Francis Fong – 06/30/2022

[theme music] [theme music] > Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing. It's a new program broadcast daily on WebBroker. Every day, I will be joining by guests from across TD, many of them you will only see here. We'll take you through what's moving the markets and answer questions about investing. Coming up on today's show, we will be joined by Francis Fong, senior economist at TD Economics. He says that just because real estate prices are cooling, doesn't mean homes are actually becoming more affordable. And in today's WebBroker education segment, we will have a look at how you can compare your investment performance versus the major benchmarks. It Kaitlin Cormier will join us later on. Here's how you can get in touch with us later on. Email moneytalklive@td.com, or fill out the viewer response box under the video player right here on WebBroker. Before we get our guests for today, let's get you an update on the markets. This is the last day of the quarter, and it will mark the first half of the trading year. I'm rather glad myself to put it behind us. We are not going out on a great not. If we hold this trend into the closing bells. It TSX down 251 points, 1.4%. The pain is pretty broad across the sectors and we are seeing a lot of plays in the cyclic coals and minors and energy names under pressure in Toronto. We got canopy growth under considerable pressure today right now to the tune of about 18%, $3.68 a share. Got some news from the name in terms of converting some debt into equity. Investors are taking a careful look at this. Across the border, we are taking a broader read of the American market, the S&P 500, it is down about half a percent. Heading into today's session, your today, get ready to say goodbye to the first half of this year. The S&P 500 a little less than 20%. Check out the tech heavy NASDAQ. There is pain and technology stocks again today. Let's take a look at the NASDAQ 100, down almost 29% year to date. As we said, broad-based selling, let's check in on Bank of America, one of the big Wall Street names. We can see that it's down to the tune of about 1.8%. That's your market update. Rising interest rates are having a cooling effect on some parts of the Canadian housing market. But just because prices have been declining and are forecasted to decline, doesn't actually mean that real estate is getting more affordable. Let's dig into that now with our guest of the day, Francis Fong, senior economist at TD Economics. This is intriguing, the notion that we have a price for crest, including from TD Economics, that we are going to see a pullback in prices. You're saying don't get excited about affordability showing up on the heels of that. >> If your prospective homebuyer, your thinking home prices or begin to fall, maybe this is the time to get in. It's not that simple. Let's take stock. We've seen sales fall about 10% we will probably see another 10 percentage point decline in average prices. In total, 20% peak to trough at the end of the year. That's coming off the back of rising interest rates. Canada has already raised rates by about hundred and 25 basis points. Mortgage rates are about hundred and 40 basis points from the fall of last year. If we kind of anticipate more interest rate increases we are seeing an increase in mortgage rate totality and so will be estimate is that if interest rates rise by roughly a percentage point, you need at least roughly 8 to 11% decline in prices just to keep your mortgage monthly payments in line. So that's going to be a challenge for folks that are hoping to get in. Obviously it does help with the down payment, but on the same token, if your savings have been in the market over the past year, it hasn't been all that positive either. >> You talked about the headlight number, the forecast, you're talking about a 20% reduction in price from the peak but that doesn't even take as I think back before the pandemic. There was a big run up a prices during the pandemic. >> That's right. Let's look at Ontario for example. We saw an eye watering increase of over two thirds in the GTA, but price increases outside of the GTA across the province were actually higher than that. So really, you seen this decline in affordability had everyone. As we saw, a lot of folks during the pandemic relieving the big cities and searching for more affordable real estate elsewhere. So yeah, there was definitely a massive run-up of prices pose pandemic and this 20% the client just when does that, so we're back to early 2020, late 2019 levels which, you know, I can't for the time being all that affordable either. >> We hear voices saying that when you see this kind of rate increase, pressure in mortgages, pressure in household, it could spell bad things for the Canadian housing market. I have no production because I'm not an economist. That's why have you here. What are the dynamics of the market? For the past 10 years when we've really been covering Canadian real estate, there been a lot of hurdles. It seems to jump over all of them. Will it trip up? >> This resilient story has been a defining featureof the Canadian economy relative to a lot of countries around the world,and that narrative that we have told is always been based on a few key elements. I think if we looked at boom bust cycles we've seen another housing market in the past, look to the US, the obvious example, between 2000 to 2006, huge run-up in prices and huge crash during the crisis. The difference is really about credit quality where you saw the big run-up of prices in the US was really driven by borrowers that fundamentally couldn't afford those homes. Compare that to Canada and what we've seen over the past 10, 20 years is this gradual uptick in credit quality which I think is kind of mind-boggling for a lot of folks because essentially what that is saying is that the people that are purchasing at the is… Too many people egregious level of prices are perhaps the ones that can best afford that level of prices. Add that to continued household formation outpacing housing supply or new housing construction and overall demand growth from all sorts of folks and we seen, basically, the Canadian housing market sustain itself through all of these kind of shocks we've seen for the past little while. A great example of that, perfect example, is Alberta post-2014. Oil prices crashed. You would think this huge run-up of prices prior to that, there was a doubling of the claimant rate and that was associated with an increase in interest rates at that time as well, and yet, you never saw a major crash in home prices. They kind of just languished until relatively recently when we saw things pick up. So yeah, definitely dear one, there has been a tremendous amount of resilience,we are testing that on a nationwide basis. We are expecting this really big run-up in interest rates and housing market resiliency is going to be tested. >> Does it come back to the labour market? Before the dislocation of the pandemic, before everything that we thought we understood went sideways, invite guests in front of me talking about the housing market, I asked what would be the greatest challenge for the housing market? They respond to jobs, lack of employment. was the situation in Canadian employment right now? Where are we headed? Could that be a challenge? >> Record low unemployment rate of 5.1%, the lowest since 1974. We are in an extremely tight labour market position right now. It's a good starting point. but on the same token, there is some risk that we will see reversals. Certainly as we see interest rates start to creep up. So to that point, I think there definitely is some vulnerability in the housing market to job losses, but I think the real challenge again is looking back even in our recent history, looking back at Alberta, a doubling of the employment rate at that time, they were the only province to get hit that hard because they were the most exposed to oil prices, but we didn't see any structural decline in home prices. So it really begs the question, at the end of the day, what can hit it? If we've already had markets with a huge increase in unemployment and increases in interest rates, what more does it take to kind of take it down? >> I Mithra one more thing that you. Everyone is trying to figure out what's going on in Canadian realist rate, what was the real driver? how much investor activity there is on the market. It substantial. Is there a danger that in a downturn like this, investor start to disappear? > Absolutely. Recent Bank of Canada data, which is incredible research, first time homebuyers has fallenwith investors picking up the slack over the last two years, post-pandemic story. Does that reverse? I think the real challenge here that we need to talk about is where household demand growth comes from. There has been a tremendous amount of household demand coming from immigration, young people leaving their parents homes and going elsewhere, does that pull back if interest rates increase in portability decreases? We are getting into a tough spot from an affordability perspective because rates are so high. Does that pullback? Absolutely, I think that's absolutely a risk. Time will tell whether we see that trigger any kind of structural problem. >> Great start to the program. We will get your questions for Francis Fong from TD Economics. Get in touch by emailing moneytalklive@td.com. Fill out the viewer response box under the video player here on WebBroker. Right now, I want to get you updated on some of the big worldwide stories and how the markets are trading. The Canadian economy grew at a stronger clip than expected in April but then it strength was likely short-lived. Canadian GDP expanded by 0.3% in the month and the increase in economic activity was broad-based with the oil and gas sector showing considerable strength. That said, StatCan's early estimate for maze for a modest decline in economic activity. TD Economics says that is certainly a worry, noting there is a risk can of Canada's relative outperformance relative to its global peers may be coming to an end. Small business confidence continues to slide in the face of high energy cost and labour shortages. The latest read from the Canadian Federation of Independent Business shows 1/3 straight month of declines for its business barometer. The survey shows soaring energy bills are top of mind for business owners and the shortage of skilled labour remains the biggest challenge for growing sales and production. TD Economics points out that while business confidence has become a bit more threadbare in recent months, the level is still comparing favourably to pre-pandemic levels. Air Canada reducing at summer flight schedule in the face of what it calls complex and unavoidable challenges. Airline says the changes are aimed at avoiding last-minute travel troubles for customers. Some 150 flights across Canada and the United States will be dropped in July and August and that resents roughly 15% of its schedule. Air Canada says that despite a hiring spree and investments in air-traffic equipping, its operations are being hit by disruptions in the global travel industry. Quick check-in now on how the benchmark indices are trading. We will start on Bay Street with the TSX Composite Index. Right now down to the tune of about 305 points or about 1.6%. Pretty hard to find a place to hide today. It broad-based selling with those sectors all of the red on my screen being led by materials, energy, some cyclical names when it comes to consumer goods and services. South of the border we've got some signs the US consumers are slowing their spending. It seems to be rattling investors to a degree. The S&P 500, the broader read of the American market, down a little shy of 1% right now. Of course, this is the end of the quarter. We are closing the books on the first half of the trading year. It's been a rough one. we've got plenty of questions coming in from the platform. Let's get to them right now, someone keeping in mind the rise on what I was looking at, Canadian GDP report. a bit hey, I got some good news for you, but after that, some not so good news. How did you read the numbers? >> It's a continued strong print keeping in line with what we have seen over the past few quarters. I think the story differs here between Canada and the US. We need to tell a bit of a different story here in the sense that we are still continuing to see quite significant strong demand from all across the different sectors. I think what we need to do is separate what's happening in kind of the really high frequency data like markets and other areas with the broader economic data. Like I mentioned, we have record low unemployment rate. Really what we are talking about here is what risks do we see from extremely high inflation, rising interest rates on the broader economy? That's the story here. As rates increase, they will filter through the broader economy and that will slow things down by definition, by design. The aim here is to kind of keep… At least aim to keep inflation under wraps, which will in turn have effects on the broader economy. >> We think about the R word, a lot of people throwing around the word recession right now. Most will say it's not a foregone conclusion, but I do feel that when you start to look at some voices out there right now that are saying we have to pay attention to the risk of it, what should we be weighing out to try to assess if we are going to fall into that scenario? >> This is exactly the point in that there is obviously lots of concern about the degree to which inflation will force households to divert spending from discretionary's to focus on the basics, food, households… Sorry, housing and whatnot. Obviously, that's a major concern but at the end of the day, all of the economic data still suggests sustained growth. Is it moderate? Yes. Is it still there? Yes. Even the personal income spending data from the US, there is still growth. Obviously that could change relatively quickly as people are forced to divert to going back to that point. So do we anticipate a recession? That's not in our baseline forecast simply because we anticipate things so slow down as interest rates increase and the economy eventually will pick up in 2023 and beyond. So there is definitely the risk that. . . [video buffering] You know, in 2023 and beyond. So there is definitely the risk… >> That's the key question for so many investors, what is your central bank outlook? How many more hikes should be prepare for? >> What we are anticipating is 3% by the end of the year. So we differently have quite a bit more to go. But on the same token, I think we need to take into account is, you know, the challenge before the Bank of Canada, if I can rephrase, is to what degree… What degree of kind of slower economic growth are you willing to accept to fight inflation? >> Because there is pain in that. >> Right. So there's always this kind of balancing act that the central bank has to play in fighting inflation. Right now, inflation expectations haven't moved all that much. Market measures, survey-based measures are moving quite high, but market-based measures are still pretty steady. So that I think lends some confidence that the Bank of Canada is doing a sufficient job in keeping inflation excitations anchored. On the same token, that could change very, very quickly. They've been very adamant that they will do whatever it takes to maintain inflation. Going back to this point, is there some sort of a limit beyond which they are not willing to accept a decline in in GDP growth or an increasing employment rate? There probably is some limit, but we're certainly not there yet considering that the on employment rate is at a record low. Certainly our anticipation as we see a couple more big moves down the line and then pause at that point to see, basically assess, see what kind of impact filters through. Keep in mind, a single interest rate increase can take anywhere from 12 to 18 months to filter through to real economic activity, so there is a bit of a time leg from one the bank hikes to when wecan assess what the real impact is. >>the Bank of Canada's mandate is keeping inflation low and stable within a target range. As to how much pain it wants to inflict to get there, the US Federal Reserve, I imagine, has a tough job with its dual mandate. Supposed be worried about prices and employment. >> Right. It's definitely tougher. At the end of the day, if you can take the range of inflation that we are at now, there is a huge component over which central banks have very little influence. It's all supply chain. >> Rising prices are not going to end the conflict in Ukraine, it's all going to get think shipping quicker. >> It's not going to alleviate the energy crisis or energy crunch that we've been feeling not just recently but in the last couple of years. That's been hitting countries around the world, including China, Europe, ourselves. There is that component and another component that you can consider, inflation that's coming from a very strong economy. You can consider it an overheating economy. That's where the central bank can play in kind of reducing the impact of inflation. So is it what we are dissipated is that we are going to take a little bit more out of that, out of the economy to offset with tapping on the supply side but then you have to the balancing act, like the US Federal Reserve balancing unemployment and inflation. >> I could talk central banks all day but were not going to do. I want to get a final thought from you. What's interesting about this rate height and cycle to me is that you have calls on the street saying… And then we get to this point, and then we can start cutting again. We are just jumping far on the other side of the road. Is that a plausible situation where they hike so quickly that they end up in a position where they say we brought inflation down to where we need to and we need to ease up? >> I would say that it's possible but probably unlikely. We did have in the early… I believe it was the early 2000, the Federal Reserve went through a hiking cycle and a cutting cycle relatively closely. I won't say it was immediate. At the end of the day, you need to take time to assess. One of the key points we need to hammer home is that the overnight rate, the interest rate targeting regime is a blunt instrument to impact all the sorts of things. You have all these competing goals are trying to do. You're trying to promote growth if you're in an excess supply or demand situation depending on your cycle. You have inflation, financial conditions need to worry about, liquidity, you need to worry about all of these things. You have one lever. I think it would be probably irresponsible the part of a central bank to not take a bit of time to assess where you are in the state of the economy. On the same token, anything can happen. If we are hit with some sort of a crisis or major recession, you can be damn sure the central bank will not have any qualms about lowering interest rates rapidly if need be. >> Interesting times indeed. We're gonna take a break. Make sure to do your own research before you make investment decisions. We are going to get back to those questions in a moment. You can get in touch with us any time, moneytalklive@td. com. Let's get to our educational segment of the day. When you're looking at the performance of your investments, it can be helpful to compare to global benchmarks, give you a bit of perspective. Joining us now is Kaitlin Cormier, client education instructor, TD Direct Investing. Help us get some perspective. How does WebBroker help us do this? >> Yes. Hi Greg, how are you? Absolutely, it is important, especially when we are in small town markets to have a perspective. When things are going up we don't worry as much. We think we've done a good job with our portfolio. When things are going down, it's a good idea to make sure that it is… See where you fall with the rest of the market, so let's take a peek at how you can do that with your specific portfolio in WebBroker. So where we are going to go as we are going to come in under the account tabs under our leftAnd scroll down to performance. This is going to take us to a page that is going to give us a carafe of the performance of our portfolio. we are seeing here, bear with me here and imagine that we have a bit more than a straight line for illustrative purposes, but what we can see here as you can see a bit of a graph. He got a bunch of different time ranges as far as what we would like to see you for performance within our portfolio. We can do a longer period of time or we can choose a short timeframe or custom timeframe. For today, let's choose the last six months. We can choose either one account to do this with, we can choose a grouping of accounts or we can choose all accounts that we have within our portfolio, so again, that's something we can choose based on what we are looking for. And then as we scroll down, we are able to see that we can actually overlay some different benchmarks. We have first year the SNP TSX Composite Index, so the Canadian market as a whole and we can impose that lying on top of our performance and see how that measures up. Again, in the scenario, we are dealing with a portfolio that doesn't have much action but we can see it's performing above what the benchmark is, which is hopefully a good sign. We can also choose the S&P 500 which is kind of the biggest 500 companies in the US. We can see that performance against our portfolio as well as against the TSX. The last thing that we can superimpose on this targetIs our own annual target. So we have sort of a goal for growth in our portfolio during the year, perhaps we already have kind of a number in mind that we need in order to beat our investment goals, then we can put that in, the target, and hear and put them on the chart as well. So here I have a target of 10%, so chewing me over the last six months, I should've had 5% growth, no we are seeing a difference there, what are actual returns have been. And if you scroll down here, you can see your returns versus the index on sort of a regular basis. So we are seeing an annual or more than an annual comparison there, was going on in your portfolio versus what's going on in the interest is. > Interesting stuff. There is a tab's will for personal rate of return. What does that tell us? >> Great question. Time rate of return looks at the period of time you have invested in something, so we are looking at the six month timeframe, it's taking those exact six months and showing you what the return of the portfolio was. The personal rate of return works a little bit different. If we go into WebBroker and click on personal rate of return, what this is going to do is is actually going to show us a more relevant return to our specific portfolio, so it showing us our beginning balance that it's also showing change in market value, but it's adding in any interest or dividends that we have earned, and he deposits that have gone in, withdrawals transferred out, the ending balance and then the numbers there. If we are looking at our personal rate of return versus time rate we will see different numbers because personal is looking at the performance of underlying investment where is this one is taking more things into consideration. A lot of investors do like to see this return as well because it's more specific to you as opposed to the investment. >> Great stuff as always. Thanks for that. Enjoy the long weekend when it comes. >> You too. >> That was Kaitlin Cormier, client education instructor with TD Direct Investing. Check out the learning section in WebBroker for more. Before you pack your question, a reminder of how you can get in touch with us. You have a question about investing or what's driving the markets? Our guests are eager to hearwhat's on your mind so send us your questions. There are two ways to get in touch. Send us an email any time, 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 one of our guests can get you the answer right here at MoneyTalk Live. We are back now with Francis Fong of TD Economics. Francis, we started the show with a discussion about real estate. You talked about the fact that rising borrowing costs are pressuring home prices to the downside, but carrying costs are higher because mortgage rates are higher. We had a viewer interested in that who asked will you be able to get more house for your money in this environment, saying that's what they observed happened in the West in the 1980s. >> It's a tough question to answer. I will give it a shot. One thing we did observe is this home price decline I mentioned earlier, 10% relative to February, that in what's called the average existing home price measure that the Canadian real estate Association puts out and that's affected by the composition of sale. >> That's the thing about averages. >> Exactly. So if you have lower-priced sales that are happening but none in the higher price markets, then you recorded decline even if the actual sales prices are even. If you look at the MLS home price index released by Korea as well, prices are only got about 2% since February. So we are saying fewer sales and higher priced housing and markets relative to lower-priced ones. It lends itself to saying to be there is a higher price pressure in higher price areas than others. Which, to the point, might give you the opportunity to move up. But on the same token, it's a challenge because it's impossible to talk about a national housing market. Everything is regional down to the neighbourhood. It's going to be impacted by local dynamics of where you intend on moving, where you are coming from, are you intending on moving into a lower-priced or higher-priced jurisdiction, what the price dynamics are there. Is it a possibility? Absolutely. This is to the point of what I was raising earlier were we have seen higher-priced gains outside of major metropolitan areas then in major metropolitan areas because people are looking for more house for lower-priced points and, unfortunately, that's crowding out local buyers in those markets from acquiring housing. One person's gain is another person's loss, unfortunately, in this market with the fixed supply. >> Lots of interest in the housing situation in this country. We haven't told the audience yet that part of your focus in TD Economics… Your focus is ESG, environmental and social governance. We have a question about that. Inflation and energy sources impacting the renewable transition. I always love this question because when times are good and you asked people to give him more for the good of the country and planet, you say sure. When times get tight, which they might be getting, is it a harder go? >> We are obviously saying that right now and a lot of countries faced with these energy shortages, challenges and getting sufficient natural gas, coal, whatever supplies, rather than kind of leaning in towards the renewable energy transition, they are falling back and saying, you know what? We need to focus on energy security right now. It's important to make sure that folks are well taken care of and have energy to produce the things they need, heat their homes, produce their food, what have you. I think the situation we are in right now is really a kind of interesting push and pull factor. You have this kind of leaning against the energy transition by falling back on also fuels but on the same token, there is this kind of slow moving freight train that already been moving towards renewable energy and that's very, very difficult to stop too. I'm reminded that just this morning we had an article talking about the supreme court in the US… >> Limiting the EP's power to regulate omissions. >> This is going to be a key policy that the Biden administration is going to use to lower emissions broadly. It allows the EPA to say we are going to set emission standards for your electricity generation at the state level. We don't care how you do that but you figure it out. The application is that you kind of transition away from fossil fuel generation towards renewable energy generation. But regardless of that ruling, that's happening already. 80% of electricity capacity addition in 2021 were solar or wind because at the end of the day, it's a lower level cost of energy. Wind and solar are far cheaper to produce than coal or crude oil or what have you. Renewable alternatives are now becoming the standard, whether or not there is a regulation out there that forces people to do that. As the economy and energy demand continue to grow, we are going to see renewable energy continue to play a more significant role. in Alberta we have seen a dramatic amount of renewable energy capacity. >> Do you think the buy-in from the corporate side is real? We are talking about a judicial decision, there is political risk when leadership changes, different use of energy, but it comes down to is the corporate side of this on this path in a way that they are really committed to? >> Right. I would say it's probably a spectrum of possible outcomes are you have some that are very committed to it and others where they are kind of just starting on the journey to talk about net zero. But to that point, I'm just about to bring up Alberta, having a tremendous amount of new renewable generation capacity that's come online in the last few years has almost been exclusively driven by the private sector. In Alberta, they are market-driven. They have purchased power agreements. A firm in Alberta can purchase their energy directly from a renewable energy provider and so a tremendous amount of upwards of 2 GW of generator capacity and has now been built in Alberta. They are now Canada's leader and solar and wind generating capacity and that's been driven by corporate interests. > On the steam as well, we have of you are asking about the pricing of carbon as part of this framework of ESG. Isn't it inflationary and isn't is a problem? >> This is a tough one. what we need to do is take a step backand look at how carbon pricing impacts energy prices. Let's take gasoline for example. It was recently estimated that carbon pricing adds about $0.11 to the total price of gasoline and the most recent increase in the carbon price that happened in April added about 2.2 cents per litre. The entirety of the increase in gasoline prices, carbon pricing represented relatively, absolutely a very small share of that increase. What often gets left a note of the conversation about carbon pricing is twofold. First, there is a significant household rebate that everyone gets back for the carbon taxes that they end up paying. You pay more at the pump, you receive that money back at tax time. The point of that policy, the point often gets left out, the point of that policy is, yes it's inflationary, with the aim of carbon pricing is to increase the relative price of activities, goods and services that produce admissions relative to those that don't. While it might be inflationary in some respects, it's not inflationary in others and the aim there is to try to push you towards, no due to words that non-emitting alternative. The second point is that not all provinces are the same. In only four provinces does the federal tax apply. Everyone else it's provincial carbon pricing framework. The 4 Provinces Are Alberta, Saskatchewan, MB and Ontario, those are the only provinces where the federal backstop applies. Everyone else, it's up to them whether they decide to give the money back. In Québec, there is no rebate. Everyone pays a carbon price. In BC, they go back to you. In New Brunswick, they use the proceeds to lower income taxes. Everyone kind of find their own way of trying to give that money back to people. If you want to use that money to keep buying gasoline, go ahead. That's your choice. But if you want to switch to an electric vehicle, there is a financial incentive for you to do that. >> Interesting stuff. We will get back your questions for Francis Fong from TD Economics in a moment. Make sure you do your own research before making any investment decisions. A reminder, you can get in touch with us at any time. You have a question about investing or what's driving the market? our guests are eager to hear what's on your mind. Send us your question. There are two ways you can get in touch with us. Send us an email anytime: moneytalklive@td.com. Or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send. We'll see if one of your guests can get you the answer right here at MoneyTalk Live. It's been a rough start to the year for the markets. We are at the halfway point as of the close today. How much of that poor performance has impacted investor sentiment? 20 us now to discuss is MoneyTalk Anthony Okolie. >> This is a snapshot of how our self-directed investors are feeling based on their activity last month and this covers a period between April 28, 2022,, so the overall index, it can range from less than 100 being bearish and +100, being very bullish, and it's around… Our DIY investors were still feeling bearish. I want to point out a couple of key highlights. First, active traders. These are traitors who have 30 or more trades in the previous three months. They help drive sentiment higher in May. The active traders are chasing trends in energy and IT. When we look at some of the top stocks for active traders, Tesla, Shopify and Suncor were among the top bought. When you break things down by age, gender see an millennial's, those born in 1981 or later, and they favour the IT sector and they look for stocks that appear to have hit bottom. Among the top bought stocks among Gen Z and millennial's word Shopify, Apple and Amazon.com. when you look at things by sector, energy was most favoured by retail investors. Suncor, Enbridge and… Were the most bought stocks. Great? >> We had a few breakdowns there. Can we do it by geography across Canada? >> Yes. When you break things down by geography, the Perry provinces were the most optimistic. There was home by us for the energy sector. Home bias meaning people invest in a particular sector that's in line with the region. On the opposite spectrum was Ontario. It Ontario was very negative despite the fact that they are positive on energy. What drag sentiment down was materials and financials. Interesting as always. Thanks. >> My pleasure. >> Money talks Anthony Okolie without report. Let's check at the markets now. We are halfway through the lunchtime trading session. On the TSX, we are down a full percent. About 200 points. Loss of selling a lot the last day of the quarter. This is the last day of the first half of 2022. It has been a rough ride. The TSX heading into today's session is down roughly about 9 1/2% on the year. A lot of pain across a number of sectors including the mining stocks. Take a look at first quantum, $24.81 a share done about… Let's look at the S&P 500. A little less than 1% to the downside on both sides of the border as we headed to this halfway marker of the year and close the books. Heading into today's trade, he to be the bearer of bad news, but we know this from watching the market carefully, the S&P 500 year to date down almost 20% heading into today's session, adding somewhat modestly to those losses today. The NASDAQ, want to check on the tech heavy in DC, it sound about one person's. Huber, want to keep our eyes on this as well, one of the stock selecting on Wall Street, down 2.8%. We are back now with Francis Fong from TD Economics. Lots of questions coming in. We told the audience you have a focus on ESG. The government's concerns around the new green markets. >> This is a tough question. If you think about what yes she really is and is about, but we are ultimately seeing as action from firms is we are seeing a lot of net zero commitments which is a really positive thing, and we are seeing firms start to take action, to think about how they are going to start achieving some of these objectives. That's willing good but the government peace is the linchpin that holds it together. If there is no accountability, there won't be any action. The way I often think about governance is informed the critical umbrella that keeps everything together. But there are some really interesting governance challenges that we are facing in particular areas of ESG. One of them that's emerging is in voluntary carbon offsets. We are seeing quite a lot of action in this recently. Even here in Canada. Basically, we are starting to set up systems, markets and financial instruments, where you can basically have some sort of a process that reduces emissions or captures carbon somewhere in the world and you can generate a carbon offset from the period that carbon offset can then, when these markets are getting set up, get traded to anyone, any purchaser and essentially what that does is it provides a financial incentive for not just firms to reduce their missions to generate carbon offsets but anybody anywhere around the world. So you could have methane destruction, landfill methane destruction in Kenya producing carbon offsets that get traded and sold to a company in London that wants to reduce its carbon footprint. The challenge that we've been facing is how do we provide the financial incentive to actually help people reduce emissions? Up to this point, we use things like carbon pricing which is more of a punishing tool or basically we are saying, we are going to charge you for this and the financial incentive is a cost abatement. You can imagine that doesn't work as well as being more of a profit-making exercise which is what a carbon offset… > It's the state, where's the carrot? >> Exactly. Carbon offsets are the carrot. That's a great analogy. If we want a burgeoning hydrogen market to help us reach net 0 x 20 50, we would need something like 120,000 km of pipelines running all across America to support that. It's been estimated. That's roughly the same pipeline mileage that has been built to support the natural gas market, you can imagine the size in the states, over the past 20 years. So with the financial incentive for anybody to build that kind of infrastructure? Well, carbon offsets are the thing. But we need good governance around let's make sure there is not greenwashing of those things. Carbon offsets have to be considered additional, meaning it has to remove carbon that otherwise would not have been reduced in the first place. It needs to be permanently reduced, you can't get rid of it and then it gets readmitted. And it has to be verified by 1/3 party. We are struggling with all of those elements now in terms of figuring out how do we send people, going back to my example of rule Kenya, and figuring out if what they claim is actually a true emissions reduction? Governments are this linchpin that we forget about but it's going to be important going forward. >> It's often the forgotten one in ESG. You made a good point about how Kia can be. That's all the time we have a question before illegal. Any final thoughts for the audience? After today, we are going into a long weekend. In a put our concerns aside and enter into the second half of this year. The first half, I'm happy to put it behind me. What should we anticipate in the economy and central banks as we head into the next six months? >> Is going to be an uneven period. It's gonna be a lot of uncertainty. I think was often difficult to wrap your mind around, let's go back to the central bank piece is how different the current rate hiking cycle is to history. CI think a lot of folks that it been in the market, the housing market, the last 20 years, have never seen a rate hiking cycle like this. You have to go back to the 80s to see something like this. I think that's causing a lot of unease among firms, individuals, investors, what have you. I think that's probably going to continue because unfortunately we're not going to necessarily know how this all shakes out because this could be something that's going to come with time. It's going to be a rocky ride in the latter half of the year, but very likely we will come out of it okay is my anticipation. >> Great conversation. Appreciate having you here. >> Thanks. >> Francis Fong, senior economist at TD Economics. A reminder of some of the guests we are having coming up. We'll take a break for the Canada day long weekend. When you come back next week, Tuesday, and Kelvin will be joining us from TD securities. We are want to talk about the economy. On Wednesday, we are going to talk equities with Damien Fernandez on TD Asset Management and then Greg Barnes from TD security joins us. We will do a deep dive into the mining sector. Thanks for joining us today. Have a great Canada Day. We will see you on the next MoneyTalk Live. [theme music] [theme music] [theme music] [theme music]