. Some of the mega-cap tech names that disappointed last week with their earnings and saw the share prices fall quite dramatically still under pressure today, we've got the NASDAQ down by 87 points, a little shy of a full percent. Amazon, of course, was among those names last week that disappointed the market with their latest earnings. Amazon warned that heading into the all-important holiday season, sales would be more subdued than they would like to see, and that stock continues to be under pressure, and1/2%, hundred and one bucks and change. That's your market update. It is a big week for investors. When we await await the latest Federal Reserve rate decision on Wednesday. Last week the Bank of Canada delivered a smaller than effective hike. Summers addressing that the Fedmaybe getting ready to slow its pace of rate increases as well. Joining us now for more is Derek Burleton, deputy chief economist at TD Bank. Great to have you. >> Happy Halloween. >> Happy Halloween indeed. Let's talk about the Fed. We're not going to assume that the Bank of Canada is going to be that influential over the Fed, but I got people talking about next steps. >> That narrative is out there. I think what started it was the Fed, Fed officials the week before, small but growing number suggesting that the Fed needs to be bringing a little bit more caution or soon to around rate hikes so that sort of pushed it to a new level and the Bank of Canada last week made global news when it cut by 50 rather than 75. >> Hiked by 50. >> Right! >> We will talk about rate cuts later. We do see some coming. But hike, yeah, absolutely. But yeah, I think it just reinforces some of this narrative so it will be interesting. I'm not thinking so much that we are going to see a major Fed pivot at least on Wednesday. I think there are number of reasons that they are going to be cautious. The data, the US economy is bending, it's not breaking. We saw that in the third quarter GDP. We haven't really seen any slowdown in the job market. I know those numbers are coming at the end of the week, but markets are still expecting another payroll gain in October and I think one of the things that the Fed's going to be concerned about, we saw a big rally in bond yields last week. That's a loosening of financial conditions and that kind of runs counter to what they are trying to achieve. So if they start to go too early, they have a big impact on global bond markets. That could be something that could come around and bite them later. I think you added up and I think Powell in the statement itself are going to remain quite hawkish. >> It sounds like central banks are in a tough position, as you mentioned. The markets will react off the smallest piece of information and then perhaps that's not what the Fed wants to see in terms of financial conditions, so they have to start to worry about, okay, going forward, if we don't take some reflection as to what we've been doing already, how big of an impact will it have on the economy a year for now, 18 months for now? But if we stop too early and inflation doesn't get under control, it doesn't sound like an enviable task at this moment. >> No it doesn't. And you harken back to the 70s were inflation fell back and then jumped up again, little bit of focus on Australia where they went from, they dial back rate hikes and all of a sudden the inflation numbers really broke out in the next two months and who knows what they are… The challenges they are going to be faced with. So yes, it's not an easy challenge. I think they still have their focus on inflation. The latest signs of inflation we have the September spending data last week and that's their preferred measure of inflation. It still remaining stubbornly high. The one positive thing we saw last week was wage growth may be starting to rule over a bit but it's too early to say. But I think that they are going to lean on the side of caution on that front. I think the markets will have to extrapolate. I think by December, they are probably going to be in a position… The difference with the Fed and the Bank of Canada is the fact that we hear from Fed officials all the time. They are out there, talking and they have plenty of time and data between now and December to start realigning that ship, that something I don't think Powell will do much of this week but there's going to be plenty of opportunity to do so as we move into December and I expect to. >>we've all seen the graphs and the charts which are quite dramatic in terms of how much energy prices have gone up, how much shipping costs have come down, and that inflation starts working its way to the economy to the services. Is that the real trick now as it enters that area of the economy to say how do we get that? >> Yeah, I think that's a big one. Until wage growth begins to pull back more noticeably, they are faced with the challenge and for that to happen, we gotta see some slackening in the job market. So not just the October employment data out on Friday, we also get this report that now is gaining almost household notoriety, it's the jolts data, but that has a leg to a month. What that tells us his job vacancies, the labour turnover survey, and that comes out earlier this week and that'll give us a sense, as of September, how many job vacancies were there. We saw last month the excess demand is beginning to roll over a bit. Some data showing up with the payroll data. That will come out earlier. I think the two together we will be looking at this week to say, okay, you're starting to see some evidence of the job market flowing. >> If you listen to central bankers speak, whether it's hours, Tiff Macklem, south of the border, other Western countries, the playbook seems to be now we need to raise and just raise to tame inflation and once we get there, at some point, we will pause what they were going to hold it there for a long time to make sure that we have a situation under control. That is what they would like to do. What do we think they might have to do? Really, what and try to get at is one of the going to start cutting and? >> That goes back to my first point. I do think there's a good chance they are going to overshoot. I don't think I'm going to be alarming to many people by saying that. They are basing their rate decisions on back for looking data to some extent or have been another Bank of Canada has begun to pivot. They are building and more of the current spending slowdown which is more than a leading indicator of inflation into their calculus and the Fed hasn't done that yet. They are still focused on inflation which is really evidence of activity that happened six months ago. So yeah, that's really the saying and I think that's the one thing, we will see. That will be the noticeable shift and to the point about rate cuts, yeah, it's going to happen very quick. I think we get to mid-2023, we are going to start seeing clear evidence that they have overshot. The economy will have been softer. That's when inflation is really going to begin to pull back, start to see more pullback in wage inflation and that's when they are going to set them up for rate cuts. We have the Bank of Canada cutting rates by a full percentage point in the fourth quarter next year more than the markets are pricing in the Fed cutting by less but still looking to cut rates. And the markets will be pricing that in earlier. >> Group fascinating stuff and a great start to theshow. Contact with us anytime. IMO moneytalklive@td.com or Phil at the viewer response box radar in the video player in 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. OPEC says demand for crude oil will keep rising despite the push towards getting the world off fossil fuels. The oil cartel forecasting demand to rise by 13% over the next decade,and then for that demand to hold at those levels for another 10 years. The call puts OPEC at all with many Western governments vowing to cut emissions and the economy's reliance on oil over the next decade. Shares of Wynn Resorts are in the spotlight today. That after Houston Rockets owner Tilman J. FertittaTook a roughly 6% stake in the casino operator, that's according to regular Tory filings. In addition to owning the NBA team, Fertitta's business Empire controls a restaurant group and the Golden Nugget casino. At last year, he dropped plans to take his casino and restaurant business public. China zero COVID policy has visitors at Disney Shanghai under lockdown. Park goers must test negativefor the virus before they are able to leave the park. That after Shanghai reported some 10 cases of COVID locally in recent days. There are also some reports are there that COVID restrictions at a manufacturing facility could hit Apple's iPhone production in the coming days. Let's check in at the stock market. We will start here at home with the TSX Composite Index. right now, we are down at 21 points, .1%. Shopify has continued a runoff. Weakness in telecom and other sectors holding us back. South of the border, the S&P 500 right now, again, fading lower into the session at 3875. We are now down 25 points. Nothing too dramatic but about half a percent, giving back some of those big gains last week, particularly the big game is on Friday heading into the weekend. We are back now with Derek Burleton, taking your questions aboutthe economy. we are getting a fall fiscal update. What you expect in knight? > Not a whole lot, Greg. I know that anytime the federal government talks about its finances, it's gonna get a lot of attention and I think this Thursday it's really going to be kind of a refresh of their current fiscal situation and the equestrian policy, new policies, I think they're going to shy away from that. They are going to heed the advice of the IMF that are telling the governmentsthat really, I think the UK was front and centre for what not to do, and that's be careful if you're going to introduce new measures. They should be targeted. Now is not the time to be pumping up the fiscal stimulus with inflation being the worry and Chrystia Freeland's been suggesting she's going to live by that in really downplaying expectations of new supports. I'm not saying there won't be any, but I think if they do something, it's going to be fairly modest. So in terms of the fiscal position, that's really what is going to be about. Those numbers are really looking better and I think Canadians will get some comfort out of it when they see it. They give you a sense they had a deficit last year, they had the final numbers released just last week and the deficit was about 4% of GDP. Well down from its pandemic peak. This year, they had budgeted somewhere in the order of I think 2% or around there, GDP, but that number is probably going to be, and you update going to be looking less than 1% deficit in the 20 billions, and it's getting there. We are getting close to balance and Canada's benefiting from some of the commodity revenues, commodity prices earlier this year and just inflation generating some windfall revenues. So we will see that, clear evidence of that on Thursday, I think. >> Gave the rest the world a pretty severe lesson. Under former prime minister Liz Truss, who didn't last that long, about what not to do and how the markets will react if you make the wrong steps. At the same time, you could see perhaps a bit of a desire on the part of governments to try to help the people getting hit the hardest by inflation. So you mentioned targeted. Can they do that? Can they help the right people in society who are struggling to put food on the table, to get gas in her car to go to work without inflaming people who really don't need any more stimulus at all? >> I don't think markets would have major quorums with that. Given the steady improvement in finances, there may be room to jump in there. Keep in mind, they did announce some support earlier this year to the tune of a few billion dollars for GST rebates, some support on energy and the like. So they've already gone down that path. Certainly wouldn't be surprised if they do a bit more of it. But yeah, I think Canada's may be a bit better off and that our fiscal position was looking better, in the UK is already announced spending before it and then announced a lot of broad-based tax cuts and the like. So I wouldn't rule it out. I just think it's not going to be a budget. If anything, it's going to be a fiscal update with a few new measures, maybe a little detail on their new growth fund. We are always looking for more detail. They will have a chapter on that kind of thing. And that's what this fiscal update will be about. I think they are going to save their power in the event that we do go into recession and obviously risks continue to go up and we will probably have at least a mild recession and that's when governments will be looked so to provide some support on the downside. >> Fall update, like they used to, we've seen enough of these to know when the fall update used to be a nonevent. Of course, the pandemic changed a lot of that. We will get back to older form. Let's get another question and then from the platform. This one about, with all the rate hikes a scene, we see the housing market react. The viewers asking is the worst damage to the housing market already behind us? Is it passed? >> We see the big reversal, there is no doubt. It was all such mammoth heights and what gets me thinking that we are, you know, at best halfway through the correction is that even though we have seen sales pull back to the low end of pre-pandemic range, so they've really come back, down 30% year-over-year, so huge pullback, yet rate holds continue to provide some underlying support. Homeowners that God in or purchasers that God in early got a rate hold for several months. Up till recently, those numbers are being supported, so I can see maybe another wave of downturn. The good news is, not a lot of forced selling so that's, you know, that's a very bright sign. But in terms of the rate impact, yeah, we just had another half-point last week on rates. Those rate impacts are still going to work through. So I think we are probably looking at the spring market of next year as being the earliest for kind of a bottom and until we get that, prices will be pressured down, sales will continue to face downward pressure, even if some of the knee-jerk pullback, some of that is in the rearview mirror. >> When the Bank of Canada came out with its rate decision last week, it also had the monetary policy report, and it wasn't a surprise to look at their projections and would add to the economy going forward and would subtract from the economy. The housing was in the subtraction column. We are not used to that in this economy. What will that mean for us overall? >> Well, it's removing a huge engine of growth and that really does stand out when you look at GDP by industry, the construction sector, new home building has continued to remain fairly healthy but we have seen a big pullback and ran a spending. We see commercial construction really slow. Overall, the weight is already on construction. That's going to remove that… You get the second round effects on the economy so any kind of forecast going forward would have a big chunk of the weakness related to construction. But it's beyond that. One of the things I noticed in the Bank of Canada NPR policy report is that it was more focus on household financial risks, the renewal shock in 2023 that's upcoming, not so bad in the short run because a lot of the homeowners that bought five years ago, their home values are still well above what they paid for them. We've seen prices pullback, but we haven't even seen the pandemic gains being reversed. So at least a lot of homeowners have the benefit of still healthy balance sheets. If we don't get rate cuts in the forecast towards the end of next year, one worries about the compounding effect on renewal shock, trigger rates and all that going into 2024. But the Bank of Canada gets a lot of data, they are going to see some of this risk and I do think part of the reason for the pivot was just reassessing some of the household financial risks in Canada and just realizing they got to be a little bit careful about too much rate increases over too short a time. > Because of the psychological impact to, the wealth effect, this idea that when your house is raising, going up in value, you are feeling wealthy about yourself, your nest is worth more. You feather your nest more in those circumstances. In the short term, could that actually help bring inflation down? >>if you're talking about wealth declines, you could use sort of a similar argument, albeit with a negative sign on it. The question is, is it even larger on the downside, it's not symmetrical. And I do buy into some of that. But the good news is the wealth effect is not nearly as severe as other shock. I do not that's good news. But I will put that is the lesser of the headwinds. I would put the bigger one being the income hid from higher rates on Canadians squeezing out disposable income for discretionary spending and that's no doubt a headwinds and one that's bigger in Canada than in the United States were relative debt levels are lower. We do have offsets and I don't want to paint to bleak picture in part because balance sheets in Canada at last count are still in pretty good shape. I mention that home prices are still elevated and much will depend on where they go from here, but it is a concern and something the Bank of Canada is clearly tracking and something that could lead to potentially earlier rate cuts in 2023 then what we are expecting. >> Great analysis there, the housing market and what it means the broader economy. Look at another question. What is your outlook for the loonie? The US dollar has been pretty much mowing down everything in its path this year. >> It has, and the Canadian dollar has held up relatively well under the circumstances. It has lost a bit of late and since it became clear that the Bank of Canada would likely fall short of the Fed in terms of rate increases. Most forecasts build in a gap. We have the Bank of Canada peeking out of 4 1/4, the Fed at 4 1/2, could be higher than that. The last dog plot and the fed, we won't get and you don't plot this week. They do that forecast quarterly. Based on Fed officials, some of the comments we've had, they still live by that dog plot and it has 4 3/4 as the top. It has markets pulling back the loonie and that still went to be a pressure. We have the currency reaching about 71 US cents by the end of this year, the early part of next year, couple months away from here. That the couple of cents down. Lotta dramatic weakening, but I see a one-sided direction given the fact, we will see it this week, the Fed will be more hawkish than other central banks and putting more emphasis on the inflation outlook then say the Bank of Canada. >> In terms of the economy right now,should we be thinking about a weaker dollar? There was the traditional arguments of our dollar being weaker making our goods looked better to the US. At the same time, even Gov. Macklin expressed that these levels of the Canadian dollar, we are going to be importing some inflation. >> That's the way central banks look at it. We call reverse currency. They used to be a time where looking for a weaker currency to support your demand, as you mentioned, now it's about inflation, all things being equal, the it drives up inflation. Interesting that the Bank of Canada meeting last week, no talk about any big talk about the currency. I wondered if he would've slipped that into the press conference. There was like a one sentence statement. The currency, didn't quite know what to do with it. It weakened a bit. There was a knee-jerk reaction and then of course global, some of the global conditions filtered into the currency market. So we did see a big draw. but interesting that it wasn't to a point, he made a comment about it but didn't repeat it last week. So we were left wondering about how big of a priority it is to shore up the currency. >> Exciting set. At home, always make sure to do your own research before you make any investment decision. We will get back to your questions for Derek Burleton on the economy in just a moment's time. Our minor coursing get in touch with us at any time. Email moneytalklive@td.com. Now let's get to our educational segment of the day. If you are looking to stay on top of the markets, WebBroker has tools which can help. Caitlin Cormier has more. > Alright. Today, we are going to take a look at the watchlist tool within WebBroker. It is one of the many tools that we haveto help you build a portfolio of self-directed investments. Okay, we're going to happen. We are going to click, within WebBroker, probably the easiest way to get watchlist is just in the top right-hand side of the corner where we have this little star button. That will bring up our watchlist page. So what we can use, we can actually create up to 10 different watch lists with up to 10 securities per watchlist. So I can just type in here either the name or the stock symbol for whatever securities I would like to add to my profile. I'm going to go ahead and add some Canadian and US securities here so I have a good mix. We will just add a couple more here. There we go. All right. That should be enough for now. So under this initial page, we can see is if you click the drop-down and see the performance of this particular security, so a quick chart, we can also see the quote information, so what that current prices that security, the open price, the volume of trades for the day and we will also got some ranges throughout the day and the 52 week period we have the analyst rating and we can also hit buy or sell here if you would like to move forward with the security. If we click on fundamentals, we can see some dividend information, market Information, price-to-earnings ratio and an estimated earnings if that something your interested in finding more out about. Here we have a couple of links where you can see some use charts or options at that something you're looking to do as well. Within the watchlist, you can add stocks, mutual funds and indices, select the different types of securities you can add. Another really neat tool within this watchlist is we can hit the tracker. So the tracker actually allows us to build a portfolio kind of like a mock portfolio right within our watchlist. So what I mean by that is you can click right here on this quantity and we can act as if we are actually going to purchase the security. So I can say for example I want to purchase 100 shares of Apple and I'm just going to put in the current price there and click save. And then I can do the same here for the Telus stock, so let's say 50 shares of Telus at 2762. And I'll do this one as well, we will do 75 shares at 1182. Okay. Now, once I click save here, you can see already the securities are actually updating to show me how the performance would have been if I had gone through with this purchase. So it showing me the last price for the security, the average cost based on the information I input, the price change, market value, book value and any gain or loss that has been unrealized of course at this point. So it's a really neat way to be able to build a portfolio without actually having to go through and put any of your money on the line. You can test at some of your theories about different investments you like to purchase and see how you would have panned out. All right, so that is our watchlist tool. Of course, if you have any other questions, feel free to send the mentor MoneyTalk Live and check at the learning centre for a bunch of additional information on all different topics to do with direct investing education. >> Our thanks to Caitlin Cormier, client education instructor at TD Direct Investing. Make sure to check out the learning sector and WebBroker for more educational videos, live interactive master classes and some upcoming webinars. Before we get back to your questions on the economy for Derek Burleton, reminder of how you get in touch with us. You have a question about investing or with driving the markets? Our guests are eager to hear what's on your mind, so send us your questions. There are two ways to 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 will see if one of our guest can get you your answer right here at MoneyTalk Live. We are back now with Derek Burleton. We are taking your questions about the economy. This one has just come in the past couple of minutes. As central banks can't curb inflation soon, what could happen? This is a bit of a scary question actually. >> It is, because I think pretty much consensus is that as we move into 2023, inflation will begin to come down. We are already seeing some disinflation sign show up on the goods from global weakness concerns, seeing an energy pull off its peak and all that, it really comes down to that second wave of inflation, the service driven inflation, the wage inflation is a big part of that. So I think we are assuming that even if inflation remains relatively elevated, it is past its peak. We will start to soon see that. Now if it doesn't, I think the economy is really going to force everyone's hand. It's quite get much weaker and were getting into some outcomes of a more severe recession than I think most are predicting, technical recession, calling for a recession or stagnation, then you get other outcomes. It clearly means interest rates are going to keep going up. Central banks are sending a signal that they will do everything within their power to wrestle inflation down. I wouldn't see a pivot where inflation is at 7% all of a sudden their cutting rates. So I think at the end of the day, it's going to mean higher rates, deeper economic weakness and, at some point, that will bring down inflation, I have no doubt. It just going to be a tougher lending than anybody would want to see. >> That actually brings up our follow-up question. This from another viewer about the expectations of a recession and how bad it could be. But really, I guess the answer is it depends on the fight against inflation. >> Absolutely, inflation is really going to drive that. I think it's inflation comes down, as many expect, and hopefully wages will continue to trend lower, we may start to see some of that as early as this Friday, so we will keep a look at that. But I think inflation really will map it out. Fortunately, forecasters track record on protecting inflation and central bank hasn't been great, but we will keep at it and I think we are probably in inflation peak and that's because of interest rates. We were at zero not that long ago in Europe now huge adjustment that's working its way through the system and that should bring inflation down. It has kept inflation expectations relatively well anchored, so that's one sign that gives me confidence. >> It's one thing to when people think about inflation perhaps not thinking it through in terms of base effect. It doesn't mean that the price of crude, for example, or any other good that we are concerning craters. It just means doesn't continue to go higher year-over-year. >> Absolutely. And last time, said Powell referred to the key data they are watching. It's the PC data, we had the data for September last Friday, they use that inflation measure in that report, the PC deflator, that's the preferred measure of inflation, not the CPI, and they are looking at it from, okay, what's been the change in the last three months, the last six months, the last year? And it's when the short-term measures come down below say the three month comes down below the six and the 12 month, then they start getting more confidence, they removed the base effect in other words, then inflation trends are slowing. Last week, we were starting to see some evidence. That's still too early. It's one month's data. Hopefully over the next two months it will showed inflation is on the dissent. >> It seems every question we are getting, even though they are about different parts of the economy, they come back to inflation as well. It was the job market like in Canada right now? >> We also track vacancies. It's given a bit of a different narrative on the job market. We had employment rates at multi-decade lows or thereabouts but the excess demand shown by just the sheer number of job postings or vacancies, that's been coming down but it's still very high. So a tight job market in Canada, that's even now is three months of declines in measures of labour survey… We had a bit of a bounce last month but on a trend basis we are coming down. So anticipate we will see that continuation of gradual slowdown in labour demand continue. Supply-side has been interesting. Canada seems to be losing workers of late. I think some of the older age cohort has been heading to the sidelines. Later than it did happen in the United States. We will see if that trend continues. But some of that tightness, even if your labour demand pulls back, if your supply is also declining, is going to limit the extent of the improvements. That's one of the trends in going to be looking at. It's still a drum tight market and same argument with the Fed. You gotta see more underlying slackening for the Bank of Canada to really even think about pausing. >> Is that the real, I guess, and game of all this tightening of the economy, that if you are going to try to fill those positions, perhaps in the traditional way, would mean enticements. All razor ways, give you this. That's all inflationary. In the end, it's really about the Fed, the Bank of Canada, the central banks are trying to not crush the economy, that's too strong a word, but slow it,, down, tamped down for a while. >> Yeah, the labour market is part of the target. It's interesting, in the NPR, the policy report, the projections of unemployment, they say fairly quiet on the labour market. It's all about GDP and output in all that. But clearly just do some of the comments, the labour market is really what they mean to see slow down and slacken and return to more balanced conditions. A slip in excess supply, that's going to keep them up at night. That might even be preferred to bring wage growth down and that's what they're going to be looking at. So these data on Friday, if the Bank of Canada signalling, okay, rate hikes are approaching an end, really for them to get to that end, they fought to see employment really losing steam not just overall, public sector employment is part of it, but private, full-time job creation is something that I think they want to see slacken. >> We are going to get back your questions for Derek Burleton on the economy in just a moment's time. As always, make sure you do your own research before you make any investment decisions and reminder you can get in touch with us at any time. 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 time at moneytalklive@td.com or you can use the question box right below the screen he here on WebBroker. Just writing your question and hit send. We will see if one of our guest can get you the answer right here on MoneyTalk Live. Gold and precious metal prices have softened after the highs they put in earlier this year, and TD Securities has a new report out almost been driving that weakness. Joining us now with more is MoneyTalk Anthony Okolie. >> They have lowered their near-term gold estimates due to rising interest rates and US dollar. After briefly testing about $1800 US per ounce, the price of gold continued to fall, ending the quarter at just over $1600 per ounce. Now, the gold ETF outflow in Q3 totalled about 7%, we saw the SNP TSX golden X in US dollars was down about 9% in the third quarter. I brought along a chart that shows TD Securities revised forecast for the price of gold. As I mentioned, they have lowered the forecast of the average gold price to just over $1700 US, that's down from about $1800 per ounce. In 2023, they are forecasting gold prices to be around 1750 as well, that's down from the previous forecast. The forecast for silver was also slightly lower for this year and in 2023. Now, TD Securities is also seeing increasing likelihood next year that the Fed will maintain higher interest rates for longer, which would strengthen not just the US dollar but also lift real rates and that's going to reduce the outlook for the price of gold. Now, TD Securities also notes the report that company messaging appears to be that inflationary cost pressures has mostly piqued. But that costs are expected to stay high through 2023. On production of gold and precious metals, it TD Securities expects it will be stronger in the second half of the year with several companies indicating that the second half will likely see higher production versus the first half which was impacted by certain things such as maintenance, COVID 19 related impacts and geopolitical factors. They are maintaining their sector overweight and they have made no recommendations… With a 12 month view, TD Securities expects the improvement in precious metals prices as current rate tightening cycle ends and the expectations for future interest rates declined. Greg. > So this inflationary environment, like so many other industries, you see pressure and operating cost, on capital cost. When it comes to the minors, what does TD Securities think they are seeing in pressure point? >> They pointed two areas. One is the need to move to decarbonisation at the operational level. That means things like moving towards electric vehicles, renewable energy. Another area where they are seeing mid-to medium-term cost pressures is updated global standards for retailing, that's toxic waste, that's adding to medium-term cost pressures. > Thanksfor that. It MoneyTalk's Anthony Coley. It let's look at the markets. We'll start here on Bay Street with the TSX Composite Index. We are in negative territory, pretty modest. 19,447, deficit of about 24 points, little more than 1/10 of a percent. We got some weakness today and some of the lumber plays in Canada, including West Fraser Timber right now down about 1 1/2%, a little bit off the lows from the session. The last time I checked, some of the oil companies are getting a bid. It's not that impressive, add $10. 53, you Crescent Point Energy up just 1.6%. South of the border, the S&P 500 after some of the gains of last week, particularly Friday, we are heading into a pretty big event this week on Wednesday, the US Federal Reserve will come out of a two day meeting and if you are an investor, you'll be listening to that one. We don't like to use the cliché all eyes, but if you are an investor and you are not watching, I don't know what you're up to. 3872 on the S&P 500, down 20 points, about three quarters of a percent. Tech heavy NASDAQ after last week's mega-tech Names came out under pressure last week, not too dramatic, down 65 points, little bit more than half a percent. Let's check in on Apple. That's one of the mega-tech… When it came to iPhone sales, even though they were softer than the street was expecting, they are of 10% year-over-year. This report out of China that perhaps some of their iPhone production will be hampered by COVID restrictions perhaps weighing a little bit on the name but it is a little bit of a down day overall for the market. Down pretty audibly with Apple, 153 bucks and change, a little bit more than 1 1/3%. We are back now with Derek Burleton from TD Economics, take your questions about the economy. Let's get to them. What are we hearing from businesses about the strength of the economy? This is an important one for central banks to watch. What a sentiment like out there among business owners? >> It's quite glum, not surprisingly. We get confidence data at a small businesses, the CFIB in Canada and the FIB in the US. We have larger business confidence, the Bank of Canada Business Outlook Survey which runs ahead of their meeting pointed to sharp declines, historic declines in confidence. For a while there, we sought resilience but all of a sudden in the last three months or so, we are seeing the businesses are increasingly getting concernedabout higher interest rates and on the economy, hearing all the recession talk in everything. So it's concerning. One thing I would latch on to you is investment intentions didn't decline as much his overall confidence and that was one good thing. It did fall back but we will still see evidence that businesses plan to invest at least to a modest extent on aggregate. I think some businesses, they can take advantage of some of the opportunities to automate because we will get to the point where the economy, if we fall into a recession, it will rebound in those businesses that invest could maybe take advantage of that to be a little bit better position. >> We just had a viewer question come in and I know we touched on it briefly before, supply chain issues. Not only was it bad for inflation, it wasn't good for business owners. we have indications that they are starting to ease. Can we take some comfort in that, that maybe the global supply chain is starting to move a little more effectively? >> Yeah, the one silver lining of weakening global demand as we are starting to see supply chains thought. That was the hot topic heading into this year, the early part of this year.. After a head fake, we are now seeing pretty visible signs of pullback. That is what we are going to see. The inflation pullback is going to happen in waves. It's going to be goods dominated to start already, that's beginning to happen, and in the next wave will probably be service inflation. Even the shelter component, we often say that some of the disinflation is showing up in all data except for the CPI. We are reading about market rents beginning so pullback in the US and the like, so that tends to happen with the leg. Then wages are maybe the last thing to pullback. So I can see waves getting us to a more desirable endpoint but hopefully the economy doesn't have to soften too much to get us there. We are counting on some of the goods disinflation help mitigate against the risk of even higher rates and more of a burden to be taken by the service I going forward. >> We will squeeze in one more question in the time that we have. We just talked to businesses, what about the consumers? What you think about the health of the consumer? We have had some early indications that we are slowing our spending. Is that the same thing as the health of the consumer? >> Yeah, that's the automatic extension of the household feeling pressures. We talked a little bit earlier about the wealth effects, you know, just confidence as pullback. These are early signs of a significant scaling back in spending and we are seeing that in the last couple of months. Spending hasn't cratered, but it's flattened out in some of that reopening benefit has faded. So you know, any forecast going forward, I knew the Bank of Canada has contractions in consumer spending in the last couple of quarters, not deep ones, but contractions nonetheless and I don't see any way around that. I think the pressures on the household, the rate increases, the job market is still there and thank goodness, but we are going to start to see signs of more significant slowdown. >> Heading into the spring, I think a lot of people were in the same camp I was in. My wife and I took a few getaway trips on weekends where he spent a lot of money. We haven't spent money in a long time, and she was like, slowdown, buddy. It's a little too expensive for one night away. >> Absolutely. And with all this uncertainty, I think you will thinking okay, our mortgage is coming up for renewal, we file save money for that because you gotta prepare for the hit. We are going to see more that show up in the hard data in months to come. >> Great to have you here. Great conversation. >> Thanks. >> Derek Burleton, deputy chief economist at TD Bank. Stay tuned, when tomorrow show, Steve Biggar, Dir. of financial services research with Argus Research is going to be on the program taking your questions or financial stocks. A reminder of course you can get a head start on that show. Email moneytalklive@td.com. Get a head start on your questions, we are still going to start the show at 12 Eastern time tomorrow. That's all the time we have for today. Thanks for watching. We will see you tomorrow. [music]