Hafiz Noordin – 06/28/2022

[music] >> Look at where there may be some opportunity in the emerging markets. Hafiz Noordin it is port folio manager from global fixed income, TD Asset Management. He will be our guest today. Today's WebBroker segment, Nugwa Haruna will take us through GICs on the plat form. How do I get in touch with us. Email moneytalklive@td.com. Fill out the viewer response box on the video player here on WebBroker. Before we get our guest for today show, let's get an update on the market action. Let's start here at home. It's barely hanging in the positive territory, giving up some earlier gains of the day. Still in the green but moving off the highs of the session. We are seeing strength and energyin other areas. Let's take a look at one of the most actively traded names on Bay Street. That would be the big airline, Air Canada. It's at 1. 7%. It was a little firmer earlier in the session. You can see a bit of a drift. South of the border, the last time I looked at the broader read of the market in America, S&P 500, it continues to lose ground at this hour. We have some crosscurrents out there. There has been some news about them loosening up restrictions for inbound travellers. It seems in the morning session he gave investors hope about opening up in the world's second-largest economy, but more concerns are coming in about recession and what central banks will have to do to tame inflation. Let's check out the tech heavy NASDAQ. Let's look at some of those names that were highflying during the pandemic. It's been a different story since the final innings of last year. The NASDAQ 100 is down almost 2%, 1.83%. Some of the names that were making gains this morning, Bank of America, it's high among the session. But now it's barely hanging in there, third of a percent. That's your market update. Rising interest rates have made the bond market a little bit more interesting for the first time in years. Our featured guest today says if you are looking to diversify your holdings, there is good opportunity in the emerging markets. Joining us now is Hafiz Noordin, portfolio manager for global fixed income at TD Asset Management. Great to have us with you on the program. A lot of people, we are getting questions every show about fixed income or not. Tell me what you're seeing in the emerging markets. >> Is great to be here, first of all, Greg, and it definitely been a tough environment for emerging markets. We are seeing rising global inflation as a result of rising global interest rates and on top of it now we are seeing a period of time where growth will likely slow down a bit here. So historically, that's being tougher the environment but what we see now is there are a number of winners and losers in the emerging world. There are some that are more impact by Russia's invasion of Ukraine. On the other side, there are a number of nations that have been proactive in raising rates in their central banks raising rates well ahead of what the Federal Reserve and the bank of Canada have been doing. Add to that some of those countries are also commodity exporters so they have been really linked to this cycle that we've seen in rising commodity prices and have actually benefited and those have provided interesting opportunities to enhance yield in a fixed income portfolio. >> That's in addition to opportunities in emerging markets. As we go through emerging markets, it's not just one group with all the same characteristic. Take us a little deeper into some of the different pockets you are seeing. >> For sure. It's nice to take a regional approach. Latin America, I think, is one of those regions where commodity exporting… Exports have been really helping in terms of boosting fiscal revenues and providing more stability in their currencies. On the other end of that spectrum, there are a number of commodity importers that have been losing out, you know, India, a lot of Asian countries, some of the Eastern European countries. When they are importing commodity use, that has really caused a lot more strain on their fiscal balances and that's just causing inflation to rise further. I think that's one differentiator is commodities, and the other is how ahead or behind the curve are some of these countries in raising rates? Some that have been behind the curve, such as in Eastern Europe going into this year, had a lot more pain. Their bonds are down about 40% this year, just because of having to really catch up in hiking rates. And then on top of it, the sentiment around Russia's invasion of Ukraine. So I think it's that commodity… The commodity links and then the… How good the central banks are doing in terms of hiking rates in the face of inflation. >> We talked so much about the Fed, a visa, because the whole world is watching the US Federal Reserve. Here at home we talk about the Bank of Canada. It interesting that you mention that there are perhaps some central banks in these emerging markets that have been more proactive than we have been. >> That's right. I think what happens in some emerging markets, Mexico and Brazil are probably good examples, where they saw inflation rising quickly last year, they know from past cycles that they need to get ahead of this otherwise their currencies can get out of control because crises happen a lot in emerging markets. So what they did on average in Latin America, on average, about 650 basis point of hiking has occurred between the beginning of 2021 and now, and that compares to, you know, the Fed and the Bank of Canada where it's been about 100, 150 basis points of hikes over the last few months only. And because they did that, a lot more foreign capital entered the country, comfortable that their yields were high enough to buffer inflation a little bit. And as a result, they were able to benefit from those capital inflows and keep their economies a little more stable. >> We talked about emerging markets, fixed income opportunities, are we on the cusp of calling it high-yield or would that be going too far? >> There's actually a distinction. There are some solid investment grade emerging-market names, some single a rated like China or Chile or Peru, which have very low debt levels, and historically a very good management teams. Their governments have been doing a good job of managing their fiscal balances. and then there are some of the triple B area, like Mexico or Indonesia, which are pretty solid investment grade names, their credit quality is pretty good. But there are some more risks that you have to watch forgetting downgraded to high yield. But you're getting compensated for those risks. Then there are the high-yield names. If you do the bottom of research right, then, you know, there is good opportunities. But there is definitely some names there where things can get out of hand fairly quickly without the right government in place and they can get into default situations. So similar to the corporate market, you do have to do the bottom-up research. I really don't think emerging markets are a passive investment. A lot of indices in emerging markets tend to allocate capital… [video buffering] Their fiscal balance… [video buffering] Some countries have debt to GDP levels of 80 to 90%, which is very high, even higher than some undeveloped markets, and that's where you have to be careful that if they are getting to those high debt levels, the putting in place rules, fiscal spending caps, for instance, to make sure that that doesn't go too much higher? The other area that we look at our reserves. You know, when there is a lot of currency volatility as we are seeing right now,you need to make sure that emerging markets that are borrowing in US dollars or borrowing an euro have the necessary currency reserves to help to meet some of those external liabilities, so really understanding the data and also how will the governments are doing in managing those balances and not, you know, spending them on nonproductive measures. > I want to ask you when you brought up US currency reserves how they are managing that because obviously the reason why the entire world looks to the US Federal Reserve is because of the influence they have. What if the Fed has to say on this aggressive path? What is that start doing to emerging market opportunities? >> That's a great point because that's really the key risk right now. The market for now has priced in the rate hikes that we are seeing, that the federal will have to get above a neutral area, so call it a 3 1/2 to 4% area on their policy rate. And so emerging markets for now have kind of price that in, but the risk is that accelerates higher if inflation continues to go to the upside. I think that will causes that for those emerging markets that don't have sufficient reserves, they will start to see more expensive it US dollar debt that they have to start the payback. Turkey is a very good example where they have very low reserves and they had very unorthodox monetary policy and get into trouble in times like this and happy getting into trouble with the US dollar starting to go up and with US bond yields going up. The flipside is that some countries like Brazil, I would highly, that have strong reserves. Yes, there debt levels are high, but they so much reserves that they have gained from commodity experts over the years that they can likely buffer some of those shocks from higher US interest rate. >> Very interesting stuff and a great start to the show. We are going to get two questions for Hafiz Noordin from TD Asset Management in a moment. You can get in touch with us at any time. Email moneytalklive@td.com or if you fill out the video responsive box. We will now look at the world of business and how the markets are trading. Nike sales forecast for the first order has come below the forecast as the company grapples with pandemic closures in China, the company's most lucrative market. Their inventories have dropped as supply chains kept their product stuck in shipment. The company is warning the later arrival of goods to store shelves will see perhaps some write-downs in terms of price. The Wall Street banks that are raising their dividends, the move coming after the big banks cleared the US Federal Reserve's annual stress test. Of course, that was last week. Bank of America, Goldman Sachs, Morgan Stanley and Wells Fargo are hiking their returns. Citi pointed to a range of stress scenarios. Airbnb is making its ban on parties permanent. The short-term rental company brought in temporary rules against holding parties and homes listed on the platform back in August 2020. Airbnb says that Ben has been effective with a 44% drop and report the parties since it was ushered in. Today, the company made that been permanent. The penalties for defying the ban, apparently can have your account suspended from the platform or get removed from the platform altogether. We'll jump back in on the benchmark index, starting Canada, C of the TSX is trading. It is barely hanging in positive territory. We have seen a slide off of the highs of the session. There are strength and energy names in Toronto but clearly we've got some weak points in the market. I want to qualify that for you. Let me bring up those sectors here in WebBroker to look at what's holding us back. Energy is still firmly in positive territory but we have technology, materials and industrials exerting some downward pressure on Bay Street. Let's quick check-in on Wall Street as well. We started the show in negative territory and the S&P 500 now down more than a full percent. Pretty much the same story. Still got the energy names making some gains on Wall Street but you've got tack and some of the cyclical consumer names pressuring at the S&P 500. We've got lots of questions coming in. Let's get them started. We want to know your take on China at the moment. The news we got about the ending of lockdowns, perhaps a bit of abuse there? >> Hopefully that will continue. To start the year, the target for authorities there was a five and-half percent growth for 2022. Unfortunately it with the omicron variant and the ways we've had and the zerotolerance policy which they have stuck to causing shutdowns in large cities at the peak, about 25% of GDP was on lockdown. So a big growth hit there, but… [video buffering] Early to tell that growth can rebound to that 5 1/2%bounce back. If you look at economist expectations that's more of a 4% growth year. [video buffering] If you look at asset prices, date took a big hit and so there are certainly opportunities. When I think of fixed income, what's bad for equities sometimes good for fixed income and that was the case in China, where bond yields have been very stable in China. About 100 beeps higher in the US 10 year, no movement in the China 10 year government bond. It's been attractive so far but looking ahead, yes, if some of the COVID measures can be lifted and hopefully the omicron waves are not going to be as stressful when the economy,, what will probably see is inflation start to rise and bone you'll start to rise as well. To the similar trends we have seen in the developed world we might start to see in their bond yields. So I think that's just something to watch out for. >> As the world's second-largest economy, we keep an eye on it. Are there other interesting pockets across Asia? >> For sure. Most of Asia or commodity imports. When I go back to that framework, I talk about commodity import export and where are they on the hiking cycle? A lot of Asia are commodity importers. So inflation has been impacted by that. But there's a couple countries, Indonesia and Malaysia, which are both commodity exporters, so they have been benefiting recently, and Indonesia in particular has been interesting because even with the volatility and growth we saw from the pandemic, over the long run, they've been really able to achieve a very stable 5% growth rate which is very good compared to the rest of the world. And on top of that, they have been able to keep fiscal balances and check, and when you look at their 10 year bond yields of 70%, it's not bad for a triple be rated country. So there opportunities like Indonesia which I think make a lot of sense, but I think the risk in Asia broadly still is this idea that as China rebounds, the whole region probably will start to see a bit more of an inflation boost, and that could impact bond returns in the near term. >> Very interesting stuff. We will take a look at a few different geographies today. We have a question coming in off the platform about the investment climate in Europe given the Russia Ukraine conflict. How should we be thinking about the continent? >> It unfortunately continues to be a very difficult humanitarian crisis, first of all. It seemed like, from the headlines, that there was may be some amount of subsiding in the conflict, but sure enough, we saw another offensive on Kyiv recently but it's a really sad and difficult situation. From an investing standpoint, it doesn't provide the probability of a boost in investor and consumer sentiment to increase anytime soon. So I think a lot of pain already has happened in terms of bond yields going up significantly. Poland, which was normally a very… Probably the highest-quality country in the region, a single a rated sovereign, has normally had very low bond yields similar to Germany and some of its neighbours, now it has 7% bond yields because it really had to hike rates quickly, so I think opportunities are coming up. I think timing wise, we really have to continue to watch the situation in Ukraine. Once we start to see a stabilization there, then we can be comfortable that inflation will also start to stabilize in the region and provide the conditions to allocate capital there. >> Before we have this conflict, Europe is very interesting and the fact that we are talking about negative interest rates in some economies, it must have been such a strange investment climate to try to navigate. >> Absolutely. And when you look at just the euro zone more broadly, they are still right now it a -0.5% policy rate, but they are expecting hike rates very quickly, 2 to 3%, which is unheard of compared to what we have seen after the global financial crisis. I think they are going to be going through this transition and for both developed and emerging Europe, in some sense feels like uncharted territory but I think it will present opportunities for fixed income and equity investors. >> I don't think you could say of any central bank in the world right now that their job is easy, that the task ahead of them is easy. I wouldn't want to be a central banker on the good days, much less now. Europe in particular, they are dancing a bunch of fine lines, it feels like. >> Absolutely, yeah. I think part of it has been the conditioning of policymakers… The positive one. And so I think it's going to take some adjustment, but I think, at the same time, when there are crises, not only from a economic perspective but know what we are seeing from the Russian invasion of Ukraine, it's actually causing a little bit more cohesion and a sense around what policymakers need to do to stay more united. So I think that's perhaps for the integration of Europe may actually… The probability may actually increase and we could actually see a successful outcome, but not without some pain in the near term. > Back to your questions. All as always, make sure you do your own research before making investment decisions. Before we get back to those questions, we want to make sure you get in touch with us anytime. Email moneytalklive@td.com. Now let's get to our educational segment of the day. With rates on the rise, GICs have become an area investors might want to keep an eye on an WebBroker has some tools that can help you keep an eye on them. To wounding us now is Nugwa Haruna, From TD Direct Investing. Always great to have you with us. If investors are looking at purchasing some guaranteed investment certificates, GICs, where do you get started on WebBroker? >> Hi Greg. Thanks so much for having me. When it comes to GICs or guaranteed investment certificates, as you mentioned, we are in a rising interest rate economy right now, so investors who are looking to diversify their portfolio could potentially consider using GICs. GICs are issued by banks and trust companies and investors who have more of a low risk profile could consider these because they are insured by the Canada Deposit Insurance Corporation or CDIC. The once in WebBroker, and investors able to go into WebBroker, click on research and then pull up the GIC Rate Sheet. Once you do that, you'll be presented with different kinds of GICs which would include short-term, long-term, cashable or market link GICs. We are going to talk about each of these briefly. When it comes to short-term GICs, investors who still want a guaranteed return with the potential of some kind of guaranteed principal protection with a potential of some kind of return may consider GICs that are as short as 30 days or as long as 306 to 4 days. If you are looking for more of a longer-term investment, you can consider GICs which ranged from one year to five years. One of the things about purchasing GICs from within WebBroker is that you will have access to more than 15 different institutions. So once again, the idea of having some kind of CDIC insurance coverage, investors want to find out more about what the potential coverage is. Investors should take a look at that on the CDIC website. Investors who may not be too sure about what their timeframe is could consider cashable GICs. These are GICs that allow investors flexibility in terms of being able to cash in, but still, if they stay for the duration of the GIC, they are guaranteed to get that return. Finally, we'll talk about the market link to GICs. Investors who want the best of both worlds could consider these kinds of GICs because these GICs, while they do provide 100% principal protection, they could also provide investors with a range when it comes to their return. For instance, if a certain index does really well, an investor could get a range of up to 50% in terms of the return +100% of your principal back. > Interesting stuff indeed. Always, there is a top and bottom end of the range. You can see all the rates and different kinds of GICs. What is an investor want to place a trade on WebBroker? >> Right, an investor can pull up a trade ticket in WebBroker by clicking on the trade ticket option. Once they do that, this investor is able to go on there and choose from a variety of GICs on there. So for instance, an investor could choose to purchase long-term GICs. I will mention that to make these purchases within WebBroker, they will need to make the trade between Monday and Friday between 9 and 4 PM Eastern standard Time. Once in WebBroker, the investor can choose the type of DAC the you would like to purchase, including the term, and finally, investors can choose how often they want to be paid some of these returns they talked about. For someone who is looking for monthly income, they could consider receiving their interest payments monthly, or an investor who wants to potentially take advantage of the power of compounding, where your interest earned even more interest, they could consider using something like the compound annual interest payments. >> Interesting stuff as always. Thanks for that. >> Thanks for having me. >> Nugwa Haruna, senior client education specialist. Always be sure to do your own research before making your decisions. Look at WebBroker for more videos, master classes and webinars. Before you get back to your questions, reminder of how you get those questions to us. Do you have a question about investing or what's driving the markets? Our guests are eager to hear what's on your mind, so send us your questions. There are two ways you can get in touch with us. You can send us an email anytime@moneytalklive@td.com, or you can use the question box right below the screen that here on WebBroker. Just write in your question and hit send. We will see if one of our guestscan get you your answer here at MoneyTalk Live. Let's get back to your questions on fixed income. We have a question coming in from the platform. the viewer is asking, can you please explain what floating-rate bonds are and how they should behave according to whether interest rates are rising or declining? >> Absolutely. Similar to when you take out a mortgage, you can take out a fixed rate or floating-rate when you know when you have the floating-rate mortgage, your payments will go up on the central bank is hiking rates, and it similar as a lender. When you're buying a bond, you are lending to an issuer with the same terms and normally a fixed rate bond, it's a fixed coupon over that time period, but the floating-rate bond, the coupon you are receiving will be based on a floating-rate benchmark. . . Similar in Canada, there are rates like that which are highly correlated to the Bank of Canada's policy rate. So when the Bank of Canada hikes rates, then you will get a higher coupon. So I think it makes sense to be thinking about these investments during a hiking cycle because that's the time when your income levels will start to go up. The only challenge I think with floating-rate bonds is that there's not a lot of them out there. There's not as much issued, particularly in the Canadian market, the liquidity on some of these instruments can be a lot worse than fixed rate bonds which are more of a standard instrument over the long run. So I think they can play a role in a fixed income portfolio, but you do have to trade off some of that benefit of increasing your coupon level within the liquidity concerns you could have with those insurance. >> Is interesting you bring that up because liquidity is what helps you get in and out of positions if you want to get in and out of them. In the fixed income space, how are you feeling about liquidity conditions right now? >> It's definitely being a challenge. When you see higher volatility, liquidity tends to deteriorate. The challenge with the cycle has been that volatility, the root of volatility has been from the bond market. Because of the volatility and inflation that's causing a lot more price discovery and even the US treasury market, the most liquid and deepest market, that then feeds into poor liquidity and the rest of the fixed income markets, corporate bonds, emerging-market bonds and so on. It's definitely challenging. What that means for us at TD Asset Management, it really speaks to the need to have a strong research had on. When we are investing in a corporate bond or any kind of bond, we are really thinking about, are we comfortable buying and holding that to maturity and not necessarily being forced sellers in certain situations? So doing that research, understanding the fundamentals and knowing that you are comfortable, that you will receive your principal and coupon is critical to holding a bond and managing through any type of liquidity requirement. >> We want to do a quick check in on the North American equity markets because things are changing on us as the show progresses. Right now, you got the TSX hanging in there in positive territory, up a little more than 14 points, about eight tics of a percentage. We've got some strength and energy stocks but we are seeing the tech stocks and others weighing down that headline number. Beneath the surface of that, let's take a look at the S&P 500. Right now still down about 1%. Take a look at the consumer names now that are weighing on the TSX. Sorry, the S&P 500 as well. We do have that strength in the price of crude and energy but there is pushback in parts of the market. Let's get back to some of your questions right now. Here's one. If we have an answer for this, I think the central banks are gonna watch this segment. We have a viewer asking if there is evidence of inflation peeking? >> This is the root cause of volatility in liquidity it, you predict ability in inflation so far. This last month, we Cilicia guy prints in the US, the market or economists were expecting a low number, 8. 6. In Canada, the expectations were for 7. 3, we got 7.7. So we have been seeing these upside surprises and inflation and so looking ahead, it's hard to tell near term because I think it's very much month by month, but gasoline prices for sure are important when we are looking for input. I think the impulse we have seen, we have seen being repricing and gas prices. For now, we are perhaps seeing a bit of stabilization but from there, there is still probably a lot of volatility to come. I think we will start to see going into the second half of the year and inflation is that we will see some of the demand part of the equation impacted, that is impacted by the rate hikes start to fade in. What the Federal Reserve can control are, you know, rate hikes and how that influences buying a house or buying other high interest levered purchases. So that's where demand will start to kick in. We should start to see some lower inflation from that. But it's going to take some time because, for now, there's a lot of inflationary pressures both from goods but also from the services part of the economy. >> Traditionally, we are not in times of great stress like we are right now, the central bank will say, as we make changes to our policy rate, we are only talking about change that will flow through the economy, that we won't see for 18 months. I feel like perhaps there's more than urgent response on behalf of consumers right now when they see central bank action. Are we in a bit of a different situation. . . >> That's where what we have to monitor is not just inflation happening now but inflation expectations. So we will know if inflation is becoming a really, really big problem if inflation expectations start to go up very quickly. So far we haven't seen that yet. Yes there has been some amount of consumption in this past year. Part of it is that household balance sheets have been strong. If we start to see that panic line because inflation is getting out of hand, we see that in inflation excitation measures. The data so far, the US has a great data print from the University of Michigan, they monthly consumer survey, that shows the 5 to 10 year inflation excitations are still around 3%. So the level of 3% compared to historical is basically in line. But the trend has been higher. So if we start to see 3 1/2 or higher percentage levels on 5 to 10 year inflation expectations, I think that's going to really be a concern for the Federal Reserve that they have to get even more aggressive in hiking rates to reign in those expectation. >> This leads into the next question were getting off the platform. A lot of people are concerned about what the central banks are doing and are concerned about how far they need to go. Markets have been repricing in recent days at their expectations for how aggressive central banks need to be. How should we read that? Is that premature? It seems the market is saying, we got a few indications that perhaps the Fed at some point this fall will start to relax. >> Yes, well, the bond market is pricing at what we call a terminal rate. After all the rate hikes over the next year. . . if the bond market has priced it correctly, then we will see that the effect of that starting to slow down the economy. Now, I think that's where a lot of the bond market volatility is right now is is that the right terminal rate or not given how high inflation is and that the surprises and inflation can't seem to stop. That's the debate. We could see a terminal rate that is closer to 4% instead of 3 1/2, and that would cause another leg higher in bond yields. So that's why think it's difficult to call the top in bond yields. But I think we are a lot closer to the beginning of the year in terms of a reasonable terminal rate that reflects the need to slow down the economy to bring inflation in check. >> I find it curious about the situation that we are talking about how far they need to go to get to that terminal rate orbit above it, then you have some people starting to pencil in, well then, as certain. After that, they willhave to start cutting again. That conversation feels fairlyLong down the road. My wrong about that? >> Something we learn from this cycle is that this is a very fast cycle. The crisis itself, the pandemic was a very… Extremely deep recession, but it was quick. The rebound in jobs was quick. Sure enough, the hiking cycle appears that it will be a very quick one compared to what we experience for the global financial crisis which just seemed to take forever. I would not be surprised to see that. The hope is that cutting in interest rates that are priced in and after 2023 is part of this journey of a soft landing where the Federal Reserve….You get it just right. Tame that inflation, give us a break. Dad hiking just enough to cool down demand but not to get us into a recession, and then bringing back the policy rate more to the neutral range again. That's the hope. It's certainly not a 0% probability, but it's a small window to achieve that. >> We get back to your questions for a fee is a TD Asset Management. Do your own research before making investment decisions. You can get in touch with us at any time. Do you have a question about investing or what's driving the markets? Our guests are eager to hear what's on your mind, so send us your questions. There are two ways you can get in touch with us. You can send us an email anytime@moneytalklive@td.com, or you can use the question box right below the screen here on WebBroker. Just write on your question and hit send. We'll see if one of your questions can be answered by our experts here at MoneyTalk Live. Of course, we have inflation hitting levels we haven't seen in decades. TD economics has a new report focusing on Canadian's spending habits. Anthony Okolie joins us now. Anthony, we are free to spend. What is TD saying about it? >> TD economics is saying that Canadian spending data shows strong recovery from the omicron low through May 31. They also said that card spending, both debit and credit cards, were up 2.2% month over month in May. That's a slight pullback from the months post omicron waited for about they are seeing that there is strength in nominal card spending due to high spending. But real spending is up 15% year-over-year and there is little evidence that consumers are pulling back because of inflation. The data is showing a shift in spending patterns from good to services. Things like dining, eating out, travelling. TD economics says, in the report, that the rebound in trouble, plane tickets, car rentals, hotels, has fizzled out and they point to things like staffing shortages, delays, long lines and airports, high prices as, you know, evidence that that may be copying recovery in the travel sector. Spending is also higher for recreation and entertainment, things like amusement parks, theatres, which is actually past the pre-pandemic levels. It's up 40% higher in nominal terms, suggesting that consumers are ready to have fun after two years of restrictions. Other observations in the report of TD economics is that consumers are embracing credit cards with spending of 33% in May year-over-year to near pre-pandemic levels. Again, the biggest uptick in credit card spending is in travel and recreation spending. >> It summer time, the living gets freer. We finally don't have the uncertainty that we have over the past couple of years hanging overheads. The expectation is… I'm probably gonna spend. What they things that happen in the fall? >> TD economics expects that the reality of things like higher interest rates, higher inflation, higher debt servicing costs, reduced savings, reduced wealth, that will cause Canadian consumers to be more concerned about their spending behaviour in the fall. >> Thanks to Anthony for that report. That was Anthony Okolie. Let's see if the TSX is managing to hang in. 25 points to the upside. Energy is keep their heads above water on the Bay Street composite index. Let's take a look at one of the big names in terms of volumes of trade today. One of the most heavily traded names are the energy spaces including Canadian natural resources. Right now about 3 1/2%. South of the border, we are in negative territory. We got the S&P 500 right now down a full percent or 40 points. Let's check in on the tech heavy NASDAQ. The NASDAQ 100 down 2%. We'll take a look at some of the big tech names to see the weaknesses on Wall Street. It's down 241 points. But the energy names south of the border, we were putting names on the table earlier, petroleum up 3%. Warren Brooks is Berkshire Hathaway continues to increase its stake. So investors taking a look at the name. We are back now with Hafiz Noordin with TD Asset Management. We are talking fixed income. When Nugwa was on earlier talking about how to screen for GICs on the platform, it got people talking about GICs. I'm going to put up on the screen. I want to know your thoughts on casual GIC is in a hiking cycle like we are currently living there. >> I think broadly, one of the cashable GICs in general, they are part of the cash part of the portfolio which, when there is volatility, it does make sense to have a cash allocation, and certainly I think the advantage of cashable GICs is that they are somewhat shorter maturity and nature compared to some other term GICs which can be longer-term. So I think that shorter-term will help to make sure that as an investor, you can deploy that more quickly. I think the challenge compared to a longer term, two or three year GICs, is you are locking in your cash and you don't have that flexibility and, moreover, you are locking at a rate that, after inflation, is actually a negative real rate. So I think it certainly makes sense right now that there is some amount of cash in a portfolio to take advantage of opportunities. Contrasting that to bonds, the one thing to remember in bonds is that you are getting that income, if we do get into a recessionary environment, we will likely see then is bond yields at the longer end of the curve come down and provide a more positive total return, reversing some of what is happened so far this year, and that will help the buffer the shock that will happen in other parts of the portfolio, inequities and other risk assets. The GIC will provide that same level of negative correlation with equities, but it does provide a flex ability. So I think having a mix of the two, bonds and cash, makes sense in this part of the cycle. >> Traditional portfolios, bit of equity, bit of bones, sort of what we've been told, get those returns, historical over time, we have an investor off the platform asking us, what's going on with bonds right now? Why are they still selling off? You got equities and bonds selling off. >> It comes back to that inflation being the root cause and what happened over the past month were some of those upside surprises we talked about really caused that renewed leg in the bond selloff and despite growth concerns becoming more part of the narrative which, historically, mean lower bond yields, it's being offset by this sticky inflation. So I think that's what we have to watch. We have to continue watching the monthly data prints. We have to watch signs of inflation expectations stabilizing at once that happens, I think central banks can be more comfortable noticing that the market has priced the right terminal rates. >> Another question coming in off the platform. A lot of people curious about fixed income and your thoughts on this. What are some of the big indicators we use to keep our eyes on in the space? >> Certainly on inflation, the CPI prints are important. Those are the big ones that come out every month and can move markets. > I remember when it used to be jobs. Remember what was jobs Friday? >> Yeah. We are seeing jobs, the labour market is pretty solid, but for inflation, watching CPI, PCE, which is the consumption index that the Fed formally tracks is an important one as well. I talked about inflation expectations, so the University of Michigan expectations is the one that Powell mentioned, so the market will be paying more attention to that than it used to. But I wouldn't forget about jobs. I think it's important when we think about are we getting into a recessionary environment, weekly, there the jobless claims in the US, which are a good high-frequency indicator of the stress on the leg or market and letting us know if we are still in this said he labour market. >> Summer months can get sleepy for investors. >> Absolutely. Unfortunately, it's one of those times where even when we are on vacation, it's hard to peel away from the screen. At the same time, it's about being patient. I think that we know the volatility will be here for a while. What I would say is that in these… [video buffering] You know, really strong forward-looking yields which means forward-looking total returns for fixed income are a lot more attractive than they used to be, and that can also apply for other parts of the market. > Great conversation, Hafiz. I appreciate you coming by and joining us. >> It's a pleasure. >> Hafiz Noordin from TD Asset Management. A reminder of some great guess we have lined up for you here on MoneyTalk Live: Wednesday, I think that's tomorrow, the week is flying by, Bart Melek is going to join us from TD securities. We are going to talk commodities. On Thursday, we will sit down with Francis Fong and talk about the economy. On Friday, we are we to enjoy a day off because it's Canada Day. That's all the show we have for you today. Stay tuned… Join us tomorrow for MoneyTalk Live. [theme music] [theme music] [theme music] [theme music]