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[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're going to 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 bets when weighing on the commodities trade and where there may be opportunities this year. Hussein Allidina from TD Asset Management joins us.
MoneyTalk's Anthony Okolie is going to have a look at a new report from TD Economics on the health of the world's largest economy. And in today's education segment, Jason Hnatyk will take us to the different cards available on Advanced Dashboard.
Here's how you can get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get to all that and our guest of the day, let's get you an update on the markets.
We will start your home on Bay Street with the TSX Composite Index. We've got some green on the screen. It is pretty modest but after some money-losing sessions, if you're on the market, you'll probably take it.
20 points on the upside, more than 1/10 of a percent. Birch close is not moving to the upside like that top line number.
Birch was coming out and cutting the dividend in half. You're down about 10% on the name at five bucks and $0.16. I'll tell you more about that later. I also want to take a look at Athabasca Oil.
Seeing oil prices steady today. Seeing gold prices modestly higher. Not flowing through to some of the mining names either.
At least Athabasca is off the lows of the session. Earlier today was negative. Now it's just poking its way into positive territory. South of the border, let's check in on the S&P 500. Another read on the US economy that was stronger than expected, this time it was jobless claims.
Reflecting a pretty tight labour market.
Pretty strong consumer south of the border. He put it all together, a bit of green on the screen today after yesterday selling pressure, 23 points are about half a percent. The tech heavy NASDAQ, perhaps the chipmakers are in the spotlight today again and doing some heavy lifting. It appears so. Hundred and 75 points to the upside, more than a full percent. Taiwan Semiconductor saying they see strong demand this year based on AI, artificial intelligence applications. That stock is up more than 8%. And that is your market update.
The commodities market is carrying a lot of worries into the new year, with oil and gas particularly challenged. But our Guest today says a lot of pessimism is already priced into the energy trade, which could make the space interesting in the longer term. Joining us now is Hussein Allidina, Managing Director and head of commodities at TD Asset Management. We've got a few interesting things happening today.
How are we trying to square this in our heads as investors?
>> 2023, demand growth was a concern through the bulk of the year. Hard landing, soft landing, no landing.
The larger surprise I think in 2023 was better-than-expected supply. US production, shale production growth rebounded in the latter half of 23 and uranium production actually increased by five, 6000 barrels per day largely because sanctions were not enforced. There might be some politics there with inflation where it was, maybe we let the Iranians export. It 2024, demand growth is going to slow.
The COVID rebound which saw demand growth trend in the last couple of years is going to get back to more normal levels. The iA actually published there will market report this morning and their exciting demand growth of 1.2, 1.3 million barrels per day. A lower than we've seen in past years.
>> Still growth.
>> Still growth. As we talked about before, the price of a commodity is determined by the intersection of supply and demand levels.
The magnitude of demand is growing in 2024, as you mentioned. The uncertainty I think the market is grappling with is what happens to the supply side? The iA is forecasting supply growth of 1.4 million barrels per day.
While we are probably trading at the lower end is tremendous uncertainty, geopolitics and the Middle East top of mind. But even if I build by 200,000 barrels per day over the course of the year, it's from very, very low levels. Inventories are sitting quite tight.
Crude prices have come under pressure. The shape of the curve is still backwards.
That tells you the market is still tight.
>> With what's happening in the Red Sea, the geopolitical concerns in the Middle East, some people may take a look at the price of crude right now, just a bit under 74 bucks per barrel for American benchmark crude, and wonder about where the risk premium is?
>> A tremendous amount of potential supply that is at risk, to date, no supply has been disrupted. If you look at the last five, six, seven different episodes of potential supply disruption, you've never made to any alpha trade on that.
I think the most recent thing that comes to mind is when the who sees attacked Saudi's facilities in the eastern part of the country. You had a couple of days of materially higher oil productions.
Production was brought back to market relatively clearly. I think today we have three, four, 5 million barrels a day of spare capacity, the market is a little bit sanguine about the potential for disruption. The peace that concerns me there is if we do see a disruption, the holders of spare capacity are primarily Saudi and the United Arab. The use the Strait of Hormuz, they use the Red Sea to a pretty elevated degree to move their crew. I'm not sure it's fair to say that we have a lot of spare capacity and if there is a disruption we could meet that.
I think there's probably far less risk priced in then there should be but again acknowledging the fact that over the past five, six, seven years, the last time you got paid to trade potential supply disruptions was the fall of the market in Libya a long time ago.
>> Important to keep an eye there. What's been overhanging this market for quite some time has been central bank policy. We entered this year with expectations that the Fed was going to deliver a certain amount of cuts. I feel it in the past couple of days or even some of the data that's coming, people are wondering what the Fed will do this year. How is that going to overhanging the commodities market?
>> At the last couple of years, and went for the commodity space has been higher rates in an attempt to slow the economy and by extension materially firmer dollar.
If we look, for example, at the price of crude trading well off of nominal highs in US dollar terms, in India, as an example, because of the weakness in the Ruby and the strength of the dollar, Indians have been paying record high prices for the better part of a year, a year and 1/2. If the dollar weakens because we see easing in monetary conditions, that should fundamentally improve demand in economies that are not backed by the dollar. I think the macro has been a headwind for commodities. The micro has been supportive. 2024, there are question marks around the micro due to uncertainty around US production growth and demand. The macro is probably going to be more favourable from a policy point of view as it relates.
>> When we think about market watchers waiting for that first rate cut from the Fed, whether it's going to be March or pushed out based on all of this, commodity markets watching a just as carefully?
>> I think so. The challenge today is that we are talking about cutting rates in an effort to boost the economy because inflation has come off.
Expectations rent rate hikes are being reduced. The economy is running hotter, that prevents the Fed or central bank from cutting as quickly as the market is discounting, that should mean that the demand for commodities is higher today than the market is expecting. So it's a very sort of tricky I think. That we are in. Ultimately, though, I underscore the fact that inventories across commodity space, with a couple of exceptions, are sitting at multiyear lows, demand levels continue to increase and the supply side, given the lack of investment over the course of the last 10 to 12 years, has left the supply-side challenge. If we get unexpected GDP growth and I mentioned earlier that I feel he does a lot of pessimism priced in, if we were to get slightly better-than-expected demand growth whether it's for oil, copper, etc., we don't have the cover to meet that demand. So I think there's a lot of potential upside. I am and I think the market is concerned, though, that growth may not be as robust as we are hoping.
>> Is that potential upside a longer-term something? In the here and now we've just on a nice rundown of everything are facing. In the longer term, we think about underinvestment, you think it's been a decade or more of underinvestment?
>> I believe strongly that over time, the global economy is going to grow. We can debate what growth might look like in the first half of 24 or 24 as a whole, but there's a lot of inertia in GDP growth.
As the economy grows, that supply issue has not been addressed. Ultimately, demand will grow and that will serve to tighten balances.
That's why I am structurally constructive on quantities here anticipating commodity prices will continue to perform over the course of the next 5 to 10 years. In the very near term, there is uncertainty around what growth will look like. When I look at positioning in the market, I think that the market has gotten too pessimistic, given fundamentals in the commodity market and given the potential for growth. This time last year, we talked about Chinese demand growth. You talk to folks in commodities, very few are even talking about or focus at all what China is doing. China disappointed expectations this year. I think the possibility of them exceeding very depressed expectations is not being priced in.
>> Fascinating stuff as always with Hussein Allidina. We are going to get your questions on commodities for Hussein in just a moment's time.
And a reminder that you can get in touch with us any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on 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.
Shares of Taiwan Semiconductor are on the rise today. The contract manufacturer of chips for the likes of Apple and Nvidia is forecasting sales growth of 20% this year.
The CEO of Taiwan Semi says the demand for high-end chips or artificial intelligence applications remains high.
It appears the focus on artificial intelligence will mean more job cuts at Google. Several reports indicate Google sent a memo to employees outlining ambitious goals in areas such as AI, the memo did add that those investments would mean what they call tough choices, including eliminating some jobs.
Right now you got Alphabet, parent company of Google, up 1 1/3%. Shares of Birchcliff Energy are under pressure today after the natural gas play slashed its dividend in half. In a note to clients, TD Cowen called rightsizing the dividend a solid first step, but it added confidence in the company's operational plans will take some time. The stock is down more than 10% on the news.
A quick check in on the markets. We will start here at home with the TSX Composite Index. On Bay Street, we've got some green on the screen I was going to say but now we are modestly to the downside. We are not winning this battle just yet. Down 10 points are about five ticks. South of the border, the S&P 500, more indications today that the US economy is quite strong, particularly in jobless claims.
11 points to the upside for the S&P 500, about 1/4 of a percent.
We are back with Hussein Allidina, take your questions about commodities. Let's get to them. Right off the hop here, it's been cold in Canada this week. Can we get your view on natural gas?
>> It has been cold and it's been, frankly, long time coming. Last year, we had a materially warmer than normal winter. To start this year, November, December, up until last week, was quite warm and that actually together with very robust production out of the US has contributed to leaving inventories relatively well supplied. We saw quite a bit of volatility and gas prices to start the year. I think you probably rallied up 15% off 10%. If this weather does not persist, which I don't think the forecasts are calling for it into the end of the winter, we have adequate inventories. We are not going to run out of gas this winter. That was a concern a couple of winters ago. US production is still growing. There hasn't been any meaningful incremental demand for the ability to evacuate those molecules from the North American basin until we get to 2025, 2026, when we have additional energy capacity come to market.
So I think US gas prices probably… Absent any meaningful weather disruptions.
It is progressing far better in the U.S.
Senate is in Canada. Canada is still sort of trying to get there but the US has quite a bit of capacity coming online, already has come online over the past couple of years, and there is more slated for the second half of 2025 into 2026.
There is a prevailing idea in the market that one you have sufficient export capacity out of the US, Henry hub prices, trading at 250, 260 BTU, it may converge with higher European or UK gas prices. I think what that misses is the reality that it's not only the US has growing LNG capacity. Qatar, Australia and others have incremental gas capacity coming to market.
I'm not convinced that you see US prices necessarily move up to European prices. We might actually see a convergence between the two. It still constructive for US gas balances but I've talked to some folks who say gas at some point in going to be trading a, nine dollars BTU because that's what we are trading in Europe. I'm not sure that's the case.
You might see a convergence, downside in Europe, upside in the US, but near term, we are well supplied.
>> When it comes to LNG, is there a risk?
Is there a risk that Canada is going to be left behind in this?
>> I think that the unfortunate reality about the way that we have approached our energy policy in this great country is we have discouraged the upstream, we've discouraged the midstream and I think the intention for discouraging that is the environment. The reality, though, is if we had more LNG capacity, if we were exporting more LNG off of our westward coast, China would argue that we've lost cold. When you zoom out and you think about the demand for energy over the course of the next 10, 20 years, as the world, particularly the 7 billion people who are not consuming out what the fortunate billion are consuming, as the power demand grows, energy transition moving from coal and oil to cleaner fuels is going to require more power, and that power is probably going to come from a combination of natural gases to feedstock and nuclear stock so I don't think we are missing out, per se. We have missed the opportunity to help Europe during the crisis that they had last year. We missed the opportunity to temper Chinese coal demand, but the demand for energy, if you believe the economy is going to continue to grow, the demand for energy is going to follow suit and I think gas has a hold for sure in power generation, whether we are talking five, 10, 20 years forward.
>> That's the discussion on natural gas.
Let's get to another question from the audience.
Of your will to get your outlook for the metal space and China demand, is it coming back?
>> 2023 was interesting for the metals.
The positive metals demand in 2023 was the energy transition. The copper, the aluminum, the nickel for EV batteries, at as power generation is buildout, midstream generation capacity, but China was weak, relatively weak and 23, has been since COVID. There are issues with infrastructure spend, real estate in China, those things look like they are improving on the margin. So we are actually more constructive on metals today than we have been for the better part of the next 6 to 8 months.
As EV demand continues to grow, DM to a lesser extent and China again could surprise to the upside and that would be quite constructive. The supply side also came into material focus late last year with the issues that we had at Cobre Panama.
>> Wears a copper going to come from?
>> People forget it's not Amazon prime, we can order copper for delivery tomorrow.
These are projects that take seven, nine, 10 years. As the demand side improves, the constraints on the supply side become more apparent. Within the metal space we are most constructive on copper.
>> We've had questions about stimulus in China.
People have been surprised that there have been little measures but not a big stimulus push. Does that matter to the metals to market?
>> In the short term, it would be definitely better for metals demand if the Chinese government started helicopter ring money in but that's not going to happen. I think they take a far more methodical long-term view with the effort to have stable, sustainable growth. So probably all else equal, more bearish near-term than if they were just handing money out to folks.
But they clearly are trying to stimulate the economy just in a more measured way.
I think course of the medium term, you were going to see incremental metals demand, particularly because of energy transition and I think weakness that you see in in these industrial sectors in China and in the real estate market, they don't know how much worse it can get.
I think it probably get better from here and that helps us be bullish on the metal space looking at 24.
>> Let's take another question from the audience.
This one is about agriculture space. How are you viewing it?
>> We are bearish broadly speaking.
For the first time in at least three or four years, we had synchronize favourable weather in the US and South America. That hasn't happened in a while.
We've also had a couple years of elevated prices. When we talk about the commodity space broadly, we talk about supply and elasticity. Corn, soybeans and wheat are arguably the most responsive, the quickest to respond, again, not Amazon prime, but if corn prices move higher and beef prices move higher rate, we see better husbandry and acreage come into the mix and we seen that over the last couple of years. Corn, soybeans and wheat inventories have improved and we anticipate that they will continue to improve in 2024 but again from relatively low levels and not without risk.
The weather has been very variable over the course of the last many years. That's probably not going to change. There are still some risk in the breadbasket of Europe. Again, people are not really focus on that.
So bearish heading into 24.
But our cognizant that the cover that we have in anticipation of any sort of disruption is quite low.
>> Things can change pretty quick.
As always, make sure you do your own research before making any investment decisions.
we will get back to questions for Hussein Allidina on commodity is in just a moment time. And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get to today's education segment.
In today's education segment, we will take a look at TD's Advanced Dashboard, a platform designed for active traders available through TD Direct Investing.
Jason Hnatyk, Senior client education instructor with TD Direct Investing joints as noted and you will take us through some of the Tard tools available in Advanced Dashboard.
Show us what you got.
>> Great to be here. Advanced Dashboard, one of the hallmarks of the platform is that it streaming so no need to refresh.
As the market and the world turns, you are going to get that updated data right into the platform to have right in front of you. It is highly customizable. Let's jump into the platform and take a look.
We have some educational videos of top and the learned tab. Additionally if you are looking for a deeper dive on WebBroker itself in the learning centre, you will be able to access a one hour master class where we focus solely on charting.
If we are looking to adjust aggregation., You will notice text of the symbol in the top left, little D here signifying that our candles are one-day candles. I got the ability to look at intraday charts as well as looking at longer-term candles to spot those trends that interest you. At the bottom if we are looking for the frequency of the chart, we have some predefined common frequencies that are ready for you to cycle between.
Let's get customized in this. I'm gonna show everybody how to add indicators to their charts.
Go to indicators button at the top of the chart. Click on that. Got a wide variety of many different indicators that are available here. I can scroll down and look at the list or I can type in onto the list here to do a more efficient search. Maybe I want to add in a simple moving average created by typing in SM a here I've got simple moving average popping up so let's add that's my chart.
As I click it I can go ahead and add multiple moving averages to my chart.
Maybe I want to have three so I'm looking for some crossovers or other information.
It defaulted to an average of seven. If I click these gears in the top left-hand corner, it allows me to get into the functionality of the averages themselves.
Let's make a short-term average of 20 and a midterm average of let's say 50 and then long-term of 200 so we can get a sense of how that's working and you will notice that it's defaulting to different colours so we don't have to go ahead and spend time worrying about that.
You can add studies on the chart.
We will add in a Mac D to see how that would look as well.
Once I get that added on, one of the nice things about the platforms I spent some time customizing the platform but if I were going to save this template for future use so I don't need to re-create the wheel, you will notice the templates button at the top of the chart. If I select that, I've got a number once I've saved already but I can go to save indicator template and maybe just type in the studies that I've got on the chart so I can tell what's going to be selected when I choose that template. We go ahead and say back.
Let's say for future use I can use it on different templates. I can go in quickly toggle between others. I can go ahead and not muddy at my chart with too many indicators so I can see the forest for the trees. Many ways to make out my own. I thought the powerful tools there when it comes to charting. We know a lot of investors rely on charts and analysis of charts and they are doing the research.
When they get to the stage of having done the research and maybe they want to trade off this information, can you trade right off the chart?
>> Yeah, that's one of the capabilities.
There are couple of ways we can get that done. Let's show that off right now.
The first thing we will show to everyone is if we take a look in the very top right hand corner of the chart, there is a buy, sell, as well as alert. We can see alerts and be kept informed when price levels are touched. That's easy to accomplish just the same way that buying and selling is as well. If I go ahead and hit by on my chart, what I notice is that my crosshairs that are appearing on the screen, if I click on the screen, it's just as easy as one click. I get in order to get popping up with the actual limit price that I selected from the chart. That's one way.
The second way we can do that without even clicking buy and sell, if we notice my crosshairs on my chart, we will notice the very right that there is a little + here.
Just with one click, plus button, it is the a couple of different order selections as well as to create new order options.
Without having to navigator to data entry, it's all right there. You can make quick decisions based on your analysis right on the chart.
>> Great stuff as always. Thanks for that.
>> My pleasure.
>> Jason Hnatyk, Senior client education instructor with TD Direct Investing.
And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
We are back with Hussein Allidina, taking your questions about commodities. Let's get to them.
This one wants to know about Canadian energy. When will we see the price gap between Western Canadian select and West Texas intermediate narrow and with the benefit Canadian oil companies this year?
>> Good question.
Trans Mountain Pipeline is a long time coming. I believe it was delayed further because of some moving issues in BC. I believe that Canadian energy regulator approved the variance. The pipeline I think worst case is expected to be online by the end of this year, hopefully sooner.
When the pipeline comes on, you will see WCS narrow relative to WTI. It will not trade at the same level.
Whether that difference is seven or eight dollars per barrel, it's materially better than in the past and that improves the realization for Canadian energy producers.
>> Nice quick one on that one. Let's get to the next question. Plenty coming in.
Consolidation. What kind of year we going to have in 2024? Do you expect more consolidation in the US energy sector in 2024, similar to what we saw last year, using Exxon as an example.
>> Yes, we had a number of large deals in the second half of last year. We probably will still see some degree of consolidation but it's unlikely that the bigger exons or axes or pioneer who have already done a bunch of deals in 23 common.
There aren't too many private targets left. A lot of the larger private producers have already been acquired. You will see activity next year for sure. I think it's easier as an energy producer to acquire production versus going to find and produce production in this environment.
I don't think it's going to be the same magnitude that was on 23.
>> We've seen a trend to return money to shareholders whether it's in special dividend or share buyback. We've seen some M&A activity. As the tougher environment to go out and find your oil or natural gas deposit. How long can that last?
At some point, all the dealmaking that can be done will presumably be done.
>> At some point, you would argue that we would have to go and start looking for incremental resources.
I think the challenge, Greg, is there is still this what I believe false narrative that we are not going to be using oil in five years, seven years, 10 years. The iA, we mentioned earlier, release their monthly report this morning. In 2020, DIA came out and said gasoline demand they believed peace in 2019, pre-COVID. 2023, a year where Europe was arguably in recession, Chinese demand growth and economic activity was bigger than inspected, gasoline demand reached record high. So at some point I think inventories get tight, commodity prices move higher, oil prices move higher and it forces equity investors to encourage energy companies to go look for resources. Today, we are still very focused on ESG which is important but we are ignoring the social.
If we are not investing in oil, we are going to see oil prices move higher. That is going to happen. Negative social ramifications, particularly in the emerging markets where oil is a greater proportion of personal exposure.
Again, there is a challenge with the narrative that we are not going to be using oils or companies are being punished when they go and look for incremental resource and they are being rewarded on the margin forgiving cash back to shareholders. Any dollar that you get back or stock buyback is a dollar that's not looking for a resource that is still seeing demand increasingly structurally.
>> This one about uranium. We had a bit on a nuclear earlier. With the recent news out of Kazakhstan, what's the outlook for uranium?
>> I think bigger picture, you're right, we talked about this a bit earlier, I don't think that we can meet the world's power demand if we are going to do away through time with Cole and with oil and eventually maybe even natural gas without having some sort of baseload power generation. Wind and solar will continue to increase but wind and solar are not baseload. You need to have baseload generation and I think the world is arguably too slowly when waking up to the fact that nuclear is actually a great alternative. Crop 28 Which Took Pl. in 08, one of my colleagues from the SG team was there, he said every pavilion and room he went to, people were talking about nuclear. On the supply side, not dissimilar from the rest of the commodities.
Prices have not encourage the exploration and production of uranium. I think when you see supply disruptions, the Cossack description that you mention, prices move materially higher and I think over the course of the medium term, because I believe in economic growth and I believe that economic growth requires energy and power, I think uranium continues to do well.
>> Interesting space to watch there. I'm surprised we got this far in the show without this question popping up.
But hey, you have to save your heads and sprinkle them through. What's your take on where gold is heading?
>> We talked about gold I think at length over the last couple of years. I think gold plays a very important role in your portfolio from the context of portfolio construction. Gold is able to hedge against the tail risks like no other asset does. It's really interesting. If you look at the performance of gold and 22 and 23, most folks were bearish gold because the dollar was strengthening and real rates were moving higher. Most models, on the south side, if you have a gold forecasting model, the model has the dollar and real rates in both of those things were quite negative for gold and 22 and 23. But gold still performs and I think it perform because you work at seeing and continuing to see portfolio construction on the part of the emerging-market central banks.
Central banks, particularly emerging-market, or on the margin of diversifying their reserves away from the US dollar towards gold.
If you look at the volatility of EM currencies and periods of duress, the currencies, the countries that have a greater holding of gold has slightly less volatility. I think the concern around the US potentially confiscating reserves as they did with Russia and Afghanistan is also encouraging all the margin incremental gold demand. I think it's really interesting for gold in 2024 is the dollar should actually weakened over the course of the year and I think that that might encourage incremental flows in the gold market. ETS length in the gold market, retail demand for gold has been quite low. If equity start to have a bit of heartburn, I think you would see incremental demand move into the gold space.
>> When comes to the supply side, gold is bit different.
>> Yes. All gold ever produced still exists.
There's a price at which you're gonna get that to me. As uncertainty around other assets that you own increase, I think the level where gold trades moves higher.
>> Nice guide, you'll just take my goal.
>> Anytime you would like to give me your gold, I will take it.
>> I don't have any gold to give away a, just for the record. You will get back to questions for Hussein Allidina on commodities and just moments time.
As always, make sure you do your own research before making any investment decisions.
And a reminder that you 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 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'll see if one of our guests can get you the answer right here at MoneyTalk Live.
Despite interest rate sitting at a 22 year high, the US economy outperformed its G-7 peers.
So what's behind last year's US economic resilience and what can you expect for this year? Anthony Okolie joins us now, been digging into a new TD Economics report on that very matter.
>> Was started off as a year of recession calls quickly turned out to be a outperformance of the US economy. TD Economics outlined several reasons for the US is outperformance versus the G-7 peers.
A major factor, of course, has been the US consumer.
Since central banks began hiking rates in the second quarter of 2022, the US consumer has outpaced all of its peers, as the churches.
Recent data points to per capita spending across the most other advanced economies already slowing bedding fact US consumers continue to open their wallets at a healthy clip.
We saw that in the December US retail sales data which came in at .6% month over month, much hotter than the 0.4% that was expect it.
The US consumer continues to be resilient despite higher interest rates.
One of the reasons why they are resilient is of course the US jobs market and today we got the US initial jobless claims which posted an unexpected drop last week, marking the lowest level since September 24 of 2022, again pointing to the continued strength in the US labour market. Another reason why we continue to see consumer spending, substantial cash reserves that have been built up during the pandemic. That's the second factor the TD Economics points to driving US outperformance.
TD Economics attributes a large liquid savings of US households as really due to the US and acting larger fiscal support measures during the pandemic. We know that roughly 45 million Americans were unable to work during the pandemic. But the US was one of the only G7 countries to send multiple rounds of direct payments to households irrespective of whether their employment situation was impacted by the pandemic. As the pandemic receded, households in the US have been comfortable spending that windfall.
Another factor that TD Economics points to for the US outperformance versus the G-7 nations has been due to its mortgage structure.
The US is the only G7 country with a 30 year fixed rate mortgage. Canada and most of the European economies also offer fixed rate products but interest rates reset more frequently than in the US, exposing homeowners to a higher interest rates much sooner than their American counterparts.
This is freeing up more money for American households to spend and continue to support their economy.
In addition, US households started out with relatively less debt going into this interest rate hiking cycle. US household debt outstanding as a percentage of disposable income was the lowest across all peers. With fixed rate mortgages accounting for about two thirds of that debt, US households so far are largely insulated to those higher interest rates.
Now that being said, last year's tailwinds are likely to fade this year but not completely die out, according to TD Economics.
They expect that the US economy is projected to expand by 1.5% in 2024.
That slightly below the economy's potential upward trend growth of 1.8% but it's a stark contrast to the more anemic pace of growth expected by the rest of the US G-7 peers including Canada and the UK and others.
>> We know as you outlined there that fiscal policy will have an impact on an economy. Have there been any moves particularly perhaps thinking about manufacturing in reshoring, bringing it back home?
>> That's been another factor that has helped the US economy outperformed versus the G-7 nations and it's not just consumers that have been failing to succumb to the high interest rates. US fixed investment was up 4% year-over-year after adjusting for inflation. Again, that's providing further support to the US economy. TD Economics attributes much of the strength to the generous incentives that include legislation enacted in late 2022 aimed at strengthening the economy, reshoring production of semiconductors and improving the US infrastructure. While other countries including Canada have implemented incentives and subsidies, they don't rival the generous incentives offered by the United States and that's had a significant impact on where companies are making their capital investments.
>> Interesting stuff. Thanks.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, for an update on the markets.
We are heading back into TD Advanced Dashboard, platform designed for active traders available through TD Direct Investing. We are on the heat map function to look at the market movers. We will sort the TSX 60 by Price and volume. The US economy, another piece of data today, resilient. Bond yields moving higher.
Gold a little bit higher.
Oils a little bit higher. That's the stage for you now. As I look at the screen, it's not really playing out in the energy trade.
It's been a choppy ride lately. We are not getting a lot of movement there. Gold is up almost 11 bucks an ounce.
Was going to be happening in the basic materials area? Not much with the miners either. Modestly lower or higher. Shopify, we are seeing continued weakness in some tech names including shop, down to the tune of almost 3%.
You can find more information on TD Advanced Dashboard by visiting TD.com/advanceddashboard.
We are back now with Hussein Allidina from TD Asset Management talking commodities.
It's talk about political risk. How should we be thinking about political risk given was played out in Panama for First Quantum?
>> Political risk is an issue I think not just for copper and not just for Panama.
There's a lot of geopolitical risk in the Middle East right now. The Red Sea is getting quite a bit of attention. I think that, broadly speaking, as you move into the investment phase in the commodity cycle, when commodity supply is constrained relative to demand, the incidence of supply disruption grows and this is because the labour in the mine or the labour in the oilfield, the farmer in the cotton field can see where the price of the commodity is and wants to greater take. That's also true in the host country where you are operating.
The folks at First Quantum have experienced this in a very real way in the past little while.
I think the likelihood of supply disruption will grow as commodity prices move higher because both host country and labour that is operating will want more.
In an environment where you have excess supply, the environment we have come out of over the course of the past 10 years, I really want you to invest in my country because no one else wants to, so I'm quite favourable and friendly.
We see this in every cycle. We saw this in the 70s around the nationalization of Aramco as an example. We saw this throughout the early 2000.
The likelihood again of production grows and this is one of the things you have to be mindful of when we are taking commodity exposure to equities.
You want leverage if things work out but when the news that Panama was not going to let First Quantum operate, very challenging for First Quantum shareholders. We were kind of smiling upstairs at the commodity desk because we knew it would mean for copper long term.
>> Interesting stuff. We have run out of time for questions. Before let you go, we are not that deep into this year. What are you keeping an eye on in the commodity space?
>> I think the biggest uncertainty for all commodities and 24 is around growth. We have been challenged.
Quite a bit of uncertainty around what growth is going to look like in 24, etc.
If we get reasonable, synchronized growth, I think the upside in the commodity space is possible. If it fits and starts with the economy globally. In certain places you've had good growth, others weak growth. If we get better growth in aggregate, I think there's a lot of upside.
>> Always a pleasure having you here.
Looking forward to many more chats.
>> Thanks.
>> Are things to Hussein Allidina, head of commodities at TD Asset Management.
As always, make sure you do your own research before making any investment decisions.
stay tuned for tomorrow show. We will be back with an update on the markets and go through the latest Canadian retail sales report and see how are consumers doing. On Monday show, Colin Lynch, Managing Director and head of global real estate investments with TD Asset Management will be our guest. He wants to take your questions about real estate to get them in ahead of time.
Just email MoneyTalkLive@TD.com.
That's all the time we have the show today. Thanks for watching. See you tomorrow.
[music]
Every day, I'll be joined by guests from across TD, many of whom you'll only see here.
We're going to 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 bets when weighing on the commodities trade and where there may be opportunities this year. Hussein Allidina from TD Asset Management joins us.
MoneyTalk's Anthony Okolie is going to have a look at a new report from TD Economics on the health of the world's largest economy. And in today's education segment, Jason Hnatyk will take us to the different cards available on Advanced Dashboard.
Here's how you can get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get to all that and our guest of the day, let's get you an update on the markets.
We will start your home on Bay Street with the TSX Composite Index. We've got some green on the screen. It is pretty modest but after some money-losing sessions, if you're on the market, you'll probably take it.
20 points on the upside, more than 1/10 of a percent. Birch close is not moving to the upside like that top line number.
Birch was coming out and cutting the dividend in half. You're down about 10% on the name at five bucks and $0.16. I'll tell you more about that later. I also want to take a look at Athabasca Oil.
Seeing oil prices steady today. Seeing gold prices modestly higher. Not flowing through to some of the mining names either.
At least Athabasca is off the lows of the session. Earlier today was negative. Now it's just poking its way into positive territory. South of the border, let's check in on the S&P 500. Another read on the US economy that was stronger than expected, this time it was jobless claims.
Reflecting a pretty tight labour market.
Pretty strong consumer south of the border. He put it all together, a bit of green on the screen today after yesterday selling pressure, 23 points are about half a percent. The tech heavy NASDAQ, perhaps the chipmakers are in the spotlight today again and doing some heavy lifting. It appears so. Hundred and 75 points to the upside, more than a full percent. Taiwan Semiconductor saying they see strong demand this year based on AI, artificial intelligence applications. That stock is up more than 8%. And that is your market update.
The commodities market is carrying a lot of worries into the new year, with oil and gas particularly challenged. But our Guest today says a lot of pessimism is already priced into the energy trade, which could make the space interesting in the longer term. Joining us now is Hussein Allidina, Managing Director and head of commodities at TD Asset Management. We've got a few interesting things happening today.
How are we trying to square this in our heads as investors?
>> 2023, demand growth was a concern through the bulk of the year. Hard landing, soft landing, no landing.
The larger surprise I think in 2023 was better-than-expected supply. US production, shale production growth rebounded in the latter half of 23 and uranium production actually increased by five, 6000 barrels per day largely because sanctions were not enforced. There might be some politics there with inflation where it was, maybe we let the Iranians export. It 2024, demand growth is going to slow.
The COVID rebound which saw demand growth trend in the last couple of years is going to get back to more normal levels. The iA actually published there will market report this morning and their exciting demand growth of 1.2, 1.3 million barrels per day. A lower than we've seen in past years.
>> Still growth.
>> Still growth. As we talked about before, the price of a commodity is determined by the intersection of supply and demand levels.
The magnitude of demand is growing in 2024, as you mentioned. The uncertainty I think the market is grappling with is what happens to the supply side? The iA is forecasting supply growth of 1.4 million barrels per day.
While we are probably trading at the lower end is tremendous uncertainty, geopolitics and the Middle East top of mind. But even if I build by 200,000 barrels per day over the course of the year, it's from very, very low levels. Inventories are sitting quite tight.
Crude prices have come under pressure. The shape of the curve is still backwards.
That tells you the market is still tight.
>> With what's happening in the Red Sea, the geopolitical concerns in the Middle East, some people may take a look at the price of crude right now, just a bit under 74 bucks per barrel for American benchmark crude, and wonder about where the risk premium is?
>> A tremendous amount of potential supply that is at risk, to date, no supply has been disrupted. If you look at the last five, six, seven different episodes of potential supply disruption, you've never made to any alpha trade on that.
I think the most recent thing that comes to mind is when the who sees attacked Saudi's facilities in the eastern part of the country. You had a couple of days of materially higher oil productions.
Production was brought back to market relatively clearly. I think today we have three, four, 5 million barrels a day of spare capacity, the market is a little bit sanguine about the potential for disruption. The peace that concerns me there is if we do see a disruption, the holders of spare capacity are primarily Saudi and the United Arab. The use the Strait of Hormuz, they use the Red Sea to a pretty elevated degree to move their crew. I'm not sure it's fair to say that we have a lot of spare capacity and if there is a disruption we could meet that.
I think there's probably far less risk priced in then there should be but again acknowledging the fact that over the past five, six, seven years, the last time you got paid to trade potential supply disruptions was the fall of the market in Libya a long time ago.
>> Important to keep an eye there. What's been overhanging this market for quite some time has been central bank policy. We entered this year with expectations that the Fed was going to deliver a certain amount of cuts. I feel it in the past couple of days or even some of the data that's coming, people are wondering what the Fed will do this year. How is that going to overhanging the commodities market?
>> At the last couple of years, and went for the commodity space has been higher rates in an attempt to slow the economy and by extension materially firmer dollar.
If we look, for example, at the price of crude trading well off of nominal highs in US dollar terms, in India, as an example, because of the weakness in the Ruby and the strength of the dollar, Indians have been paying record high prices for the better part of a year, a year and 1/2. If the dollar weakens because we see easing in monetary conditions, that should fundamentally improve demand in economies that are not backed by the dollar. I think the macro has been a headwind for commodities. The micro has been supportive. 2024, there are question marks around the micro due to uncertainty around US production growth and demand. The macro is probably going to be more favourable from a policy point of view as it relates.
>> When we think about market watchers waiting for that first rate cut from the Fed, whether it's going to be March or pushed out based on all of this, commodity markets watching a just as carefully?
>> I think so. The challenge today is that we are talking about cutting rates in an effort to boost the economy because inflation has come off.
Expectations rent rate hikes are being reduced. The economy is running hotter, that prevents the Fed or central bank from cutting as quickly as the market is discounting, that should mean that the demand for commodities is higher today than the market is expecting. So it's a very sort of tricky I think. That we are in. Ultimately, though, I underscore the fact that inventories across commodity space, with a couple of exceptions, are sitting at multiyear lows, demand levels continue to increase and the supply side, given the lack of investment over the course of the last 10 to 12 years, has left the supply-side challenge. If we get unexpected GDP growth and I mentioned earlier that I feel he does a lot of pessimism priced in, if we were to get slightly better-than-expected demand growth whether it's for oil, copper, etc., we don't have the cover to meet that demand. So I think there's a lot of potential upside. I am and I think the market is concerned, though, that growth may not be as robust as we are hoping.
>> Is that potential upside a longer-term something? In the here and now we've just on a nice rundown of everything are facing. In the longer term, we think about underinvestment, you think it's been a decade or more of underinvestment?
>> I believe strongly that over time, the global economy is going to grow. We can debate what growth might look like in the first half of 24 or 24 as a whole, but there's a lot of inertia in GDP growth.
As the economy grows, that supply issue has not been addressed. Ultimately, demand will grow and that will serve to tighten balances.
That's why I am structurally constructive on quantities here anticipating commodity prices will continue to perform over the course of the next 5 to 10 years. In the very near term, there is uncertainty around what growth will look like. When I look at positioning in the market, I think that the market has gotten too pessimistic, given fundamentals in the commodity market and given the potential for growth. This time last year, we talked about Chinese demand growth. You talk to folks in commodities, very few are even talking about or focus at all what China is doing. China disappointed expectations this year. I think the possibility of them exceeding very depressed expectations is not being priced in.
>> Fascinating stuff as always with Hussein Allidina. We are going to get your questions on commodities for Hussein in just a moment's time.
And a reminder that you can get in touch with us any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on 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.
Shares of Taiwan Semiconductor are on the rise today. The contract manufacturer of chips for the likes of Apple and Nvidia is forecasting sales growth of 20% this year.
The CEO of Taiwan Semi says the demand for high-end chips or artificial intelligence applications remains high.
It appears the focus on artificial intelligence will mean more job cuts at Google. Several reports indicate Google sent a memo to employees outlining ambitious goals in areas such as AI, the memo did add that those investments would mean what they call tough choices, including eliminating some jobs.
Right now you got Alphabet, parent company of Google, up 1 1/3%. Shares of Birchcliff Energy are under pressure today after the natural gas play slashed its dividend in half. In a note to clients, TD Cowen called rightsizing the dividend a solid first step, but it added confidence in the company's operational plans will take some time. The stock is down more than 10% on the news.
A quick check in on the markets. We will start here at home with the TSX Composite Index. On Bay Street, we've got some green on the screen I was going to say but now we are modestly to the downside. We are not winning this battle just yet. Down 10 points are about five ticks. South of the border, the S&P 500, more indications today that the US economy is quite strong, particularly in jobless claims.
11 points to the upside for the S&P 500, about 1/4 of a percent.
We are back with Hussein Allidina, take your questions about commodities. Let's get to them. Right off the hop here, it's been cold in Canada this week. Can we get your view on natural gas?
>> It has been cold and it's been, frankly, long time coming. Last year, we had a materially warmer than normal winter. To start this year, November, December, up until last week, was quite warm and that actually together with very robust production out of the US has contributed to leaving inventories relatively well supplied. We saw quite a bit of volatility and gas prices to start the year. I think you probably rallied up 15% off 10%. If this weather does not persist, which I don't think the forecasts are calling for it into the end of the winter, we have adequate inventories. We are not going to run out of gas this winter. That was a concern a couple of winters ago. US production is still growing. There hasn't been any meaningful incremental demand for the ability to evacuate those molecules from the North American basin until we get to 2025, 2026, when we have additional energy capacity come to market.
So I think US gas prices probably… Absent any meaningful weather disruptions.
It is progressing far better in the U.S.
Senate is in Canada. Canada is still sort of trying to get there but the US has quite a bit of capacity coming online, already has come online over the past couple of years, and there is more slated for the second half of 2025 into 2026.
There is a prevailing idea in the market that one you have sufficient export capacity out of the US, Henry hub prices, trading at 250, 260 BTU, it may converge with higher European or UK gas prices. I think what that misses is the reality that it's not only the US has growing LNG capacity. Qatar, Australia and others have incremental gas capacity coming to market.
I'm not convinced that you see US prices necessarily move up to European prices. We might actually see a convergence between the two. It still constructive for US gas balances but I've talked to some folks who say gas at some point in going to be trading a, nine dollars BTU because that's what we are trading in Europe. I'm not sure that's the case.
You might see a convergence, downside in Europe, upside in the US, but near term, we are well supplied.
>> When it comes to LNG, is there a risk?
Is there a risk that Canada is going to be left behind in this?
>> I think that the unfortunate reality about the way that we have approached our energy policy in this great country is we have discouraged the upstream, we've discouraged the midstream and I think the intention for discouraging that is the environment. The reality, though, is if we had more LNG capacity, if we were exporting more LNG off of our westward coast, China would argue that we've lost cold. When you zoom out and you think about the demand for energy over the course of the next 10, 20 years, as the world, particularly the 7 billion people who are not consuming out what the fortunate billion are consuming, as the power demand grows, energy transition moving from coal and oil to cleaner fuels is going to require more power, and that power is probably going to come from a combination of natural gases to feedstock and nuclear stock so I don't think we are missing out, per se. We have missed the opportunity to help Europe during the crisis that they had last year. We missed the opportunity to temper Chinese coal demand, but the demand for energy, if you believe the economy is going to continue to grow, the demand for energy is going to follow suit and I think gas has a hold for sure in power generation, whether we are talking five, 10, 20 years forward.
>> That's the discussion on natural gas.
Let's get to another question from the audience.
Of your will to get your outlook for the metal space and China demand, is it coming back?
>> 2023 was interesting for the metals.
The positive metals demand in 2023 was the energy transition. The copper, the aluminum, the nickel for EV batteries, at as power generation is buildout, midstream generation capacity, but China was weak, relatively weak and 23, has been since COVID. There are issues with infrastructure spend, real estate in China, those things look like they are improving on the margin. So we are actually more constructive on metals today than we have been for the better part of the next 6 to 8 months.
As EV demand continues to grow, DM to a lesser extent and China again could surprise to the upside and that would be quite constructive. The supply side also came into material focus late last year with the issues that we had at Cobre Panama.
>> Wears a copper going to come from?
>> People forget it's not Amazon prime, we can order copper for delivery tomorrow.
These are projects that take seven, nine, 10 years. As the demand side improves, the constraints on the supply side become more apparent. Within the metal space we are most constructive on copper.
>> We've had questions about stimulus in China.
People have been surprised that there have been little measures but not a big stimulus push. Does that matter to the metals to market?
>> In the short term, it would be definitely better for metals demand if the Chinese government started helicopter ring money in but that's not going to happen. I think they take a far more methodical long-term view with the effort to have stable, sustainable growth. So probably all else equal, more bearish near-term than if they were just handing money out to folks.
But they clearly are trying to stimulate the economy just in a more measured way.
I think course of the medium term, you were going to see incremental metals demand, particularly because of energy transition and I think weakness that you see in in these industrial sectors in China and in the real estate market, they don't know how much worse it can get.
I think it probably get better from here and that helps us be bullish on the metal space looking at 24.
>> Let's take another question from the audience.
This one is about agriculture space. How are you viewing it?
>> We are bearish broadly speaking.
For the first time in at least three or four years, we had synchronize favourable weather in the US and South America. That hasn't happened in a while.
We've also had a couple years of elevated prices. When we talk about the commodity space broadly, we talk about supply and elasticity. Corn, soybeans and wheat are arguably the most responsive, the quickest to respond, again, not Amazon prime, but if corn prices move higher and beef prices move higher rate, we see better husbandry and acreage come into the mix and we seen that over the last couple of years. Corn, soybeans and wheat inventories have improved and we anticipate that they will continue to improve in 2024 but again from relatively low levels and not without risk.
The weather has been very variable over the course of the last many years. That's probably not going to change. There are still some risk in the breadbasket of Europe. Again, people are not really focus on that.
So bearish heading into 24.
But our cognizant that the cover that we have in anticipation of any sort of disruption is quite low.
>> Things can change pretty quick.
As always, make sure you do your own research before making any investment decisions.
we will get back to questions for Hussein Allidina on commodity is in just a moment time. And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get to today's education segment.
In today's education segment, we will take a look at TD's Advanced Dashboard, a platform designed for active traders available through TD Direct Investing.
Jason Hnatyk, Senior client education instructor with TD Direct Investing joints as noted and you will take us through some of the Tard tools available in Advanced Dashboard.
Show us what you got.
>> Great to be here. Advanced Dashboard, one of the hallmarks of the platform is that it streaming so no need to refresh.
As the market and the world turns, you are going to get that updated data right into the platform to have right in front of you. It is highly customizable. Let's jump into the platform and take a look.
We have some educational videos of top and the learned tab. Additionally if you are looking for a deeper dive on WebBroker itself in the learning centre, you will be able to access a one hour master class where we focus solely on charting.
If we are looking to adjust aggregation., You will notice text of the symbol in the top left, little D here signifying that our candles are one-day candles. I got the ability to look at intraday charts as well as looking at longer-term candles to spot those trends that interest you. At the bottom if we are looking for the frequency of the chart, we have some predefined common frequencies that are ready for you to cycle between.
Let's get customized in this. I'm gonna show everybody how to add indicators to their charts.
Go to indicators button at the top of the chart. Click on that. Got a wide variety of many different indicators that are available here. I can scroll down and look at the list or I can type in onto the list here to do a more efficient search. Maybe I want to add in a simple moving average created by typing in SM a here I've got simple moving average popping up so let's add that's my chart.
As I click it I can go ahead and add multiple moving averages to my chart.
Maybe I want to have three so I'm looking for some crossovers or other information.
It defaulted to an average of seven. If I click these gears in the top left-hand corner, it allows me to get into the functionality of the averages themselves.
Let's make a short-term average of 20 and a midterm average of let's say 50 and then long-term of 200 so we can get a sense of how that's working and you will notice that it's defaulting to different colours so we don't have to go ahead and spend time worrying about that.
You can add studies on the chart.
We will add in a Mac D to see how that would look as well.
Once I get that added on, one of the nice things about the platforms I spent some time customizing the platform but if I were going to save this template for future use so I don't need to re-create the wheel, you will notice the templates button at the top of the chart. If I select that, I've got a number once I've saved already but I can go to save indicator template and maybe just type in the studies that I've got on the chart so I can tell what's going to be selected when I choose that template. We go ahead and say back.
Let's say for future use I can use it on different templates. I can go in quickly toggle between others. I can go ahead and not muddy at my chart with too many indicators so I can see the forest for the trees. Many ways to make out my own. I thought the powerful tools there when it comes to charting. We know a lot of investors rely on charts and analysis of charts and they are doing the research.
When they get to the stage of having done the research and maybe they want to trade off this information, can you trade right off the chart?
>> Yeah, that's one of the capabilities.
There are couple of ways we can get that done. Let's show that off right now.
The first thing we will show to everyone is if we take a look in the very top right hand corner of the chart, there is a buy, sell, as well as alert. We can see alerts and be kept informed when price levels are touched. That's easy to accomplish just the same way that buying and selling is as well. If I go ahead and hit by on my chart, what I notice is that my crosshairs that are appearing on the screen, if I click on the screen, it's just as easy as one click. I get in order to get popping up with the actual limit price that I selected from the chart. That's one way.
The second way we can do that without even clicking buy and sell, if we notice my crosshairs on my chart, we will notice the very right that there is a little + here.
Just with one click, plus button, it is the a couple of different order selections as well as to create new order options.
Without having to navigator to data entry, it's all right there. You can make quick decisions based on your analysis right on the chart.
>> Great stuff as always. Thanks for that.
>> My pleasure.
>> Jason Hnatyk, Senior client education instructor with TD Direct Investing.
And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
We are back with Hussein Allidina, taking your questions about commodities. Let's get to them.
This one wants to know about Canadian energy. When will we see the price gap between Western Canadian select and West Texas intermediate narrow and with the benefit Canadian oil companies this year?
>> Good question.
Trans Mountain Pipeline is a long time coming. I believe it was delayed further because of some moving issues in BC. I believe that Canadian energy regulator approved the variance. The pipeline I think worst case is expected to be online by the end of this year, hopefully sooner.
When the pipeline comes on, you will see WCS narrow relative to WTI. It will not trade at the same level.
Whether that difference is seven or eight dollars per barrel, it's materially better than in the past and that improves the realization for Canadian energy producers.
>> Nice quick one on that one. Let's get to the next question. Plenty coming in.
Consolidation. What kind of year we going to have in 2024? Do you expect more consolidation in the US energy sector in 2024, similar to what we saw last year, using Exxon as an example.
>> Yes, we had a number of large deals in the second half of last year. We probably will still see some degree of consolidation but it's unlikely that the bigger exons or axes or pioneer who have already done a bunch of deals in 23 common.
There aren't too many private targets left. A lot of the larger private producers have already been acquired. You will see activity next year for sure. I think it's easier as an energy producer to acquire production versus going to find and produce production in this environment.
I don't think it's going to be the same magnitude that was on 23.
>> We've seen a trend to return money to shareholders whether it's in special dividend or share buyback. We've seen some M&A activity. As the tougher environment to go out and find your oil or natural gas deposit. How long can that last?
At some point, all the dealmaking that can be done will presumably be done.
>> At some point, you would argue that we would have to go and start looking for incremental resources.
I think the challenge, Greg, is there is still this what I believe false narrative that we are not going to be using oil in five years, seven years, 10 years. The iA, we mentioned earlier, release their monthly report this morning. In 2020, DIA came out and said gasoline demand they believed peace in 2019, pre-COVID. 2023, a year where Europe was arguably in recession, Chinese demand growth and economic activity was bigger than inspected, gasoline demand reached record high. So at some point I think inventories get tight, commodity prices move higher, oil prices move higher and it forces equity investors to encourage energy companies to go look for resources. Today, we are still very focused on ESG which is important but we are ignoring the social.
If we are not investing in oil, we are going to see oil prices move higher. That is going to happen. Negative social ramifications, particularly in the emerging markets where oil is a greater proportion of personal exposure.
Again, there is a challenge with the narrative that we are not going to be using oils or companies are being punished when they go and look for incremental resource and they are being rewarded on the margin forgiving cash back to shareholders. Any dollar that you get back or stock buyback is a dollar that's not looking for a resource that is still seeing demand increasingly structurally.
>> This one about uranium. We had a bit on a nuclear earlier. With the recent news out of Kazakhstan, what's the outlook for uranium?
>> I think bigger picture, you're right, we talked about this a bit earlier, I don't think that we can meet the world's power demand if we are going to do away through time with Cole and with oil and eventually maybe even natural gas without having some sort of baseload power generation. Wind and solar will continue to increase but wind and solar are not baseload. You need to have baseload generation and I think the world is arguably too slowly when waking up to the fact that nuclear is actually a great alternative. Crop 28 Which Took Pl. in 08, one of my colleagues from the SG team was there, he said every pavilion and room he went to, people were talking about nuclear. On the supply side, not dissimilar from the rest of the commodities.
Prices have not encourage the exploration and production of uranium. I think when you see supply disruptions, the Cossack description that you mention, prices move materially higher and I think over the course of the medium term, because I believe in economic growth and I believe that economic growth requires energy and power, I think uranium continues to do well.
>> Interesting space to watch there. I'm surprised we got this far in the show without this question popping up.
But hey, you have to save your heads and sprinkle them through. What's your take on where gold is heading?
>> We talked about gold I think at length over the last couple of years. I think gold plays a very important role in your portfolio from the context of portfolio construction. Gold is able to hedge against the tail risks like no other asset does. It's really interesting. If you look at the performance of gold and 22 and 23, most folks were bearish gold because the dollar was strengthening and real rates were moving higher. Most models, on the south side, if you have a gold forecasting model, the model has the dollar and real rates in both of those things were quite negative for gold and 22 and 23. But gold still performs and I think it perform because you work at seeing and continuing to see portfolio construction on the part of the emerging-market central banks.
Central banks, particularly emerging-market, or on the margin of diversifying their reserves away from the US dollar towards gold.
If you look at the volatility of EM currencies and periods of duress, the currencies, the countries that have a greater holding of gold has slightly less volatility. I think the concern around the US potentially confiscating reserves as they did with Russia and Afghanistan is also encouraging all the margin incremental gold demand. I think it's really interesting for gold in 2024 is the dollar should actually weakened over the course of the year and I think that that might encourage incremental flows in the gold market. ETS length in the gold market, retail demand for gold has been quite low. If equity start to have a bit of heartburn, I think you would see incremental demand move into the gold space.
>> When comes to the supply side, gold is bit different.
>> Yes. All gold ever produced still exists.
There's a price at which you're gonna get that to me. As uncertainty around other assets that you own increase, I think the level where gold trades moves higher.
>> Nice guide, you'll just take my goal.
>> Anytime you would like to give me your gold, I will take it.
>> I don't have any gold to give away a, just for the record. You will get back to questions for Hussein Allidina on commodities and just moments time.
As always, make sure you do your own research before making any investment decisions.
And a reminder that you 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 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'll see if one of our guests can get you the answer right here at MoneyTalk Live.
Despite interest rate sitting at a 22 year high, the US economy outperformed its G-7 peers.
So what's behind last year's US economic resilience and what can you expect for this year? Anthony Okolie joins us now, been digging into a new TD Economics report on that very matter.
>> Was started off as a year of recession calls quickly turned out to be a outperformance of the US economy. TD Economics outlined several reasons for the US is outperformance versus the G-7 peers.
A major factor, of course, has been the US consumer.
Since central banks began hiking rates in the second quarter of 2022, the US consumer has outpaced all of its peers, as the churches.
Recent data points to per capita spending across the most other advanced economies already slowing bedding fact US consumers continue to open their wallets at a healthy clip.
We saw that in the December US retail sales data which came in at .6% month over month, much hotter than the 0.4% that was expect it.
The US consumer continues to be resilient despite higher interest rates.
One of the reasons why they are resilient is of course the US jobs market and today we got the US initial jobless claims which posted an unexpected drop last week, marking the lowest level since September 24 of 2022, again pointing to the continued strength in the US labour market. Another reason why we continue to see consumer spending, substantial cash reserves that have been built up during the pandemic. That's the second factor the TD Economics points to driving US outperformance.
TD Economics attributes a large liquid savings of US households as really due to the US and acting larger fiscal support measures during the pandemic. We know that roughly 45 million Americans were unable to work during the pandemic. But the US was one of the only G7 countries to send multiple rounds of direct payments to households irrespective of whether their employment situation was impacted by the pandemic. As the pandemic receded, households in the US have been comfortable spending that windfall.
Another factor that TD Economics points to for the US outperformance versus the G-7 nations has been due to its mortgage structure.
The US is the only G7 country with a 30 year fixed rate mortgage. Canada and most of the European economies also offer fixed rate products but interest rates reset more frequently than in the US, exposing homeowners to a higher interest rates much sooner than their American counterparts.
This is freeing up more money for American households to spend and continue to support their economy.
In addition, US households started out with relatively less debt going into this interest rate hiking cycle. US household debt outstanding as a percentage of disposable income was the lowest across all peers. With fixed rate mortgages accounting for about two thirds of that debt, US households so far are largely insulated to those higher interest rates.
Now that being said, last year's tailwinds are likely to fade this year but not completely die out, according to TD Economics.
They expect that the US economy is projected to expand by 1.5% in 2024.
That slightly below the economy's potential upward trend growth of 1.8% but it's a stark contrast to the more anemic pace of growth expected by the rest of the US G-7 peers including Canada and the UK and others.
>> We know as you outlined there that fiscal policy will have an impact on an economy. Have there been any moves particularly perhaps thinking about manufacturing in reshoring, bringing it back home?
>> That's been another factor that has helped the US economy outperformed versus the G-7 nations and it's not just consumers that have been failing to succumb to the high interest rates. US fixed investment was up 4% year-over-year after adjusting for inflation. Again, that's providing further support to the US economy. TD Economics attributes much of the strength to the generous incentives that include legislation enacted in late 2022 aimed at strengthening the economy, reshoring production of semiconductors and improving the US infrastructure. While other countries including Canada have implemented incentives and subsidies, they don't rival the generous incentives offered by the United States and that's had a significant impact on where companies are making their capital investments.
>> Interesting stuff. Thanks.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, for an update on the markets.
We are heading back into TD Advanced Dashboard, platform designed for active traders available through TD Direct Investing. We are on the heat map function to look at the market movers. We will sort the TSX 60 by Price and volume. The US economy, another piece of data today, resilient. Bond yields moving higher.
Gold a little bit higher.
Oils a little bit higher. That's the stage for you now. As I look at the screen, it's not really playing out in the energy trade.
It's been a choppy ride lately. We are not getting a lot of movement there. Gold is up almost 11 bucks an ounce.
Was going to be happening in the basic materials area? Not much with the miners either. Modestly lower or higher. Shopify, we are seeing continued weakness in some tech names including shop, down to the tune of almost 3%.
You can find more information on TD Advanced Dashboard by visiting TD.com/advanceddashboard.
We are back now with Hussein Allidina from TD Asset Management talking commodities.
It's talk about political risk. How should we be thinking about political risk given was played out in Panama for First Quantum?
>> Political risk is an issue I think not just for copper and not just for Panama.
There's a lot of geopolitical risk in the Middle East right now. The Red Sea is getting quite a bit of attention. I think that, broadly speaking, as you move into the investment phase in the commodity cycle, when commodity supply is constrained relative to demand, the incidence of supply disruption grows and this is because the labour in the mine or the labour in the oilfield, the farmer in the cotton field can see where the price of the commodity is and wants to greater take. That's also true in the host country where you are operating.
The folks at First Quantum have experienced this in a very real way in the past little while.
I think the likelihood of supply disruption will grow as commodity prices move higher because both host country and labour that is operating will want more.
In an environment where you have excess supply, the environment we have come out of over the course of the past 10 years, I really want you to invest in my country because no one else wants to, so I'm quite favourable and friendly.
We see this in every cycle. We saw this in the 70s around the nationalization of Aramco as an example. We saw this throughout the early 2000.
The likelihood again of production grows and this is one of the things you have to be mindful of when we are taking commodity exposure to equities.
You want leverage if things work out but when the news that Panama was not going to let First Quantum operate, very challenging for First Quantum shareholders. We were kind of smiling upstairs at the commodity desk because we knew it would mean for copper long term.
>> Interesting stuff. We have run out of time for questions. Before let you go, we are not that deep into this year. What are you keeping an eye on in the commodity space?
>> I think the biggest uncertainty for all commodities and 24 is around growth. We have been challenged.
Quite a bit of uncertainty around what growth is going to look like in 24, etc.
If we get reasonable, synchronized growth, I think the upside in the commodity space is possible. If it fits and starts with the economy globally. In certain places you've had good growth, others weak growth. If we get better growth in aggregate, I think there's a lot of upside.
>> Always a pleasure having you here.
Looking forward to many more chats.
>> Thanks.
>> Are things to Hussein Allidina, head of commodities at TD Asset Management.
As always, make sure you do your own research before making any investment decisions.
stay tuned for tomorrow show. We will be back with an update on the markets and go through the latest Canadian retail sales report and see how are consumers doing. On Monday show, Colin Lynch, Managing Director and head of global real estate investments with TD Asset Management will be our guest. He wants to take your questions about real estate to get them in ahead of time.
Just email MoneyTalkLive@TD.com.
That's all the time we have the show today. Thanks for watching. See you tomorrow.
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