James Marple

[theme music] >> Hello, I'm Anthony Okolie and for Greg Bonnell, and welcome to MoneyTalk Live, which is brought to you by TD Direct Investing. Every day, we'll be joined by guests from across TD, many of whom you'll only see here. We'll to take you through what's moving the markets and answer your questions about investing. Coming up on today show, we will discuss what's next for the Fed as a weaker than expected US jobs report raises investor hopes for an interest-rate cut on the horizon. And in today's WebBroker education segment, Ryan Massad will shows how you can keep up-to-date with the latest analyst ratings using the platform. And here's how you 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 our Guest today, let's get you an update on the markets. We will start here with the TSX Composite Index On the economic front, traders will await jobs data later this week for clues on the bank of Canada rate policy. Right now the TSX Composite Index is up 224 points, just over 1%. Taking a look at some of the key movers, shares of Baytex energy are seeing some buying in early trading, perhaps benefiting from the move higher in oil prices. Today, we are seeing the higher oil prices amid rising Middle East tensions as well as news that Saudi Arabia raised the price of its flagship crew destined for Asia for the third consecutive month. Shares of Baytex energy are up about 6% right now. We will move south of the border and take a look at what's happening on Wall Street. Stocks there did open higher as well. Of course, traders are pricing in a greater chance of the US Federal Reserve cutting interest rates this year, following soft payroll data last week. Right now, the S&P 500, the broad-based index, is up nearly 31 points, that's .6%. Take a look at the tech heavy NASDAQ composite index, it is also trading in positive territory on the jobs news. While the peak of the first quarter earnings season has passed, including some of the mega-cap tech giants last week, investors are still watching he company said to report this week, including Disney on Tuesday and over on Wednesday. The NASDAQ is up 117 points or .7%. Taking a look at some of the movers in the US, shares of Micron Technology are getting some bids today. The computer chip company received some favourable analyst comments. The stock is up we will call that nearly 5% today. Some other big movers, shares of Moderna are down as well, the biotech company is closer to putting another product on the market, which badly needs as demand for COVID jobs plunges worldwide. The firm expects US approval for its vaccine against respiratory arts on May 12, with the hope of launching the shot in the third quarter if it is cleared. The stock is down just under 4% today. And that is your market update. Well, markets are starting the week on a positive note has a weaker than expected US jobs report has raised hopes for a Federal Reserve rate cut. Joining us now to discuss is James Marple, Senior economist with TD. Thanks very much for joining us. Of course, what's been in the news as the US jobs report. What's your reaction to the latest report to Mark >> It was kind of a Goldilocks report. It came in at 175,000 which is really not a terrible number. It we had seen expectations for 240,000, so it came in a bit below that but even elsewhere in the report, you saw that wage growth, which obviously given some of the inflation metrics and the Fed's attention to inflation came in a bit soft so slowing on both the monthly number and the year on year metric came in below 3% so that's another positive. The unemployment rate edged up ever so slightly. It went up to 3.9% from 3.8% but to the second decimal place, it was a very minor, minor change. >> It's at a historical lot. >> Yes, it has been for about 18 months. Pretty stable there. You saw a slowing in the rate of job growth in the household survey but still a positive number, but it was below the rate of growth of the labour force, so just edging the unemployment rate higher. I would say pretty good overall. I would say signs of slowing jobs with this came after a whopping 315000 Jobs in March which was actually revised up. It was originally reported that 303, the upward revision, a bit lower in January. Some slowdown I think was necessary. It came a little bit more than expected but obviously not to the point where you would be worried that the economy is any kind of, is in any kind of health issue. For the Fed, who is paying some attention to the employment side of their mandate, seeing a bit of slowing and slowing on the wage growth I think should help them have the confidence that they can eventually start using policy. >> I want to talk about expectations. You see the job growth expectations have been coming up. What does that report mean for the trend? >> Sure. It is interesting because if you look at what the six month moving average was in the second half of last year, it was actually just above what this report came in at, it was about 180,000. Of course, every month almost you saw jobs come in higher than that. I think the average was something like 210,000 over the second half, and then over the course of this year, the first three months of this year, you saw those expectations are to move higher, actually inching towards the average of the second half of last year and blown out of the water, 275,000 jobs over the course of this year on average so you have seen this sort of consistent beat on the upside and I think that really showed up in what was the 240,000 last month and I think we will see going forward is that we will start to see a more sustainable rate of growth in terms of job growth and expectation should follow that down but nothing wrong with 175,000 jobs. Our forecast is that we actually come in a little bit lower than that. The economy needs that rebalancing it obviously has interest rate policy does slow the economy a bit. But hundred and 50,000, even at 150,000 jobs a month, you are not releasing the unemployment rate move any higher, you're just keeping pace with the labour force growth. That is a Goldilocks scenario. >> Staying with the US labour market, you been focused on what we've been seeing and productivity in the United States. What is happened there? The US reading has been one of the strongest among advanced economies since the pandemic. Tell us about the trend you're saying there. >> That really stands out when you compare the US to its peers. It's the only country that has seen labour productivity accelerate relative to its decade-long trend prior to the pandemic. It's gone up about 1.5% in the four years, including the pandemic period, a group at 1%. Compared to Canada where we were very similar to the US on average in the decade prior to the pandemic but since then we have seen a negative productivity growth in Canada since the pandemic. All of the economic growth has been accounted for by increasing employment and labour hours. Europe is in a similar state where it is seen very limited productivity growth. The UK has done better but it stands out for have a weakness in its overall economic performance relative to all of its peers. What really stands out is just how different the US is from everyone else. We are seeing that now in terms of expectations for policy but also even just the exchange rate where the US has really outperformed all of its peers. I think there is a question about how sustainable that recent rate of growth is and we did have data that just came out last week for the first quarter and there was a noticeable slowdown in the rate of US productivity growth but still on a year on year basis, running at 2.9%, which is just fantastic and supporting obviously that rate of economic growth so I would say probably going to slow but still at a level well above everyone else and maybe, with the adoption of more artificial intelligence, large language models, we could see potentially a higher sustained rate of productivity growth although I think that may take a bit longer to play out than what we are seeing now. >> Given all that, what is your outlook on inflation and interest rates going forward? >> Sure. Let's start with the US. The US inflation really has been stickier, especially over the first three months. We surprised on jobs and on the inflation numbers. I think we will see inflation likely over the course of this year just the arithmetic in terms of what the Fed is looking at which is that core PCE metric, the price index on personal consumption, likely remain pretty close to that 3% mark and that just reflect some of the, just the way that the data has come in on a monthly basis and the acceleration that we saw the start of this year. But what that means for interest rates is it means it's probably going to take longer for the Fed to have the confidence that I can start normalizing policy. So the Fed funds rates at 5 1/2%. We don't think they will be cutting until December of this year and probably just 125 basis point cut. And then, over the course of… I think we do get that improvement in inflation or move more towards 2% and that should allow them to pick up the pace of rate cuts and probably get to a stage where they are cutting by 25 basis points a month and that should allow them to get to a Fed funds rate. Right now we are at 5 1/2 and eventually they will get to 3 1/2 but it will take until the end of next year. Canada, the story is a little bit different obviously. The economy has been weakening. The inflation headline is at 2.9% but if you look under the surface, some of the Bank of Canada's core measures have really slowed, especially on a three month moving average or six month moving average, more recently. The economy is only growing by 1%. The unemployment rate has moved noticeably higher in Canada. It's at 6.1%. It was more than a percentage point lower than that in its trough in 2022. That means that the Bank of Canada probably is going to cut before the Fed, we think likely by July is when we will get that first bank of Canada cut. And then, a cadence that they may not cut every meeting because they are looking at what the Fed is doing but we probably get a few more cuts by the end of this year and then again in 2025, maintaining that cadence. We are we think at the start of rate cuts and a little bit closer in Canada relative to the US. >> Sticking with Canada, we have our jobs report coming up this Friday. What are you expecting? >> We saw pretty poor jobs numbers. 2.2 or just over 2000 Jobs Lost in March and for April, we think we may move to a positive number but very modest. There is a lot of volatility in the Canadian monthly job number but I think the underlying story is job growth is lower than the rate of labour force growth and probably some continued upward movement in the unemployment rate. It may not happen in April because it actually jumped a fair bit in March but I think the general trend will be continued in the slowing economy in the labour market and gradually pushing out that unemployment rate. >> A great start to the discussion. You'll get your questions about the economy and interest rates for James Marple in just a moment. And a reminder that you get in touch with us at any time. Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker. Now, here's an update on the top stories in the business world today in a look at how the markets are trading. Montréal home sales jumped more than 25% in April compared with the same month last year, according to the Quebec Professional Association of Real Estate Brokers. It March 3 consecutive months of strong growth in sales, with levels returning to historical averages for this period last year. Meanwhile, active listings for April jumped 19% compared with a year earlier, while new listings rose 33%. The median price for all housing types was also a pure of year, led by 6.5% rise for the price of a single-family home last month. Shares of Berkshire Hathaway are in the spotlight today after the conglomerate posted a 39% jump in first-quarter operating profit year-over-year. Warren buffet's company earned just over $11 million driven by an increase in its insurance underwriting profits. The strength in the insurance businesses, particularly its crown jewel GEICO, comes as the sector as a whole benefits from stronger demand and increase pricing power. Meanwhile, Tyson Foods top Wall Street expectations for second-quarter profit and raised its full-year outlook. The biggest US meat company by sales as it benefited from reduced cost after shuttering six chicken processing plant. Revenue, on the other hand, came in lower than Wall Street anticipated, largely due to reduced US production. The meat packer has been grappling with slowing demand from some inflation hit customers cutting back on excessive purchases amid still high food prices and borrowing costs. Shares are down about 8%. Here's how the main benchmark index in Canada is trading. The TSX continues to power up. It's up just over 223.4 roughly 1%. We'll take a look at the US which is benefiting from expectations that the Fed may cut interest rates later this year. The S&P 500 right now is up 29 points or .6%. All right, we are back with James Marple taking your questions about the economy and interest rate. We'll start with the first question. Do you expect the BOC and the Fed to diverge on policy? >> ER, there is some divergence already there. The Fed is at 5 1/2% but the Bank of Canada is at 5% so we already have about a 15 to 25 basis point movement, there is a range and said funds. But we do expect that to get a bit bigger over the course of this year as we were talking about. I think the Bank of Canada will be first out of the gate in terms of cutting interest rates, just reflecting the different shape of the economies north of the border in South of the border. That should continue. At the biggest gap, we think there will be about a 100 basis point difference, about double where we are today, roughly. That just reflects differences in the economy. I don't think there's necessarily a threshold at which the Bank of Canada can deviate from the federal, it will depend on differences in inflation and economic performance, but the place you will see it is in the exchange rate and when the Bank of Canada is lowering rates in the Fed is not, that would tend to put downward pressure on the loonie and of course the Bank of Canada is aware that a lower loonie, bringing in more imported inflation pressures. It can't go too far given that there is that exchange rate mechanism that is going to keep them cognizant. Of course, a lower loonie is supportive of Canadian exporters as well so does give some support to the economy that keeps that divergence from getting too far but 100 basis points is certainly not out of the range of what we have seen historically. In the late 1990s, we got much higher than that, over 200 basis points and differences and that was again as the Canadian economy really underperformed relative to the US. There was a lot of fiscal consolidation occurring in Canada and offsetting that was both a lower policy rate and you also saw it in the exchange rate so those were the days when you saw the loonie getting even below the $0.70 mark in the late 1990s. >> I want to stick with the loonie. This question is for you. What is your outlook on the loonie? >> Sure. Reflecting this divergence we have seen, I think you'll see a little bit more downward movement. We have, versus the US dollar, that we trough at about the $0.70 mark in the third quarter of this year so that's when the Bank of Canada start cutting and the Fed is still on hold. We think that's probably the low point and we should eventually see, markets are forward-looking and the expectation is that the Fed should follow with our forecast is right. We should eventually start to see some upward movement but I would say that the one risk to that is that all of the geopolitical uncertainty that's around the world, including around the election in the US but obviously everything that's happening, that has tended to drive flight to US dollars and of course that will impact the loonie as well as everybody else. >> Lucas the next question on the housing market. What is the state of the housing market in Canada? >> We are starting to see, actually, we had a pretty good start to the year. Sales were up, just talking about even in Montréal but other major cities in Canada. We still have a market where the supply is running above the underlying rate of demand so still pretty soft but I think moving over the remainder of the year, if the Bank of Canada start cutting rates in July and we have a market where we still have a lot of pent-up demand and we know the population is growing relatively quickly, that's good fundamentals, and if that's her to get the support from interest rates, I think we could see a bit of demand pickup in the second half of this year. It's a bit of a different story across the country and in the most unaffordable markets and the places are limited, in Ontario I think we may still see some challenges but I think we will see more both sales and price growth leading in some of the Prairie provinces where both the affordability is a bit better and they are also benefiting from stronger income growth. >> What about population growth in the Western provinces? What impact could that have as well? >> Absolutely, those are also provinces that are seeing more immigration. >> As always, make sure you do your own research before making any investment decisions. we will get back your questions for James Marple on the economy and interest rates in just a moment. 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 educational segment. Analyst ratings and price targets can change a lot during earnings season and if you want to keep track of it all, what broker can help. Joining us now with more is Ryan Massad, Senior client education instructor with TD Direct Investing. Thanks for joining us. We will jump right in. Where can clients go to find more oh about stocks whose analyst liquidations have been updated recently? >> Definitely. You can always go into the reports. There is a report section and what broker where you can get a detailed point of view from analysts but sometimes all we really want to know is whether we should buy, whether we should hold, whether we should sell and what is that price protection. So in what broker, there's a spot where you can go directly to find that information. Let's help in right now. In my broker, under the research tab, we are going to go under markets and then analyst centre. This is going to give us a list of analysts and trending stocks, so if David changed a particular rating, if they've changed from one status to another, you have a list here. The analysts come from all across the market here, not just from TD. You're also able to filter this on the left side here. If an analyst has a particular rating, you could filter by reading. You can see whether it's going to be a buy and filter only the buys, the sells, the holds, only US stocks are only Canadian stocks and then even the stock size or the company size or market capitalization. These are the most recent changes. If we click on trending stocks, then we can see the ones that are most trending by either most rated, whether they be by, hold or sell, worst rated or best rated. We can also filter that way as well as the most recent changes. It gives us a lot of ideas and really filters to the surface some of this information that an analyst is using when making their price targets. >> Great overview. Now that I have found a particular stock that I'm interested in, what information is available in web broker? >> So, once you find a stock, in this particular page, you can actually click on any of them. Under markets, I can click on the analysts tab and that will bring other analyst points of view to this. And it will show me the price target for the coming 12 months. It will show us that price history of the past 12 months, it will show us analyst ratings on this particular stock, more than one, and if we scroll down, we are going to see the names of the analysts and how they see this particular stock. If you want your own, you can actually just go to the top here and type in the symbol and pull up a analyst rating on that exact symbol. Again, with the price projection and whether it's a buy, hold or sell. And then down here, you got the different analysts and each analyst has its own rating, their win loss rates and their average return. You can click on the analyst to find out more and you can even follow them to see some of their other pics later on. Lots of information. Much easier to actually look at these buy, sell price projection ratings than in the report, much easier to read. >> It helps that someone else can do the work for you. Just following the analyst that you like. Thank you very much, Ryan. Our thanks to Ryan Massad, Senior client education instructor with TD Direct Investing. For more educational resources, you can check out the education Centre on what broker or use this QR code to navigate to TD Direct Investing's YouTube page where there are more informative videos. Before you back your questions about the economy for James Marple, a reminder of how you can touch with 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 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. >> We are back with James Marple taking your questions about the economy. We will move to the next question on household debt. Should we be concerned about household debt? >> We have already seen the impact of elevated levels of household debt on the Acadian economy, especially as we have seen interest rates are to move higher. We compare some of that underperformance that Canada has seen relative to the US, a lot of it is coming through on consumer spending and how much households are able to go out and support growth and actually on a per capita basis, that has been pretty deeply negative in Canada and a lot of that I think has to do with the fact that we have seen such a fast rise in interest rates and that has come through in households directly, especially if they've had more expenses and took on debt relatively recently. So it's already having an impact in terms of slowing the economy. I think the risks obviously are around if we were to have a downturn and you have high levels of debt, that is something that could exacerbated but I think we should be in a world where interest rates are starting to slowly move lower over the course of this year and starting in July with the Bank of Canada and that helps in terms of some of those downside risks but obviously household debt is something that is impacting the economy's ability to grow and putting pressure on the economy that has to be taken into account by policymakers. >> Okay. We also have another question on productivity. I know you touched on this earlier. What can be done to increase Canada's productivity? I think this question has come up quite a bit. >> They keeps coming up because there is no one answer or solution. If there was, we would have it kicked already but this has been a question for as long as I've been around as an economist. Not like that's forever but it's been about a decade. Unfortunately, there is not one answer but if you look at why Canada underperforms in terms of productivity, it comes down to lower investment relative to the US and that lower investment means less machinery and equipment for workers and that tends to mean lower labour productivity. We have invested historically much less in ICTE or in information communication technology and that has been a big source of productivity growth, especially in the United States, and some of that under investment explains that underperformance. That even comes through not just in machines per worker but also what they can do with them. So I think obviously doing things that can increase investment would be positive for productivity. We've done some of that already. But going at it in terms of the regulatory environment and things that will make it easier for companies to invest I think would really help. One thing that I think is notable though is that in Canada, it's not as much of a laggard against everyone else as it is against the United States. The United States does have a lot of advantages in terms of its market size and its ability to get new products to market quickly. Canada is dispersed, the geographical differences affect productivity. We have some trade barriers across the country. It is harder to move, especially certain professions and even just goods and services across the country. It's easier in many cases to settle in the US than it is across provincial borders. Things like lowering those borders and barriers to competition would all help, should help and hopefully our happening going forward and hopefully we can benefit from the type of innovation we see in the US in terms of AI, doing things to adopt those kind of technologies as they are emerging could really help. >> So the government certainly plays a role in helping to improve productivity from a policy standpoint. >> Absolutely, yes. >> Let's go to the next question. Will the transmountain opening give a boost to the economy? >> Yes. It already is showing up in terms of higher oil production in the energy patch. We have seen the data. What it does is it allows more oil to get to market and the difference in production is about 600 barrels, 600,000 barrels per day, it's a huge amount of energy that they will be able to increase production because they have taken on that capacity. That has been a constraint and having the higher take away capacity should allow for a pretty significant increase in Canadian energy production over the course of this year. I think we estimate around 8% increase in production. The other thing is that there is a discount applied to Canadian oil, Western Canada select, relative to the benchmark in the US, the WTI, and that is been as high as $20. Oil is getting stock and can't get to market. That discount should also decrease. We think it could go even south of five dollars. That's relative to the WTI. Not only are we selling more oil but we are also getting more for it, so on both counts, that should be a benefit to the energy sector in Canada. >> We will get back to your questions for James Marple on the economy in just a moment. As always, make sure you do your own research before making any investment decisions. and a reminder that you can get in touch with us anytime. >> 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. >> We are going to take a look next at TD's Advanced Dashboard, platform designed for active traders available through TD Direct Investing. We are looking at the heat map function here which gives you a view of the market movers on the TSX 60 by Price and volume. If you look at the top left screen, you can see there's a lot of green on the screen for energy. The price of oil has been moving higher today. It has been affecting some energy names. Tourmaline Oil is up, TC Energy is also up, Suncor Energy, Cenovus as well. If we move over to the top right of the screen, basic materials, we are seeing some bidding off of gold miners. Gold prices have been rising, up more than 1% today, as the US dollar has weakened after softer than expected US jobs data has fuel expectations over interest rate cuts by the Fed so we are seeing some strength in the gold name such as Barrick Gold as well. Just to the right of that, technology, Shopify is also seeing some bidding. Shopify will be reporting their earnings in the next few weeks. Okay, let's take a look at the S&P 100. There is some optimism particularly with the Fed following the softer than expected job numbers, this optimism that the Fed may cut interest rates later this year. We are seeing some strength and some of the tech names, Microsoft is seeing some bids there, Nvidia, it's up as well. The chipmakers, AMD. These companies benefited from the AI boom. Nvidia is the last of the Magnificent Seven to report. It's due to come out after the close at the end of the month. The cyclical consumer goods names, we are seeing some bidding there as well. Tesla is seeing some bids as well as Disney. Disney is going to be releasing its earnings after the close on Tuesday. And we are back now with James Marple from TD economics. We will turn to the next question. What sectors will benefit or suffer from the divergence in the US dollar versus the Canadian dollar? >> Certainly, anybody that selling things to the US, it becomes cheaper for Americans to buy those products with a strong US dollar and we tend to see a boost. The energy sector is one where that's a global market and they get paid in US dollars, often, so profits go up in the Canadian dollar is falling but manufacturers obviously a lot of, was in Ontario, especially in the auto sector, can benefit in terms of profitability when the loonie is lower. The sectors that it could be -4, retailers who are importing goods, those goods become more expensive. You can either pass those prices on to customers or take it in terms of margin, take lower margins. Food and groceries and those kinds of things tend to not like a lower loonie so those are sectors that are hurt. >> We will move to the next question. I think you touched on some of the risks out there. What impact of the US election have? >> Well, it's a great question and this is a tough one. It's difficult to try to speculate on the outcome but I think a couple of things are important. One, the deficits in the US are already a pretty high level, 6% of GDP and some of the policy proposals that are out there, there is the tax cuts and jobs act from 2017, it is set to expire in 2025 and if it is not extended, taxes will go up and if taxes… On the other hand, if they extend those tax cuts, the deficit will go up so that's definitely going to be an issue regardless of who the next president is but I would say that between the candidates, the more concerning elements are things on trade. The campaign promise to impose 10% tariffs on all global trading partners and a 60% tariffs on China, that could be quite impactful and obviously I think we would see that in terms of volatility in financial markets but tax cuts could be positive for the economy, not good for the deficit. That may be something that plays out in the bond market where we could see higher interest rates as a result of the deficit concerns. A bit of a boost potentially if there are tax cuts but I think that the thing on global trade is the one to watch and to look for depending on who the winner is and whether they can implement some of the things that they have campaigned on. >> James, thank you very much for joining us. >> You're welcome. >> Our thanks to James Marple, Senior economist with TD. As always, make sure you do your own research before making any investment decisions. stay tuned. On Tuesday, Brad Simpson, chief wealth strategist with TD Wealth will be taking your questions about market strategy. And a reminder that you can get a head start. Just email moneytalklive@td.com. That's all for our show today. Take care. [theme music[