James Orlando – 07/13/2022

[theme music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing. It's a new program broadcast daily on the broker. Every day, I will be joined by guests from across TD, many of whom you will only see here. We will take you through what is moving the market and answer questions about investing. Coming up on today show, we will be joined by TD Economics's James Orlando and get his reaction to the Bank of Canada supersized rate hike. In today's WebBroker education segment, we will see what tools WebBroker has to help you navigate this market volatility. Here's how you can get in touch with us. Email moneytalklive@td.com. You can fill out the viewer response box right here under the video player in Whataburger. Before we get our guest, let's get you an update on the market. We will start with the TSX Composite Index. Modestly to the downside, 18,608, down 70 points or a little more than 1/3 of a percent. Noticing some weakness across the financial space. Let's take a look at the action at many life. It seems a bit low, 2221, down about 1.3%. One of the shares that was making gains and one a lot of them in the early going in Toronto, I want to check in on Nutrien to see how it's bearing. Right now, pretty modest 1. 7%, 98 bucks and $0.61 per share. The S&P 500, the Americans got their latest read on inflation, this is on the minds of households ancentral bankers. And it was higher than expected, and with 9%. Aeven though the markets are down on this news, 3800 on the S&P 500, the broader read of the American market, a little less than half a percent down. Let's check out the tech heavy NASDAQ and NASDAQ 100. It down about 1/3 of a percent right now with that outsized and harder than expected inflation print. A bit of a different story, but it's hard to tell these days how the markets are going to take what we are living through. Bank of America, want to check in. It was under pressure earlier in the session. Right now at 30 bucks and $0.73, it's down, fairly modest, 2%. That's your market update. The Bank of Canada delivered a supersized rate hike up a full percentage point today as it attempts to rustle down soaring consumer costs. But what are the risks of the battle against inflation? It puts the Canadian economy into a recession. Joining us with his view is James Orlando, Senior economist at TD Economics. great to have you. Really want to dig into this question. We know we are in a rising rate environment but 100 basis points in one go? What are the risks here? >> The risks are substantial and that's what we are hearing so much talk of recession, not just in Canada but around the world. hiking interest rates by 1% is uncommon. The last time we had it happen was in 1998. If you think about what's happening right now in the way the Bank of Canada is describing everything, is that they are using this the front load, they are trying to get ahead of inflation, knowing the fact that they are really far behind inflation at the moment. So it's not just they are hiking 100 basis points, 1%, but how much further will they be hiking in the future and what does that mean for Canadians? >> Frontloading to achieve, the Gov. of the Bank of Canada said, to achieve that soft landing. Is this like trying to land a rocketship on the head of a pin? >> That's one of the analogies going around. It's very hard. If you look back at history, high inflationary time periods, rapidly rising interest rate time periods, history is littered with time periods where those things go up and we end up in recession. The issue we are facing right now is that everyone is hoping we get a soft landing and how difficult is that? Think about what inflation means for Canadians. It erodes purchasing power, so your money doesn't go as far. When something goes up in price for one thing, you have to adjust your spending and other things. What ends up happening for Canadians as we purchase less. If we purchase less, that means less economic growth. That feeds through to businesses and everyone. Rising interest rates means you are going to be paying more money on any loans you have. Whether it be a car payment, a HELOC, if you are resetting your mortgage on your house, all of this has a big impact and so the idea that we are going to go through this time. And get a soft landing, certainly possible but given the fact that it's been so hard for that to happen the past is a big problem for the Bank of Canada. They are, as you mentioned, forecasting a soft landing so they are not forecasting recession even with everything we are talking about right now. Whether or not that happens, we will find out, but it's going to be a tough task for the Bank of Canada to achieve that goal. >> After the decision, to Macklin giving his opening remarks before taking questions on the decision they made, he basically said he recognizes that it might sound counterintuitive. Canadian households, we know you are struggling with soaring costs, so what we are going to do is raise the cost of borrowing for you. He says that short-term pain is pretty key so things don't get out of control. How hard is that a sell to the Canadian public at this point which is dealing with rising prices across the board? >> I think everyone feeling it right now. Inflation is not just a few things. inflation started ramping up, we saw it's inenergy prices but now we are seeing it in everything. Inflation is broad, everywhere. With the Bank of Canada is doing is raising interest rates which is going to raise prices on what you are spending on your home, most likely. It is a problem but the thing is the way the Bank of Canada is phrasing it and the way we should all know it is that when you're trying to maintain stable prices,the Bank of Canada wants to avoid this from happening anymore. They want to stop inflation from going up because if they don't raise rates the way they are doing now and continue to raise rates, inflation is just going to get higher and higher. Anyone that lived through the 1970s, early 80s, when there was double-digit inflation. . . [video buffering] And anyone that lived through the 1970s, early 1980s, when you had double-digit inflation… > Of course, we don't have the latest inflation print. We have it's a bit back. We have the Americans coming in with their CPI print at 9.1%, hotter than expected. This whole idea is, have we seen peak inflation yet? It doesn't feel like that, not from the American experience. >> It shown that it's not done peeking, that's for sure. In Canada, we are expecting another inflationincrease. If you look at the American inflation,some people are commenting about poor measures of inflation, that has beenaccelerating for a while. It if you look at the fact that energy prices don't seem to be abating, gas prices haven't followedwhat has happened with international oil prices to the same extent. The other factor is that all of these good prices that are still increasing at a pretty high rate… [video buffering] That the man for that is causing inflation in that area, and one thing that you will probably note from history is even if you get a peek in goods inflation, service inflation peaks later. In Canada, if you look at what happened in the 70s and 80s, we had to peaks in goods inflation, but service inflation only peaked about a year after that. >> I imagine a happy dream for a central bank, you dream about the supply chain issues being resolved, conflict in Europe result, inflation comes down of its own accord and you don't have to punish us with high borrowing costs. That would put a smile on their face. If that doesn't happen, is all that is left, what we are seeing right now,is it just to crush demand? [video buffering] >> A small but open economy. We really do, there is a little bit of inflation that is demand driven from Canada. We know that our economy is in excess demand. But as the Bank of Canada mentioned today, the majority of the inflation relative to their forecast is due to external supply driven staff and we need that to turn. If that is in turn, the ability of the Bank of Canada to get inflation to come back to target, it's incredibly challenging. Because if you don't have that, most of our inflation right now is coming from abroad, who actually need that global slowdown, so it's not just energy, was happening in Russia and Ukraine, but it's also what's the coordination of central banks? The good mark is that we do see coordination. when the Fed raises interest rates, it affects the world. When Canada's bank does that, it doesn't have the same impact. we need to see a lot of things resolve in the world, bottlenecks, commodity price issues, but we do need to see a slowing of demand globally. We are getting out a little bit right now. US growth hasn't been very impressive over the last two quarters. Chinese demand has fallen given the COVID lockdowns they have had. That is playing through in commodity prices. We need to see that much more going forward to get inflation down to target. If you look with the Bank of Canada's inflation forecast is, it doesn't picture it coming back to target until 2024. As a long time to wait for inflation to come back down to what we call comfortable levels or come back down to target. >> What about the suggestion, and it seems to be coming from the bond market, that yes, are we going to be talking about rate cuts again? Is that too optimistic? >> I think that's exactly with the Bank of Canada is doing and the Federal Reserve as well. You're talking about the OAS yield curve for future interest rate hikes, anytime a central bank says they are going to raise rates to a level to restrict economic growth,that means they are going to get rates higher than they typically would in the future. Once they actually get that turn in inflation they are looking for, they can bring rates back down to what we call neutral levels, so a level that's not going to stoke or choke off demand in the economy. This is very normal. But what you are saying in the bond market is you are seeing that over the next two years, the Bank of Canada and Federal Reserve, they're gonna raise rates a lot and when they raise rates a lot, they are going to be higher than in the long term which is what wecall a yield curve inversion. that's a pretty big harbinger for recession. People are watching that. That's why the recession talks are happening a lot. They are expecting they will go too far, restrict economic growth, and then pulled back from that at some point. >> Great start to the conversation on a pretty big day for central bank news and inflation. We will get your questions about the economy for James Orlando from TD Economics in a moment. A reminder that you can get in touch with us in any time. Email moneytalklive@td.com. Or fill out theviewer response box under the video player here. Let's get back to the top stories in the world of business and how the markets are trading. higher operating costs at Delta Airlines resulted in a profit Ms. for this quarter while fuel costs are always a concern, Deltais also pointing to labour costs as pushing the bottom line. While travel demand has rebounded, airports around the world are struggling with meeting the demand. Delta says it's going to hold it's a flying flop capacity at June levels for the rest of the year. The CEO says it's important not to grow beyond the airlines means but did concede it's attempting to do so given theamount of trouble we are seeing. American airlines on deck to report next week. Royal LePage says it'sSignificantly reducing its outlook for the Canadian housing market although it still expects average prices to end the year higher than 2021. They are pointing to more aggressive than expected rate hikes from the Bank of Canada. The CEO says these higher rates and economic uncertainty are pushing potential homebuyers to the sidelines. Royal LePage is forecasting at higher rates than last year. Previously they were forecasting 15% gain nationally. Twitter filed a suit against Elon Musk after the Tesla CEO announced he is no longer interested in buyingSocial media platform for $44 billion. Twitter is asking the court to order Bosc to complete the deal. the letter made public last week, musk said Twitter made misleading representations about the number of spam accounts on the service. Twitter says the bot counts represent less than 5% of Twitter users. checking back on the main benchmarks, the TSX Composite Index and 44%, a modest quarter of a percent. the broader read of the American market, the S&P 500, on the back that harder than expected inflation print, down about of 1/3 of a percent right now at 3806. We're back now with James Orlando from TD Economics. We are taking your questions about the economy. It's a pretty big dayFor economic news. If your question coming and saying, "What will cause central banks to stop raising rates?" >> Well, it certainly seems like nothing stopping them now, that's for sure. One thing we've heard from central banks that inflation is the main prerogative for them right now. Really what they are looking for and what we are looking to see if we are a central bank, but your central banker hat on, you need to see inflation turn. The hope is that over the next few months, we will see some of the supply chain issues and commodity prices ease off. But if we don't see that turn, they will keep raising rates. Right now, central banks are just keeping pace with inflation. I think the only reason they are which in turn is if you see inflation turn, were you see such a deterioration in economic growth that the expectation is that we are going so far down in economic growth that eventually that would lead to a deterioration in demand to such an extent that inflation would start turning no matter what. But right now, they are showing no sign of abating. >> When it comes to monetary policy, we are told in the textbooks that it can take about 18 months. Once they start to make moves, either hiking now or cutting like in the face of the pandemic back in 2020, it takes time for it all to flow through the economy. Is there an argument to be made that yeah, 25 basis points to go in either direction, it takes time. What you are hitting people with 50, 75, 100, is the effect quicker? At the very least psychologically, for Canadians? >> Absolutely. It's not just the fact that its interest rates. The speed of interest rate hikes is huge. We are seeing that in real estate market significantly across Canada. The other thing we have to note is the fact that the rise in inflation has been so quick. You look back to even what we were seeing at the end of 2021, inflation wasn't nearly at the levels it is now. The fact that inflation is moving up so fast, is scenting the wallets of Canadians dramatically which means we have to adjust course quickly. The fact he of interest rates rising, that's going to adjust people's purchasing quickly and not to mention the fact that we have a big change in what we call, when you look at housing and how people have been using housing to be able to pay for other things, home renovation, if you see the price of housing come down, that changes your behaviour as well. All this is happening at the same time so it's reasonable to think that the economic impact is going to happen much faster. > Go on. >> The other thing going on right now is the ability for people to even see what's going on and react, you survey Canadians, you survey Americans, he asked them how they are feeling right now, they are feeling terrible when it comes their overall view of the economic outlook of the future. At that sort of feeling, that they are noticing inflation is such a big degree, these are top why new stories we are talking about, it is so in our psyches as Canadians right now and as a result, the actions we take as a result of these negative impacts and hits to our well-being are going to be more quick. So I'm going to change my spending pattern faster than I otherwise would if it was a slower burn, as we would call it. >> That's and they segue into the next your question about your outlook for the Canadian housing market. We have already seen a substantial pullback. We see Royal LePage taking down its price forecast for the year. How does this player for housing? >> So far, not very well. I would caution, we have already seen a pretty substantial peak to trough decline just in the last few months but this comes after massive gains in the Canadian housing market, so does this… Is this more of a resetting of house prices? Did they go too far too fast before and now they are more settling into realistic levels? What we are seeing right now is very significant. What we are thinking is there is more to come. Interest rates are rising faster than expected previously and we are seeing behaviour, so sales dropping, so much faster than what would've been expected a few months ago. So our view is that yes, house prices have declined but there is more to go. As peoples are going to banks to mortgages, they are starting to see how expensive mortgages are going to be and how much affordability has changed over the last while. >> How big of a dent could this put into the Canadian economy? As for so long there has been a concern about housing, finance, real estate, all a part of GDP, it was a little too outsized and making people uncomfortable and now things are turning. >> When we think about GDP as a whole, think about how much spending has gone towards housing, it's not just that you're buying a house and I always say when you're buying a house, the first thing you do is fill it with stuff, whether… [video buffering] Goods that aren't specifically the house are very much supported by a strong housing market. So if you start to see less housing activity, you see less demand for these other things. We are going to have negative prints for residential spending, so spending on a lot of these durable goods, these big-ticket items which had, honestly, they had gone up so significantly during the pandemic time period, so more of a resetting of those things as well, but it's definitely going to have an impact on the economy. The good news for Canada, people are always worried about whether housing is the barometer of the economy, I would argue that the biggest part of the economy is still the Canadian consumer. By far, the biggest part of the economy. You look at where employment rates are right now, where wage growth is right now, and we do believe that the Canadian consumer should be able to support the economy even though you're having this adjustment in residential investment and residential real estate bedding in general. >> When people talk about the challenges we are facing in the housing market, the hope across any asset class for the economy is the soft landing. But then you have people saying just wait until some of these people need to renew. There is a stress test to this country when you go to get that mortgages you have to prove you can actually pay the higher rate. In the hand, is that going to be one of the saviours for Canadians? >> We are regulations around how much that people can take on. It's huge. When we talk about… This goes into the idea of when we talk about recession. A lot of people talk about recession haphazardly. But what really matters is the depth and duration of it. You go back to past really negative time periods of financial stress, like the global financial crisis in 2008, the big issue there was in high household leverage only but the fact of the people that had leverage themselves so much didn't get stressed. It's not can you handle2% higher mortgage rates. That's huge! the other factor is this one thing that we consider is the stability of the banking system. So one thing that really impacted the US was the fragilityof the banking system back then. > Make sure you do your own research before making decisions about where to put your money in this market. We will get back to your questions for James Orlando on the economy in a moment. You can get in touch with us anytime. Email moneytalklive@td.com. Let's get to today's educational segment. Volatile market conditions can make it hard for investors as asset prices change quickly. WebBroker has tools that can help you navigate all this volatility. Joining us is Nugwa Haruna, Senior client education instructor at TD Direct Investing. Always great to see you. Let's jump in. Walk us through it all. >> Hi, Greg. Yeah, during market uncertainty and volatility as we are experiencing now, one typical features investors may find is performance of asset prices from day-to-day, they also might find there's going to be larger than usual daily swings in asset prices. So as an investor is potentially looking to get into the market, it can be a little intimidating and so investors who are still seeking to get into the markets during this time may be considering purchasing a specific security, they could consider using different trade types. One of the trade types we will talk about is… To invest in that security, or if you are an investor looking to sell,You could potentially use the limit order to set a floor or minimum in the amount you are willing to accept for that specific security. So once in WebBroker, an investor is able to place a limit order by going to the trading tab and once there, under the buy sell column, and investors able to click on the ability to buy or sell ETFs, we are going to utilize an index fund today, and index ETF. So let's say I want to buy the specific security and I'm looking to buy 100 of the specific security. Once again, we are dealing with a volatile market. That investors able to use a limit order. So underpriced type, I would click on limit and what that allows me to do is to set a specific price I'm willing to pay for the security. So currently, before I do that, I want to go look at see how much our buyers are willing to pay for the security so I can see off the bat that other buyers were bidding at $28. 66, and I can see that other sellers are asking for $20.67. As a buyer, I may be looking to pay less than what they are asking us why might be looking for $25. This is the advantage of using limit order. I set the price I'm willing to pay. This then also lets me get in line because I've noticed that other buyers were willing to pay slightly higher than I am. So I might be able to wait in line for a day, which means waiting in line until 4 PM or I can set my timeframe to a specific time, or I can use the tool cancel which lets me wait in line as long as I want, which with Canadian securities it's 90 days. this is where the risk comes into play. I might be waiting in line for 90 calendar days and there may not be any sellers who are willing to accept $25 for my order. So while I am able to set the price I'm willing to pay, there is also the risk that the price may not be acceptable to another seller and I may never be able to get that position. > Interesting stuff. What if the investor doesn't have the luxury of time and is looking to execute on something quickly? >> For an investor looking to get into the market during market volatility, they are able to utilize another trade type which is a market order. I will put in the same security that I am looking to buy. In this instance, an investor wants to get a quantity, I'm able to use a price type called a market order. The market order let me get into the market as soon as possible. The advantage of this is my order is executed right away as long as the markets are open. They are open from 930 to 4 PM Eastern time. Now, this means that since I am willing to get into the market isn't possible, I will be looking to pay whatever the best price is and when you are dealing with volatile markets, that price may not be a price that I was happy to pay, so it means that I could end up paying… My order may end up being filled at a price that may be a little too expensive for me or I'm selling something at a price much lower than what I was looking for. That's the risk of using the market order. While my order goes to right away, the risk is it may end up being billed at a price that I was not willing to pay. So once again, there is something for everyone. If you want to dictate the price, you can use a limit order. If you were wanting to prioritize getting into markets right away, you can use a market order. >> Interesting as always. Thanks. >> Thank you. >> Nugwa Haruna, Senior client education instructor at TD Direct Investing. Check out the learning centre in WebBroker for even more educational videos, live, interactive master classes and upcoming webinars. . . Including what is an NFT, what it is and what it isn't. I think I might watch that one as well, see if I can figure it out. Going back to your questions for James Orlando on the economy in a moment. A reminder of how I can get in 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. send us your question. There are two ways you can get in touch with us. Emailmoneytalklive@td.com or use the question box right below the screen here on WebBroker. writing your question and hit send. We will see if one of our guests can get you the answer here on MoneyTalk Live. We are back now with James Orlando taking your questions about the economy. Here's one coming and fresh off the platform concerning what we've been talking about. The viewer asking was the percentage chance of a soft landing for the Canadian economy given this recent 1% rise by the BOC? I don't know if you're into playing the odds, but what do you think the odds are? >> So the way we are thinking about this, we have a recent forecast, we think Rose is going to decelerate below 1% just above zero. That is where we are crossing based on the forecast for interest rates we have. now, the issue is if inflation keeps coming up and they raise rates higher than that. We came out with a recession scenario which was published last week. It there we have growth decelerating into negative, rising unemployment and… Recession is the way this one looks. That would happen early 2023. If you look at professional forecasters mostly in the US, most are in forecasting recession. those that are looking for later 2023, if you look at the Wall Street Journal, their pole was 44% of forecasters,0 almost a coin flip but whether or not we go into recession. If you look at history, history is not very favourable. I mentioned earlier that rising inflation, high inflation,you look at what happened in Canada from 75 to 82, there were three recessions which happened in that time. With high inflation. Look at pass time periods of rising interest rates, almost all resulted in recession. One mentioned by the Federal Reserve is in the 1990s. Of rising interest rates where the consumer was so strong in that time period that they were able to withstand the higher interest rates and engineer that soft landing. So there are instances when it happens. Betting odds, I'm not sure what the betting odds are telling you right now. Markets… We are heading a bear market, stress indicators are moving higher, the inversion of the yield curve, all of these are pointing to the higher probability of recession so we are focusing more and more on that coin flip narrative of probability of recession. >> Obviously I know you work in economics, but you mention the markets and of course we always think of the markets as a forward-looking tool. In times of volatility like this, are the markets telling us anything about where we are heading? >> I think markets are pricing greater odds of things getting worse, that's for sure. If you look at how far equities have fallen in the United States and Canada, the idea going into a bear market, going towards a 20% decline is one thing, going into recession levels of equity market declines during the pandemic, peak to trough the pandemic decline was about 33%. If we look at the global financial market, there 50% decline. We are not at that level. we are not forecasting of the floors going to follow. If things get worse,that's what people kind of expect between 30 and 50% declines. We are not looking at that right now. Most people calling for recession are saying if we do go to recession, it's probably going to be quite shallow and not as meaningful or impactful as people are may be fearing right now. Whether or not that plays out is anyone's guess but if you look at some of the factors of whether things get much worse from here, there are a few factors, you mention one, there is regulations right now the prevent declines in housing which usually happen with rising interest rates and magnify the economic slowdown. If you look at the amount of pent up savings that Canadians and Americans have saved up over the past two years, that is a cushion. If you look at the strength of the labour market now, a lot of the areas that usually lead as the economy starts slowing down, those areas didn't actually build up their labour forces as much, so a lot of the retail, trade, even part-time temporary workers, that build up in labour force and happen this time around. A lot of them were higher paid tech jobs, warehousing, all of those industries that are little more resilient economic slowdowns. King dollar is back for sure, the US dollar we are referring to. A lot of this is based on the fact that there are a few different factors going on. One is the US economy is relatively more insulated to some of the factors that are problematic right now. Look at the fact that the United States is an energy exporter right now. tHEY ARE TAKING ADVANTAGE of a lot of the commodity price increases. It a lot of the trading partners around the world, you look at Japan, Europe, the UK, and you think… If you think the energy problem that we are seeing, energy inflation we are seeing where natural gas prices are up almost 2 times versus where they were last year, in Europe, they are up four times that amount, the impact on Europeans, people in the UK, people living in areas where they are dependent on commodities, the economic the client is more dramatic. When you talk about recession, the US dollars the safe haven of the world. So when there is risk of recession, there is demand for US dollar as a safe haven that causes the US dollar to appreciate. Canada is not considered a safe haven currency. We are more tied to commodity prices. But when you compare Canada to the west, USED TO BE A SITUATION WHERE cANADA, AS ENERGY PRICES WENT UP, we would have more of an advantage than the US. But now the US has, through FRACKING AND HORIZONTAL DRILLING, isn't there is much. The other thing is. . . How will Canada is doing and how we are levered to some of these commodity prices. If we look at the Canadian trade -weighted dollar, the Canadian dollar is doing tremendously well. The way I'm thinking about the Canada UST Cross is that when you actually need to figure out where that's going, you look at the relative momentum. Canada had been outperforming for a while and economic growth terms, the US having negative print for Q1. Now we are looking to see the US improve over the rest of this year where is the Canadian economy is probably going to underperform the US. That's something we are considering favouring the US dollar. As things might turn in the future, there is a gravitational pull to that a decent mark for the Canadian dollar where we really should be when everything comes down. How long it takes to get there, that's the real question. >> That's the question. When I think when to calm down? All this volatility is a lot to talk about. We'll get back to questions for James Orlando, we are talking about the economy. Make sure you do your own research before making investment decisions. A reminder that you can get in touch with us at any time. Give 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. Send us an email any time: at moneytalklive@td.com. Or use the question box right below the screen here on WebBroker. Just writing your question and hit send. We will see if one of our guests can get you the answer right here at MoneyTalk Live. Red-hot inflation report in the United States rippling through the markets today. TD Securities has a rush call on what it could mean for commodity prices. >> TD Securities says that the red-hot US inflation numbers which we got today is going to add more downside pressures to precious metals because it's going to need to stay extremely aggressive at a time when recession fears are increasing. This report comes when we are seeing some of the deepest outflows and broad commodity decreases since COVID prices. TDSI pointed out that many money managers are rushing for the exits which is adding to the slump in their demand signals. They also point out that the top 15 commodities by assets under management, the outflows have been about $1 billion in the first week of July alone. TDSI also expects further downside pressure on precious metals. Specifically, they expect downside for the bull market especially given the significant balances acquired during the pandemic. >> What is TD Securities saying about some of the other base metals, aluminum or zinc? >> They are bearish on copper because copper has underperformed in the global macro headwinds. For energy intensive metals like zinc and aluminum, they have actually outperformed as European energy prices have continued to search. However, they are seeing a breakdown in the commodity demand signals because… Which had actually broken down much quicker than expected. They are saying the precious metal prices will be turning back to normal or average levels in the next while. They mentioned that metal prices are strongly correlated with broad risk assets which have kept prices higher. >> Interesting as always. Thanks. >>my pleasure. >> We will look at the TSX Composite Index. 18,617, talking about a pullback of about 61 points or 1/3 of a percent. Let's take a look at Air Canada and see how the airlines are faring on the side of the border. A bit of pressure here, $16.32 a share, down a little bit more than 2 1/2% on Air Canada. Earlier we talked about Delta coming out. Even though we are seeing increase for travel demand, they are seeing higher costs in a number of areas and not just on the fuel side. Lundin Mining was showing strength earlier in the session. It was in positive territory and now it's down about 1.3%. the S&P 500 it down on about 1/5 of a percent as investors digest the hotter than anticipated inflation print that Anthony was talking about out of the United States and what it means for policy going forward in the country. The NASDAQ, let's check in on the tech heavy index, down a little bit more than… Twitter looking for its day in court with Elon Musk saying last weekend in the letter, the regulatory filing, that he was dropping his bid for the social media company. Also some other news on the name in terms of investors taking some interest. Up about 8%, 3674 on Twitter. We are back now with James Orlando. We are taking questions on the economy. this one coming in and wondering what does the US Federal Reserve do following the Bank of Canada's supersized tight? Will the Fed follow the BOC with a full 1% increase? >> It seems like every central bank is trying to catch up to the previous ones. So if you're a few weeks later, you might want to raise rates even more. We saw the Federal Reserve increase rates and do their own supersized rate hike in the last meeting. They have a meeting upcoming in the next couple of weeks. With today's inflation, I think that's what we should focus on. Today's inflation being so high in the United States, they are looking at that and saying, we need to do something about this. Yes, they are seeing a little bit of improvement in the core prices in a year-over-year basis, but the fact that inflation is so high definitely raises the odds of a 1% hike. It's not in our forecast right now, but we saw yields changed tremendously this morning. As the inflation print came out, yields rises increasing the probability of interest rate hikes. >> North of 9%. we are starting to get used to these elevated numbers. When you think about the sweet spot of 2%, it makes me think of the end of 1981. It's incredible when you think about the magnitude. Raiders of the Lost Ark was the top grossing movie of 1981. I think back to the blissful ignorance of being a kid. I realize the world was facing this precious back then. I do realize it now though. >> When we are doing all of our analysis, I was looking back to 88, 89, Armageddon was one of the big movies of that summer. Titanic unfortunately was in December of that year two. But we keep going further and further back in time, we see episodes where we are dealing with issues like this right now. And it really does point to the fact that this is an uncommon situation we find ourselves in where inflation is so high and it results in atypical decision from central banks. He mentioned a lot of the people talking about this were very young at that time. It's a whole new way… It's something we haven't dealt with in years. For years, central banks would talk about how they prefer to fight inflation rather than deflation because you know the tools to use. I think sometimes we forget how painful it can be to use some of these tools and the impact it can have because of rising interest and inflation does impact regular, real people that are facing these rising costs. >> At the heart, when we talk about inflating energy prices, we have a you are asking about OPEC making the guests the demand will outstrip supply in 2023. So why are we seeing it these moves in oil? Dasha goes to the whole broad story we are telling where slowing economic growth should lead to slowing demand. Imbalances that we are seeing right now, yes, if you have OPEC saying they think demand is going to outpace supply, that should be higher for oil prices. That's logical, economics 101. I think investors right now, what they are feeling is this slowing growth, we see it in the forecast of the United States, we see it for China, for the Globe right now. That global growth slowdown, we are seeing it in metals, things like copper, Dr. Copper they call it because of its ability to forecast global growth, when you have slowing global growth, the slowing oil will be a result. >> We are on the set of questions but I want to get this one and because this is a question that I have on my mind often, the wealth effect. Declining home prices, we are seeing equity portfolios, bonds being lower, it's hard to find a place where someone thinks of their value, like how much money they have not declining this year. What's that due to the wealth effect? > It hits the will affect tremendous lead. We know in Canada with rising house prices, the ability for people to take out money and spend money on renovations, spend it on whatever they want to, use the equity market gains, so not even the idea that you can pull money out and spend it but just the idea that you if you are assets and wealth is going up, you are feeling good so you will spend differently. The reverse happens. Your ability to take out money has lessened. Your feelings about the future are negatively impacted. When Canadians are feeling bad, they automatically start changing their spending patterns. That automatically starts impacting economic growth. >> Thanks for coming on the program. >> Thank you. >>James Orlando, senior economist at TD Economics. Satan on Friday, Brad Simpson, chief wealth strategist at TD wealth will be on the program discussing asset allocation and the markets. A reminder, of course, you have to wait for us to begin the show at noon Eastern time every day. You can get your questions in ahead of time by sending those emails to moneytalklive@td.com. That's all the time we have on the show today at MoneyTalk Live. See you next time. [theme music] [theme music]