James Orlando

[music] Hello I'm Greg Bonnell and welcome to MoneyTalk Live, brought to you by TD Direct Investing. every will be joined by guests were cross TD, many of whom you only see here. We we'll take you through with moving markets and answer your questions about investing. Coming up on today show, we will be joined by James Orlando from TD Economics to get his reaction on the bank of Canada's smaller than expected rate hike. And in today's WebBroker education segment, Caitlin Cormier will show us how you can find out info about preferred shares on the platform. And so here's how you get in touch us. Just email moneytalklive@td.com or Phil at that viewer response box under the video player right here on WebBroker. Forget all that, let's get to an update on the markets. we will start right here at home, the TSX Composite Index, one of those rare days when the central bank announcement, at least in this country appears to have moved, 1.6% 19,000 and more, of course afterward we heard from the Bank of Canada today some investors are changing her mind about where we might be in this rate hiking cycle. More on that in just a couple minutes time. Let's check in on Shaw Communications:with the Rogers takeover of shock, the market seems to be positive. Seven bucks and change. Lundin Mining up as well. MegaCap tech earnings after the close yesterday, that failed to impress the street. You still of a broader index of the border and positive territory. A little less than half a percent, 17 points to the upside. The NASDAQ may be a bit of a different story. Let's check on that. You did have that disappointment with the parent company of Google Alphabet and also Microsoft, the first blush, Microsoft looked good on the top and bottom, some concerns about the softening revenue in the cloud space. That has Microsoft down to the tune of 5 1/2%. And that's your market update. The Bank of Canada raising rates again but it was a smaller hikes and many were anticipating. Joining us now with his reaction, James Orlando, senior economics at TD Economics. Great to have you here on a day like today. Let's just start, is this a pivot or a pivot to… How do we read the smaller than expected hike? >> Exactly. We need to focus on what's happening with inflation. Nothing has really changed to improve the inflation story since last time. But will be sought today was the bank is now going from what's been happening with inflation, because inflation is very much a lagging data point, to what the future is looking like from the Canadian economy. It's looking for very weak, stagnant growth from now right up until the end of 2024. So that's a look very positive. So as a result, the Bank of Canada is moving from this state of "we need to keep hiking rates until things turned to we know interest rates work with the lag and we might be nearing the end of this hiking cycle." >> Nearing the end, that does suggest there are more hikes to come. But already one that was less than expected. What you think we get out of this bank in the next couple of months? and if we are closer to the end, where is the end? >> We started this year, we've moved up to 375. The bank will get up to maybe 4. 5% in the next meeting. We think that's pretty much going to be the peak level and policy rate. We think the impact of past rate hikes, heading to that level of interest rates, we've seen the real estate sector, we are starting to see it with the consumer right now. Remember, the consumer is the most important part of the Canadian economy. We are starting to see consumer confidence weighing and consumer spending starting to ease off. When we have that, you know that is going to result in weak demand going forward. It's going to cause below trend growth and that really is the precursor that we need to get inflation to come back down. So the banks going from what's been happening to what is going to happen. >> They don't throw the entire economy over a cliff into a deep recession. We have had conversations, I've had conversations with your colleagues. Expect a harder and harder mission to accomplish. Maybe this still seems to have some… >> They answer the question saying "we think that GDP growth is going to get pretty close to zero. So in positive territory. It could slip into negative, whether that's recessionary or not, we don't know. The idea of going to a soft landing is just that. We go into this period of stagnation where demand is lessened. It's able to catch up with some of the supply that we have right now. The high-level supply And then, you are hoping that inflation comes down. That's the story they are going with. How long they can keep doing that with higher and higher interest rates? I think they're getting to that point where they realize that if they keep going to 5%, can they actually achieve that soft landing? I think they are starting to doubt that. They don't want the economy to go into a recession. Then I want to have severe contraction. If you keep pushing on the rates, eventually you will get to a point where they will be getting to that point. I think that's where you see rates slowing down. >> Now, you have a smaller than expected rate hike. Is it too much for some market participants? I don't mind but perhaps extrapolating what might happen next with the US Federal Reserve and other central banks as they say they are sort of in the same inflationary boat together even though we do have different competence. > The Bank of Canada can influence the Federal Reserve but usually we look at it as the other way around. For some guidance. Usually it does, the opposite direction. But, one thing to note is that just last week, we've had some fed members talk about that they are going to debate at the next meeting when policy rates will happen. So they are talking about it. Most central banks when they get to what we call "restrictive levels of policy", they know they are slowing demand and growth. They know they're going to cause this type market to loosen a little. So they are realizing that "okay, 4% interest rates, maybe this is the end point for us." So it's not just the Bank of Canada. The Federal Reserve members are saying they will have this discussion in the next meeting. So whether or not they slow down basic basis rate hikes as well, I think Canada opens the door for the Fed but they will do what they think is right and are talking about doing the exact same thing that the Bank of Canada did today. >> Imagine around the table, the Fed, the Bank of Canada, that legitimacy and if they sort of put the pause button to little early and they cannot tamp down on inflation expectations and that would be just as big of an error as one would imagine on the other side of going too far. >> Yes. History tells us that that something that has happened before. We sought in the 1970s and 80s where interest rates rose and slow demand. You have inflation coming back down from double digits to 5%. The central banks decide to pull off the rate hiking cycle, they start to ease policy and then what you get, you have another level of inflation causing interest rates to go even higher than they did in the previous time. . So you don't want that. Want to make sure your raise interest rates and you lock in those higher interest rates. You convince people that their remaining high for quite a bit of time here and then you actually cause demand and inflation to slow. You get that inflation down. Once you are at that level, you can think about easing policy. That is more of a late 2023 story. >> That it would be slow and gradual… But then I think of the other side of this. It was conventional wisdom and I bought into it as well. When it comes time to raise hikes, that's what central banks do. How much faith can we put on the other end of it? How those moves might look? > Generally it is pretty gradual because it is a shock to people in a shock to businesses. So you want to be a little bit more perspective rather prescriptive when you do that sort of thing and make sure things will fall off a cliff right away. But what we do know is even the past, when central banks have been easy with respect to raising rates, they've been very quick to cover this. So they always say you take the escalator up and you take the elevator down when it comes to interest rates. We think that is probably what can happen here. When the economy turns, it turns fast. I think central banks need to react to that really quickly. We are just hoping that inflation, by that time, the economy is acting very strongly that inflation is down and central banks can be confident to cut interest rates and not do what you just mentioned before where they cut rates to early enough to raise them again. >> Outstanding stuff. A big day and want to get your questions with the economy for James Orlando just moments time. A reminder of course that you can get in touch with us anytime, just email MoneyTalkLive@td.com or fellow that your response box right under the video player here on WebBroker. Right now, let's get you updated and some of the top stories in the world of business. Let's take a look have marked her markets are trading. Shares of CN Rail are in the spotlight today, that is the company raises its earnings outlook after beating expectations and plays quarter. CN Rail says it continues to see strong demand in its North American grain shipping operations and the railway has been passing on higher costs to its customers through increased freight rates. Crescent Point Energy is announcing a special dividend for shareholders on the back of its latest earnings report. The company says net earnings from operations came in at $0.43 per share, that's up nearly 80% compared to a year ago. The special dividend of 3 1/2 cents per share will be paid on November 14 to shareholders of record as of November 4. Signs of weakness in the digital advertising market are weighing on the parent company Google. Rather the parent company of Google. Alphabet missed analyst estimates on the top and bottom lines in the latest quarter. Slowing significantly their growth rates compared to last year. Investors will be carefully watching earnings release from other MegaCap tech stocks such as Meta ready calming signs of continued advertising weakness across the space. Down a lot more than seconds 6 1/2%. Let's check on the main benchmark indices. TSX competence index, will call that a jump of more than 1/2%. South of the border, the S&P 500, some of those MegaCap text names and the broader index in positive territory. Will call that 17 points to the upside, almost half a percent. We are back in with James Orlando, taking your questions about the economy so let's get to them. First one coming in: should we be concerned with the help of the housing market given all these rate hikes? >> You see what's happening with housing market right now. Activity right now in Canada is about half of what it was before… Continued causing market rates to be elevated. That changes the affordability calculation. That is going to, when you have lower affordability, that means you have two ways of doing it. Either interest rates will come down which are not expecting to happen in a little while at work customer rates will come down we think those prices will keep coming down. With the Bank of Canada is doing right now, they are trying to limit demand and that demand immediately will impact obviously interest rates. Housing is the obvious, obvious area of the economy that is being hit first. It is the leader in the economy right now. We are expecting a little to the consumer but what we are seeing going forward as there is more to come and we expect a weakening of the housing market. >> Take a look at some of the pundits weighing on the housing markets and what's happening right now. I guess in terms of, because Canada has such a run-up in home prices before the pandemic. And then skyrocketing again during the pandemic. Getting past the early months. There could be this idea of a healthy correction of the housing market. Or it civilly is what it is. > It's definitely a recalibration to, the change in interest rates. When we think about what would happen, interest rates go to zero essentially all around the world. The expectation and was communicated by central banks is that interest rates will stay low for a long period of time. People put that into their calculation, their affordability calculation on what time of what type of home values. That causes home values to increase significant. We all know home prices all across Canada increased. Now, when you think about going from zero rates to 4% policy rates and looking at this will probably be a new normal for the next year, we are probably going to not get back down to zero, even if we do get some weakening demand in the Canadian economy, what that means is that one has to do the calculations different lay. That changes with the value of housing is in Canada. And so, you need that recalibration to the interest rate market right now. It's a shock. Granted, it's absolutely a shock. You realize you were coming in at the 12% mortgage rate and now you're coming in at four, five. That changes the calculus and completely. But he changes home prices which is exactly why I think they will come down. > Before we get off this topic, because I love talking about housing, you mentioned that people might take a look at the housing market and maybe they haven't been able to get in the market. Thinking prices are coming down and there is their chance. But you mentioned when a rising rate environment, that civilly just means your mortgage rate will be higher. So we are not getting the affordability that people think they might be getting from a drop in house prices. >> Absolutely. Yes house prices have come down. With this mortgage rate adjustment is massive. It's massive. And so, I think what happens is mortgage rates arrives first, house prices fall second and so we are still feeling the effects of those past mortgage rates increases. One thing to consider is that one thing to consider is economic growth is likely to decelerate and we will go into this period of stagnation for the next 1 to 2 years. What does that mean for people being able to afford their current homes are now? Does that cause listings to come up even more? We really haven't seen a disorderly market drop. You would think given the drop in housing markets, you have some sort of four cents. You don't have that and the reason why is the labour market is so strong. Incomes are still growing. They are able to afford that house. The change, I think you were trying to avoid in Canada is a significant recession that leads to a loss of income that would cause housing to go to even more because listings… That's the sort of thing we are worried about. Right now, it's been very, very quarterly. It's very shocking. Given what's happening with the real estate market. >> I could talk housing all day but we could get onto some more questions. Great insight there from James on that one. Let's talk about the business community. Do you have any insight into how businesses are feeling about the economy? >> The Bank of Canada had an interesting report in its back pocket and it decided to have its meeting. They recently had the business Outlook survey which is the Bank of Canada survey where they survey a bunch of businesses and they ask "how are you feeling?" The good news about that is that they are talking about because demand is expected to wane, they are also expecting inflation to come down as well. So this sort of exactly what the Bank of Canada is talking about. You saw some of the data points in their monetary policy report today. They are referencing how businesses are feeling. These are businesses that are on the ground. They are seeing their order books. They see future sales coming through. They are saying "this is likely going to start coming down pretty significantly. Starting right now, through the rest of 2022 into 2023. So I think that's what this is now. A complete weakening of demand. This is paying through a rather pain through the Bank of Canada and feeding the growth outlook. >> It's complicate it to because we worry about this economy for quite a long time. People followed closely by business investment right? Business was wanting to grow their operation. This is been a crazy few years in terms of the fact that the cost of borrowing was down significantly and you think perhaps that would spur businesses in traditional times to invest. We see any kind of investment bump during that period? Or was it just that volatile? > I think the overriding narrative in Canada is that it's been very disappointing. We haven't had, especially when you compare to what's happening south of the border, we have not had this is investments keep up with what we thought was going to be, given interest rates. We have seen a little bit of pickup recently with the energy and commodity pricing increases that we've seen. Not to mention some of the big long-term production that we are having for example, LNG pipelines. There's a big amount of investment required in building structures and factories, buying machinery, that investment is starting to pick up a little bit but really it's not an interest-rate thing. It's more "what is the price of my product doing? They're seeing an increase. That's the real incentive for businesses. But if you look without that, we have not seen businesses pick up the way we would've thought, given the growth of Canada and given where interest rates were. >> Fascinating stuff. Let's get to another question from the platform, this one about our currency. Where do you see the loonie going question on> We see the loonie depreciating. The story over the last a while has been, versus every currency except the US dollar, the Canadian dollar has done well. In Europe with their energy crisis, same thing in the UK, look what's happening in Japan at the back of Japan, refusing to raise interest rates, refusing to adjust policy. They have not kept up on interest-rate differentials. Versus most of our peers, the Canadian dollar is done well. But there has been a flight into US dollars. In the US dollar flight is when there are times of trouble, what do investors do? They sell risky assets and they buy safe assets. The safest asset to this day, right now, US treasuries. You have to buy US dollars to do that. Selling Canadian dollars. So we've seen the Canadian dollar depreciating we think there is more down the road. We think that back to the Bank of Canada, they are slowing their basis rate hikes. Proving they won't keep up with what the Federal Reserve is doing and that is going to cause interest rate differentials to consistently widening Canada. So if you are an investor internationally, you are looking at Canadian bond yields, do you want invest in Canadian bonds or US bonds? US bonds are giving much higher yield. The incentive is clear to go there. Versus Canadian bonds. That's the less demand for Canadian dollars and less demand for, essentially it means the currency should continue depreciating. >> All right. As always at home make sure you do your own research before making investment decisions. We will get back your quest is with James Orlando on the economy and just moments time. A reminder that you get in touch with us any time by emailing moneytalklive@td.com. And now our education segment for the day. Preferred shares are one asset class that investors may consider looking at during times of market volatility and WebBroker as tools which can help your research in this space. Joining us now for Maurice Caitlin Cormier, Client Education Instructor at TD Direct Investing. Caitlin walk us through preferred shares work. > For sure guys. Just a bit of what our preferred shares that we talk about. Common shares quite often. We don't talk about preferred shares quite as mucEssentially when a company is raising capital, they can raise bonds or capital by issued shares. So one way of becoming an owner of the company or helping them find would be going through common shares or preferred shares. Preferred shares you have ownership in the underlying corporations. When you buy preferred shares similar to a common share you are still an owner of that underlying company. But they are also a little bit hybrid because they have some features that are similar with fixed income Securities. So when we talk about that, were talking about the dividends. The benefit of owning a preferred share is there is a consistent dividend that's being paid with that security. It also has a better, rather a more preferred kind of, higher asset if the company were to go into liquidation. The preferred shares are behind bondholders but they are actually ahead of common shareholders. As far as dividend payments go, those preferred shareholders are always going to get there dividends before common shareholders do. So there are some benefits. A little bit of a hybrid security. For those looking for fixed income, maybe just a little bit of that access to the market as well. Some of that ownership and underlying corporations. It's kind of an interesting way to diversify your portfolio that way. >> Great stuff for people who were not up on the space. So how can we find different preferred shares using this platform? >> For sure. We will jump into the platform under the screeners tool usually uses for research for those common shares. But today we are actually going to use it a little differently. We will click on research and go under the screeners tab. Once we get there, were going to hop in and actually create our own screen. We will squeak click on the screening button. I will scroll down just a tiny bit and go ahead and clear down all the criteria selected. I will select some of my own. So I will click on "more criteria " and I want if I do share type. Make sure I select of course "preferred shares" as the shared type. I will also add the criteria at dividend yield because of course if I'm looking at preferred shares, chances are dividends are important to me. Now, I don't have to put the amount of the dividend. If there is a particular percentage of looking to have, you can actually put in what you would like. But for now, I will just have it there. So it's a list of criteria. I'm also going to go in just to narrow down some of the results. I'm going to go into the sector and industry as well. I can actually go in and choose. I'm just in a clear all and she specifically banks, I'm going to choose utilities and consumer defensive and close out there. So, now we only have oh, I will also choose "Canada". So we are down to 111 factors. So rather matches. As we go down I can see all these preferred shares that meet the criteria I put in so I can see the company name, we've got the ticker symbol for the preferred shares. You can see the. pr which indicates their preferred shares. Indicating specifically which one they are. You're the industry listed, the dividend yield listed as well as the share type of course. I can also rearrange them, again, if I want to see the lowest to highest dividend yield or I want to switch out sector and industry and sell the banks first, for example. I can go in and look more at the overview about this company but the other thing to keep in line with preferred shares is if you want to know more, because there's a lot of different features with preferred shares, for example, some of them are cumulative : there are different features of preferred shares. If you want to know specifically what the ins and outs of the preferred share are, you're just going to search for the perspectives are on the company website with that symbol. So the rypyz like that ticker symbol and that they can get the ins and outs of what the low-down is on that particular preferred share. >> All right. Caitlin Cormier with the low-down. Thank you so much as always. >> Thanks so much. >> Caitlin Cormier, Client Education Instructor at TD Direct Investing. Picture to check out the WebBroker Learning Center for live interactive master classes and some upcoming webinars. Before we get back to your questions with the economy, a reminder of how you get in touch with us. Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live. We are back now as James Orlando, taking your questions about the economy. This one just coming into the past couple of minutes. >> I think this is probably the biggest fear of central banks right now is that they have done all this work to raise rates and it doesn't have an impact on inflation. The one thing that we know about inflation, this might sound a little bit obscure is that the longer inflation remains high, that gets into people's psyches. That gets into people's businesses. People start saying "my cost of living is higher". They go to their boss and ask for higher wages. In a tight labour market, they might agree to that. They will say "my lunch now… I have to give passes on to my consumers. That feeds this cycle, this inflation cycle. So the idea that if inflation doesn't come down, it raises what we call inflation expectations. That is that psyche thing I'm referring to. That really makes it hard for the central bank to bring that down. So I think what we do in that situation, the banks would have to raise rates even more. Which means tightening the screws even more on the Canadian economy. Which would cause even more of an economic deceleration and potentially an economic contraction. So we need inflation to come down. We need these interest rate hikes to work because this is really the way that we can achieve at least an economic slowdown that is not too detrimental to Canadians and Canadian businesses. >> A different scenario that is not been spoken about lately, thinking we'll have some sort of recessionary economic pullback, stagflation. In an area where nothing is happening with the economy, inflation will come down… We put that fear behind us. I don't use the term lightly. >> I think when people are talking about stagflation, they're talking about significant rising and employment rate. Massive amounts of job loss happening alongside high inflation. Right now, everything we are seeing is, yes the employment rate is gonna rise such that the economy balances itself out. But just remember. We are in a situation right now we have historically low unemployment rates Canada. Historically tight labour markets. We need a little of that tightness to loosen for us to be able to get inflation back down to avoid that wage price spiral we are referring to. Stagflation is, if things go badly and you start seeing permanent layoffs, massive job losses, the unemployment rate rise significantly, I think that's sort of the downside scenario that isn't the baseline of our sales or Bank of Canada. What if things don't go right, that could be the path we go down. >> Almost made me glad I'm not a central banker right now as I do this show. Next question of the platform: what should we be looking for for the expected fall fiscal update question are used to cover this all the time. Every fall use to get an update from the federal government about the state of things. And the budget. >> Yes I think the federal government is gonna take some cues from what's happening internationally. We saw what happened in the UK with respect to some potential tax cuts. They do to pull back, resulting in leadership changes. We saw in the UK, Bond yields jumping as a result of the government potentially spending more money than they are increased in their debt. The federal government in Canada probably could learn a lesson from what's happening internationally. So as a result, we have seen a little bit of releases, GST increases to help lower income Canadians. But we are not expecting any big announcements. Because we know that right now is not the time that the federal government will increase spending when we actually need the entire economy to ease their spending a little bit right now. When we said there's too much demand, there's too much froth in the Canadian economy, that means there's too much money and spending going on. So if the federal government comes out and says "we will spend more money", that just adds to the end of the inflationary pressures. They can come in and say that. We are not expecting any groundbreaking announcements when this announcement comes out. >> Can they help the people at most risk for rising prices strategically? Don't give someone a bit of stimulus and say "let's do that $1000 hotel tonight. Most people don't need help but what are people really suffering as? Is it strategic? >> Absolutely. We think what inflation, we know that inflation doesn't everyone equally. We know people that their lowest income, spent more money on some of the prices going up the most. I'm referring to food here. Food prices are by far one of the biggest contributors to overall inflation in Canada. Lower income Canadians are disproportionately impacted by higher inflation overall. How do you do that and make sure that money goes into people's hands and needed the most? I think targeted spending like what you're talking about, GST, is a great way of doing it. The checks go to the lower income Canadians. I think more policies and income distribution is probably the best way for them to help people out that need it the most. Without contributing to overall inflation again. >> Good points indeed. Another question and off the platform: 70 worried about the R word. Recession. How long question how deep could it go? >> It depends in how the recession hits truthfully. Every recession is different. Look what happened just a few months during the pandemic. We were able to bounce back so strongly from it. And then in the global prices,… Look at what happened in the US, that was a business led recession but you look back and actually what happened with GDP growth is essentially getting washed away with some of these revisions. So how does this unfold in Canada is really the question. If we go into a recession, how is the consumer able to handle what goes on? We know that there is a highly…(. . . . . . . ) when we think of how long the recession would last in Canada, it goes to a point where we talk about stagnation. The Bank of Canada said we will go into stagnation for at least 2023. So there's about three quarters and there from the end of 2022 into 2023 where we are essentially getting close to zero growth and that could potentially be negative. I think that's the timeframe they're looking at. (. . . .. .. .. .. video lag. . . . ) They are looking at the time frame they want to focus on. >> We will get back to your questions with James Orlando in just a moment's time a reminder to make your own decisions after doing research. You can get in touch with us any time Do you have a question about investing, or what is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live. Anthony Okolie joins us now with a snapshot of what we've seen. Anthony. >> So far it's been a mix of good bad and ugly. We will start with the positive that we've seen so far. It's been led by Netflix, for one. They kicked off the earnings parade with some solid results. We will start with Netflix. This was one of the big winners after getting back on track in terms of their new substring subscribers and top expectations. Beating earnings. The streaming giant also gave Outlook for more growth in the months ahead, including the fourth-quarter subscriber growth. They are looking to add another foreign 1/2 million paid subscribers in the next year. We also had results from the old school tech giant IBM. Which also got good grades as well. And the company also suggested that sales are improving into 2023. Meanwhile, electric vehicle maker Tesla, they turned and Q3 results. The revenue did come in a little lighter than expectations but the company, on the right side, they did set quarterly records for vehicle production and delivery that jumped 54% and 42% respectively year-over-year. Finally, telecom giant AT&T. They had one of their best days and more than two years. They reported third-quarter results the top expectations as well as new subscribers as well. Now, on the downside, this week of course, we got results from Google's Alphabet winter report. Reporting its fifth consecutive quarter of slowing sales. Again, when we look at the numbers in the YouTube business, they posted a drop in advertising for the first time since reporting began for that unit. Microsoft, results, another report that spooked markets. Growth rates in the key cloud division and that sort of weight on the first quarter earnings. Their weakest growth in over five years. The tech giant also predicted the further slowdowns as cloud growth slows and similar, the windowsills slip up as well. Meanwhile, Texas instruments reported Tuesday along with Alphabet and Microsoft, they disappointed investors. The chipmaker fell in market trading after an outlook for the third quarter that fell short of Wall Street's expectations. Finally, the ugly in terms of earnings of course. Social media companies SNAP recorded revenue reported rather revenue that missed expectations. They also pointed to apples tracking changes as well is greater competition from the rivals like tick-tock. The net losses of SNAP surged to 400% to three and 16 million last quarter. They also issued warnings of slower growth in the fourth quarter. The stock slumped to about 25% in aftermarket trading. Of course, looking ahead, we have some earnings (…) After Apple. Greg? >> What is the market been with these big tech earners? >> These greater earnings from the likes of Microsoft and Alphabet. The investors are worried about is pointing to new weakness for the global market. Investors have a course appeared to be cut off by surprise from Microsoft's warning late Tuesday. Today, at least, it's still early but traders appear to be kind of shaking off some of those disappointing earnings from some of the tech giants like Microsoft and Alphabet. Instead, focusing on other companies that have performed in expectations as well and pulled back in bond yields as well. Again, some big earnings this week so we have to wait to see how markets respond to those. >> There you have it. I'll be sitting be around the desk. Thanks Anthony. >> My pleasure. >> MoneyTalk Live's Anthony Okolie. Let's check in the markets right now. It looks that we have some green on the screen. 317 points to the upside. Some reporting with metal prices moving higher with the pause and that US dollar. You have Kinross Gold up five bucks a share at 4 1/2%. CN Rail of course coming in after the close yesterday, sufficiently pleased as the Street team. Up a little more than 3%. South of the border, as Anthony was telling us, in the thick of earnings season with the MegaCap tech stocks, some of them disappointing the street. You do have the broader index holding modestly of 15 points to the upside with the S&P 500, little more than 1/3 of a percent. The tech heavy NASDAQ, perhaps more interesting space to look at today given the way we are seeing names from names like Microsoft. Down 24 points, a bit of 1/5 of a percent. A visa coming no shares on the rise. Up almost 5% on the name. We are back now with James Orlando from TD Economics. Lots of questions coming in about the state of the economy. Here's an interesting one: any thoughts on the government debt that we are seeing due to COVID payouts and the impact it could have going forward? I remember during all those fiscal updates, tallying up… >> The government stepped up huge to be able to support people's incomes and businesses and revenues just to be able to get to income support business and revenues just to be able to… The COVID Bill, I think the way we think of it as we consider how much debt accumulation actually happens. When you look at debt to GDP or even just look at how much government revenues, how much they actually have to use to actually pay the interest costs on that debt. Those are increasing. August the bank rather the government of Canada has locked in some of those through yields but as the bond yields start running up, we know the yields and risen all across the curve for the Canadian bonds. The Canadian government is going to have to issue at higher and higher debts. Just like anyone as a mortgage. If you have a mortgage, (video lagging)… What they're going to do is they're going to be paying more and more money as interest payments to be able to just sustain their levels of debt. So I think when we think about, you know, with the Canadian government is saying to us right now, yes there debt to GDP ratio has increased. There debt servicing cost is increasing but if you look at Canada, relative to other global economies, we are in a much, much better fiscal position then pretty much every other major economic peer that we have. >> Interesting stuff indeed. More numbers will pop up we do that fall fiscal update presumably at some point. Another question and off the platform. Any signs that people are actually spending less? The whole point of this is to slow us down. Are we actually slowing down? >> Yes we are. We have data on retail spending. We have (video lagging)… We know that spending on things like physical goods is coming down. I don't know about you but I know I spend a lot of money on physical goods during COVID lockdown. I'm a little maxed out on the number of physical things I can buy. We are seeing that come through on the rest of Canada as well. We do have a little bit of pent up demand for services as a result of past lockdowns. The beginning of this year, we had lockdowns and lots of Canada. So that pent up spending, whether you're going on your vacation that you've been looking for for a long time which is going out to restaurants, that spending has been carrying through in Canada. Below we see as we see consumers starting to switch from the nice to have spending to just the need to have. So this is exactly what you expect when inflation is high and you're spending more money in your mortgage. People will only be spending on the need to have or even just the talk of recession. The more we talk about recession Canada, the more that makes us realize that maybe we should save a little bit more. Maybe we should be a rather we should not be as frivolous with our spending. So we need to tighten up how much we are actually spending and protect our wallets a little bit. Just change how we are spending. So I think expectation of something bad happening potentially is starting to worry people. Plus the fact that people can't spend as much because of higher inflation, higher interest rates. So we've seen this play out with the data. It's not as obvious it's not as widespread. It's really a term that started over the summertime. We are going to start seeing it on Friday and will get Canadian GDP. We might start seeing it a little bit there. And I think that's going to be something that we will see not just this month but probably for the rest of 2022. >> Great insights as always. We are running out of time for questions but I do want to ask you before we think about of the viewers, big day obviously for the Bank of Canada. Smaller than expected rate hike. What's the one take away that someone should have for the Bank of Canada? >> I think what we are noticing, what I would want the viewers to pay attention to is that the Bank of Canada is consistently talking about raising interest rates. We didn't know how high they were going to get it interest rates. Were getting a little bit clear sign that we are approaching the peak and policy rates. Which is good news. It's why, when you're talking about equity markets and bond yields falling, the expectation that we might be near the end with respect to this rapid rate hiking cycle. I think that's the main take away right now it's coming through the bank's communication, the statement, the NPR and the speech. We know the impact of past rate hikes is starting to take hold and the Bank of Canada can probably ease off of rate hikes Holy by the end of this year. >> Great to have you James. Particular on days like this. Thank you so much. James Orlando Senior Economist a TD Economics. Stay tuned on Thursday, Damian Fernandes. Portfolio Manager at TD Asset Management will be our guest. That's all the time we have today thanks for joining us take care. [music]