John Eade

[theme music] >> Hello, I'm Anthony Okolie in 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 and beyond, many of whom you will only see here. We're going to take you through what's moving the markets and answer your questions about investing.

Coming up on today show, will discuss the potential scenarios for the markets in the second half of the year with John Eade from Argus Research. I'll take you through the latest results of the TD Direct Investing Index with insights into Canadian investor sentiment. And in today's WebBroker education segment, Caitlin Cormier will show us some of the different trading types available on web broker.

And here's how you can get in touch with us.

Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.

And before we get to our guest today, let's get you an update on the markets.

We will start here in Canada with TSX Composite Index where the market is trading slightly higher, lifted by financials and energy names. Of course, the Canadian stock market is coming off new highs on Friday amid growing hopes of rate cuts in the US, largely upbeat corporate earnings, as well as some firm metals prices. Currently, the S&P TSX composite index is up 142 points or .6 percent. Let's take a look at Stelco Holdings. Shares of stock or trading higher today, American steel manufacturer Cleveland Cliffs said it is acquiring the Canadian steel manufacturer in a stock and cash deal valued at around 2.5 billion US.

They are currently up. Shares of Celestica are getting some bids as well today. The leader in the electronics manufacturing sector has seen a lot of interest following its strong performance over the past year on robust earnings and strategic growth initiatives.

Shares of Celestica are trading up over 2.5%.

Let's take a look at what's going on down south with the S&P 500, where the index has opened up higher as traitors are gearing up for a big week of corporate earnings, and, of course, markets are coming off of Friday strong rally amid hopes that cooler than expected inflation data will spur the Federal Reserve to potentially cut rates later this year.

The S&P 500 touched intraday record highs last week. Currently it is up just over 30 points or .7%.

Taking a look at the tech heavy NASDAQ compensate, it is trading in positive territory. It is up to the tune of just over 140 points so far. We will take a look at some of the stocks that are moving right now.

Shares of Tesla are surging in early trading Monday and have recouped all of last week's selloff that followed reports of a planned delay for the electric vehicle companies Robo taxi day.

Currently, shares of Tesla are up 4.5%.

Other big movers are Netflix. Netflix is trading higher. It will be the first big tech company to report quarterly earnings during the current reporting period.

The streaming giant will be reporting its results after the close on Thursday. Right now, the stock is trading at more than 2%.

And that's your market update.

Markets have reached new highs this year as the performance of big tech companies continue to lead the way. But will that run continue through the rest of the year?

Joining us now to discuss is John Eade, president of Argus Research.

Welcome back. Good to talk to you again.

>> Thank you, Anthony. Glad to be on the show today.

>> Okay, so when we start with a quick recap of what we saw in the first half of the year. What are your thoughts?

>> So in the US, Anthony, it was a very strong start to the year were stock investors.

The S&P 500, which is the major market index down here, was up almost 15%. That's a great year, and to get it in the first half is pretty remarkable. A few things fell into place in order to generate those returns. There has been good progress on the inflation front, our inflation down here. It is not as low as the Federal Reserve would like it, but it is heading in that direction.

So interest rates are coming down in anticipation of potential said rate cuts later this year.

So low interest rates have been a good thing. The economy has continued to grow.

It is not growing as fast as it was in the second half of 2023. Anthony, we had average GDP growth in the second half of last year, something like 3.5 or 4%. That is not sustainable, but what is sustainable is around 2% and I think that's where we are right now.

So we have had lower interest rates in inflation. We have had good economic growth and here we are in corporate earnings season, second quarter earnings season is just getting underway and we are anticipating double-digit growth. So I think that's been the formula: lower interest rates, good economic growth and strong earnings leading to a pretty good first half for US investors in 2024.

>> Okay, so given that backdrop, you have also released a report with three scenarios for how things may play out from here.

Let's start with your base case for the markets going forward.

>> Okay. So on that base case, a lot of the trends remain intact.

The important consumer and inflation data that comes out, the Consumer Price Index, personal consumption deflator, those measures right now are somewhere between 2.5 and 3% inflation. A couple years ago, they were at 9%, 7%, 9%, so they have really come down and our base cases that they continue to head toward 2%. Maybe not progress every month, but over time, getting close to 2% by the end of the year.

We think that the Federal Reserve is in position to make some interest rate cuts.

As you know, the Fed lifted short-term rates here in the US from 0% after the pandemic to over 5 1/4% by the middle of last year and rates have stayed that high since, between 5 1/4 and 5 1/2%.

Meanwhile, those measures of inflation have come down to about 2 1/2%, so the Fed is ahead of the inflation curve. That is good news. And now, the Fed can start to ease tight financial conditions and keep the economy on a growth track. Part of our base cases that the Fed cuts rates, we think as soon as September. That is their next meeting. And then again after the presidential election, maybe in December, so to rate cuts this year.

>> Okay, so that's your base case. How about if things are not better-than-expected, what would be the bullish case?

>> Okay, well, with that base case, Anthony, let me finish by saying the S&P 500 was up 15% in the, call it 15% in the first half.

Maybe it adds another 5% on top of that and that would take the S&P 500 to about 5800 and it's near 5600 today, so that's modest growth but that's still a bull market and that's still a positive return in the second half of the year. A bullish case would see the S&P 500 maybe get all the way up to 6000. Here, in order to achieve that, I don't think, Anthony, that we are getting get more than two rate cuts in 2024, but the Fed does have a few more meetings, and they have an opportunity to signal additional rate cuts in 2025. Right now, they are signalling one or two. If they can start to inform the market that they plan to cut rates three or four times in 2025, I think that's good news and that would help lift stocks even above our base case target. Also, with the corporate earnings come in a bit better-than-expected, we are looking for double-digit growth here, if growth starts to hit maybe the midteens in the second half of the year, well, now you got good all time high earnings to support higher stock prices.

That would be a bullish case with better earnings and signals for more rate cuts into 2025.

>> Okay, now, on the flipside, how about the bearish case?

>> Okay, so the bearish case would start, we always start this conversation, Anthony, talking about inflation and the Fed because those are the two most important economic factors right here, right now.

So in a bearish case, these declining inflation trends would hold and we would start to see prices take back higher again, maybe that would be in rents, in the shelter component of inflation or transportation costs are still increasing year-over-year about 10%, so we stop making progress on inflation and that is going to hold the Fed up on those rate cuts.

So that's part of a bearish case.

And if the Fed can't cut interest rates and the market environment, the rate environment, is still tight, we could start to see higher unemployment. I didn't even mention that yet. Unemployment is very positive here in the US right now.

It's at 4.1%. That is up from 3 1/2% last year. 4.1% is still low, but if we start to see inflation head towards 5%, now, the Federal Reserve might have to scramble to cut rates but it would be worried about cutting rates, remember, because in the bearish case, the inflation trends are no longer cooperative.

So the Fed is between a rock and a hard place. Then, we have a presidential election coming up in November and if there isn't a conclusive result and that goes to the courts, that adds even more uncertainty to the environment and I think in that kind of bearish case, maybe the market and doers a correction and you see stocks give back, in a correction, you are declining 10%. That is not a bear market.

10% could take the S&P 500 back down toward 5000.

That would be the bearish case, Anthony.

>> Okay, well, great start to the discussion. We will get to your questions about market strategy for John Eade in just a moment. And a reminder that you can get in touch with us any time.

Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.

Now, here's an update on the top stories in the business world today and a look at how the markets are trading.

American steel manufacturer Cleveland Cliffs said it will by Canadian steelmaker Stelco Holdings in a deal worth $3.8 billion. It would mark Cliff's first acquisition since it's failed bid for rival U.S. Steel last year. The acquisition will expand Cliff's steel making footprint and double its exposure to the flat ruled spot market.

Shareholders in Canada Stelco will receive cash and shares worth about $70 representing a premium of 87% from the closing price on Friday. The transaction is expected to close in the fourth quarter 2024, subject to regulatory and shareholder approvals.

Right now, shares of Stelco are up more than 73%.

Meanwhile, shares of beriberi are under pressure after the British luxury giant reported a disappointing first quarter performance and issued a profit warning.

Vertebrae said comparable store sales fell 21%. The company has been battling with declining appetite for luxury products across its major markets, with the cost-of-living crisis affecting its European and US customers and economic concerns plaguing Asian consumers. The company also suspended its dividend and named it Joshua Shulman, who formerly led Michael Coors and coach, as its new CEO.

Finally, in more earnings news, Goldman Sachs prophets more than doubled to $3 billion in the second quarter thanks to better-than-expected fixed income results in smaller than expected lowermost provision. Revenue and fixed income jumped 17% on activity in interest rate, currency and mortgage trading markets. Meanwhile, the firm shrinking exposure to consumer loans all the bank provision for credit losses in the quarter fall 54%, significantly below expectations. On one minor down no, Goldman's well-known investment banking business disappointed compared to rivals amid lower-than-expected advisory fees.

But that has not seemed to shake investors. Right now, shares of Goldman Sachs are trading up more than 1%.

And here's how the main benchmark index in Canada is trading. The TSX is up more than 123 points or more than half a percent.

In the US, the S&P 500 is up as well. It is currently trading at, let's see here, it's up just over 34 points or .5%.

We are back with John Eade, Pres. of Argus Research, taking your questions about market strategy.

We will start with the first question.

John, what do you make of the rotation that we have seen from big tack into small caps?

>> So, Anthony, I'm not yet going to call that a trend. I think we have seen that in the past couple of days.

And it certainly is the case today, but really, for the past three or four years, it's been the large-caps that have generated these returns in the S&P 500, right? We talked about the S&P 500 being up 15%. I think small caps year to date are up something like 5%, so they have badly underperformed this year and, really, over the past 3 to 5 years too.

That has not always been the case, right?

The long-term record is that small caps outperform large-caps because when they have good years, those returns can be very strong. I think in order to keep a small cap rally going, we are going to need to see the Fed move quickly, lowering interest rates and improving the economic outlook for the overall economy, not just the large-caps but the small caps too.

As long as the US economy is growing at 1 1/2 or 2%, the big companies, they have the pricing power to raise prices, they have the supply chains that are intact, that keep costs under control, that is a fine environment for large-caps. Small caps can struggle in a smaller growth rate but if inflation is coming down, and that's the signal we saw last week with the low CPI, and if the Federal Reserve is going to be starting to cut rates and we heard that last week with Jerome Powell, he is the chairman of the Federal Reserve, testified to Congress that they are getting ready to cut rates, then that is going to be a good environment for small caps. But let's see those factors come together first before we call at the start of a new trend.

>> Okay.

We will move to the next question. I think you touched on this when you were talking about your outlook. How are valuation looking currently? Maybe you can expand on that.

>> Sure.

So I talked about earnings and the earnings are looking pretty good. Anthony, we did not have an economic recession over the past couple of years, not since the pandemic, but we did have an earnings recession down here in the US. That meant for three quarters in a row in 2023, the S&P 500 earnings declined year-over-year, so that was a recession. That ended in the fourth quarter of 2023 and now we are into our third quarter of earnings growth and earnings expansion so the market has anticipated that and the market has moved to new highs and if you look at just absolutely at those stock prices, you think, wow, stocks are priced very high, they are at all-time highs here. However, if you look at the corporate earnings that underlie those high prices, earnings are at all-time highs too. So the PE ratio on forecast earnings right now is about 20 times for the S&P 500, that is not low.

Dirt cheap would be 14 or 15 times, but nosebleed levels would be 23 or 24 times.

We are not at nosebleed levels here.

We are at reasonable levels. And compared to bonds, stocks are relatively attractively valued to bonds to and if bond prices rise and interest rates decline, then I think you're going to see stocks even more favourably valued. So I'm not worried about equity valuations here in the US, particularly as we anticipate interest rates are going to be coming down over the next few quarters.

Now, if something happens, Anthony, if earnings start to fall short of expectations, that's going to be a problem for stockmarkets.

Or if inflation picks back up and heads higher and takes interest rates with it, that's going to hurt valuations as well, but that's not what we are anticipating right now.

>> Great insights there. Let's move to the next question. What sectors look interesting to you right now?

>> So I'd like to answer that in a couple of ways, Anthony. I will tell you we do have sector models where we say, we like this one, we don't like that one, and then the sectors we like here are technology and communication services. We think those have a lot of earnings momentum and innovation behind them. We also like the healthcare sector. That's a sector that has leg to the market for the past two or three years, so we think there are some good values there. So technology, healthcare, communication services. The sectors we don't like as well are the materials sector. We think as inflation cools off, prices for commodities are going to start to come down and that is not going to be good for commodity manufacturers. Although I've heard you talk a couple of times about this interesting deal with Cleveland Cliffs.

That's a great company and I'm sure they are making a good deal. So materials is a sector we don't like here. But let me say about sectors, Anthony, I really feel that sectors are pretty arbitrary, right? And if you look at the makeup of the sectors, like the consumer discretionary sector, right, that sounds like retailers, okay, or restaurant companies.

But you know what the big companies in consumer discretionary are? They are Tesla and Amazon.com.

>> Tech like companies.

>> Tech like companies, right?

So you might think you are kind of avoiding the high prices of technology if you go into the consumer discretionary sector, but it's really hard to get away from the Amazon and the Tesla. So something that we look at as closely as we do as sectors at Argus are like signals from a management team that the business is going well.

So signal like a double-digit dividend increase. So now the company is saying, hey, business is good for us. We are going to share that with shareholders and not only are we going to pay a dividend because you got a clean balance sheet, but we are going to boost our dividend 10% year-over-year, so 10% more dividend payment. That is a nice cash return to an investor but that's also a signal from a management team that they are pretty confident in their near-term outlook, even if the economy is slowing. Another signal that we like is a company raising guidance. So when a company reports is earnings here this second quarter and they meet expectations or beat expectations, both are good but what is even better is if the company says, you know what?

We are looking at the second half of the year and we think it's going to come in better than we had initially expected.

So yes, sectors are worth watching, but also pay close attention to what managements are saying to the market with dividend increases and with their guidance forecasts.

>> You want to make sure that there is some earnings momentum going into the next couple of quarters.

>> Exactly.

>> Okay.

As always, make sure you do your own research before making any investment decisions.

and we will get back to your questions for John Eade on market strategy and 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.

There are different types of orders you can use when buying a security on my broker and Caitlin Cormier, Senior client education instructor with TD Direct Investing has this look at what's available.

>> There are two main types of orders that investors often use in order to complete their security transactions.

They are market order and limit order.

Let's go through those two different types of orders today and figure out what the differences are between the two. Let's start with the market order. What a market order is is essentially you are putting in an order to buy or sell a security at whatever the current market prices.

So that type of order, essentially, the most important thing is we are looking to get our order executed. We have done our research and we know we either want to buy or sell this particular security. The most important thing is to go through with that transaction. Secondary to us is price. We have an idea of what the current prices, with its trading for, but there's no guarantee and a market order as to what the price will be. When we hit submit, we are not sure what price our order is going to be filled out.

Let's go ahead and hop into a broker and see how we would be able to actually process a purchase like that.

We are going to click on the buy sell button and we are going to go ahead and choose a security to purchase. Alright. So in this process, we are going to go ahead and choose whatever our quantity is. In this case, I am looking to buy 100 shares.

We have a price type on the market, good for just the day. That's probably fine for the situation because, as I mentioned, most often these types of orders are filled almost immediately, therefore we don't have to leave it open for longer than the current trading day. That's as simple as a market order is, put in the number of shares, the price type and go ahead with the purchase from there. The second type we will talk about is the limit order. The limit order is a little different from a market order because with the market, we don't know the price that we are going to be able to fill the purchase with but with a limit order we actually have control over the price. With a limit order, we actually set a limit price which is the minimum that we are willing to accept in order to sell a security or the maximum we are willing to pay in order to buy a security.

So the benefit of a limit order is that the price security, we have a bit of control over what price or at least the minimum or maximum price that the transaction is going to complete four.

With this order type, the downside is the execution. So the benefit of the market order is one of the downsides of the limit order. There is no guarantee that the price will actually fall or rise to your limit price that you have set. Therefore, the execution of this particular order type is less guaranteed than a market order.

Let's hop into a broker and see how we can actually put this order type through.

I'm just going to choose a different security here. Again, I'm going to go as if I was buying, I can choose 100, whatever number of a security I would like. This time I'm just going to choose the limit price type and a minute type in the maximum that I'm willing to pay in order to buy the security.

In this case, let's just say I would like the price of the security to drop to $13.

I'm going to set a limit price of 13.

Because of the fact that the price might not drop down that part today, I have the option to extend the good till date to a future date.

I could choose any date I like or good till cancelled, whichever option I choose, so if I choose let's just say I want to leave this open for the next two weeks, I can go ahead and choose that. And one last thing that you do have the option of doing is the all or none option.

Without all were none, essentially what it means is your order could be filled over multiple days.

For example today I can get 50 shares build of that limit price and then tomorrow maybe I can get another 50 shares filled. If that were to happen, I would be charged to separate commission fees, commission fee today and a commission fee tomorrow for my order being executed over two days. If I were to choose all or none, which is only available with US securities, what will happen is if they're not 100 shares available at the limit price, it will not execute at all. It will only execute if all shares are available at that price.

The downside of this is that it adds another layer or reason why your order would not be filled so kind of you are less likely to have your order executed if you choose all or none.

One last page to quickly check out with limit order and market order is our order status page. This is where you can come to see whether your orders have been filled or partially filled. For market order, you can see what price or prices your order has been filled out and with limit orders you can see if they have been partially filled or not and you can change them if you so choose. That's the rundown. If you have more questions about these order types or other order types available, check out our different videos on the learning centre as well as YouTube and they will go over those different subjects. Until next time!

>> Our thanks to Caitlin Cormier, Senior client education instructor at TD Direct Investing. For more educational resources, you can check at the learning centre on what broker or use this QR code to navigate to TD Direct Investing's YouTube page where there are more informative videos.

Okay, we are back with John Eade, taking your questions about market strategy. We will get to the next question, this is on dividends.

Example of companies that are substantially increasing dividends? What are some examples of companies that you are seeing increasing dividend substantially, John?

>> So Anthony, let me say that this is a theme that isn't limited to just a couple of sectors. So it doesn't just take you directly to, say, healthcare or consumer staples.

This is the theme we really have seen across all of the sectors we cover. We cover all of the main 11 sectors.

We find double digit dividend growers in the utility sector, the tech sector. It has not been the case that tech companies have paid a lot of dividend but that is changing. Microsoft, double digit dividend grower.

We have seen this at hotel companies like Marriott, retailers like TJX or Costco. We have seen it at financial data companies like Moody's. Personal finance companies like Lisa. Even trucking companies like Old Dominion or HVAC like train technologies.

So it is a theme that crosses sectors. You can put together a nice, diversified portfolio. And then we think that dividend growth gives you three signals. One, a company has a strong enough balance sheet to pay a dividend. Two, management is aware of components of shareholder return which include dividends, and three is that information signal I was telling you where the company is confident about its near-term outlook, if it's going to grow its dividend at a double-digit rate.

Anthony, we cover about 500 stocks at Argus in all the different sectors. When we do our double-digit screen, it turns out may be 100 names, so it's really that top 20%. And let me also say that these generally are not your high-yielding stocks. They don't have yields of four, five, six, 7%. The yield might be closer to one, 1 1/2%. So they don't generate an enormous amount of income, but they do pay the dividends and it's a nice blend of growth and income, the strategy.

>> Great perspective there on dividends.

Let's go to the next question on the election. How could the presidential election impact markets?

>> So there are certainly ways and there are studies that we have done to look at how the elections impact the markets. At one of the studies we have done is to go back to 1980 and look at all the four years of the presidential cycle.

And then of those four years, that fourth year, that election year, is the worst-performing of the four. The first year is a good year, it's a honeymoon year.

I think we saw that with Biden in 2021.

The second year can be a bad year. You've got midterm elections, there are changes that play true with Pres. Biden over 2022 was a bear market year for US investors.

The third year is another good year where Congress is typically spending advance of the election and the fourth year, again, in 2023, we had a good year for stocks in the US. So then you get to the fourth year, which is the election year, and that just adds uncertainty that you didn't have in those first three years. Who is going to be running the country? Is that person would have political alignment with the US House of Representatives, with the U.S. Senate?

Are things going to change?

Our trade policies going to change? Are tariffs going to go up or down?

Is an administration would be more or less favourable to mergers and acquisitions?

What's going to be the outlook on M&A? And to specific industries too is this gonna be a administration that wants to rein in healthcare and pharmaceutical costs? Are they going to be focused on clean energy and all that means for automobile manufacturing and electricity production?

All of that comes up in the fourth year.

However, what happens is that there is a winner and this has been a big election year around the world, Anthony, right?

Mexico had an election, new president.

India had an election.

They kept the president but they change the composition of the Parliament. South Africa had an election. France, UK. Right?

A lot of people having elections and the elections are coming to a conclusion and I think as long as that happens in the US, and I have every reason to expect that it will, we will move through this uncertainty and get back to the focus on things like interest rates and inflation, economic and earnings and stock valuations.

It does have an impact but I would caution against really trying to set up a strategy to take advantage of the uncertainty and focus more on the more predictable market factors that we've been talking about today.

>> We will get back to your questions for John Eade on market strategy in just a moment.

As always, make sure you do your own research before making any investment decisions.

>> 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.

The TD Direct Investing Index for the month of June has been released and self directed investor sentiment remained neutral.

Here are the details. Let's start with overall TD Direct Investing Index which measures sentiment in a range from -100 for very bearish to +100 for very bullish.

DII sentiment settled at -54 June, down a single point from the prior month.

The so-called June the swoon for stocks failed to materialize as improving inflation data and the continued AI theme help stock markets gain ground last month and for the first half of 2024. When we compare sentiment to June of last year, a big drop on sentiment was at +19.

Looking at the components that make up the DII, to core proxies help us better understand why sentiment slipped marginally in June. One was net equity demand or bought versus sold. It came in at -9, that's down three points month over month, indicating self-directed investors sold more securities last month. A positive value would indicate investors bought more than they sold.

Secondly, flight to safety or risk appetite for investors was -4, four points lower than last month, meaning more investors pull back to safer, less risky investments. A humour point. Technology was the winner for the second month in a row. Gen Z and Milennials, born in 1981 and after, were once again the most optimistic age group although they remained neutral territory.

Technology remain the most heavily traded sector with sentiments were +14, up seven points month over month.

The rank of heavily bought stocks and technology were little changed in June with chip giants AMD, supermicro computer and AI torchbearer Nvidia which really took the top spot as the world's most valuable company by market, occupied the top spots.

Sentiment for Gen Z and Milennials went up +4 in June.

The stocks bought by young investors were Nvidia, Apple and Tesla.

And that your TD Direct Investing highlights for June 2024.

[music] We are having a look at TD's Advanced Dashboard, a platform designed for active traders available through TD Direct Investing.

We are looking at the movers on the TSX 60 by price and volume.

Looking at the financials, the top left corner, some big banks are getting bids, TD is up, CIBC. Looking at the top rate, basic materials. Actually we will go to energy. Cenovus is getting some bids.

First Quantum as well, we are seeing some weakness there. We are seeing some bids in Canadian Natural Resources as well.

If we move to the S&P 100 next, take a look at what's happening there… We will start with seeing some bids for some of the technology stocks, Apple is seeing some strong bids. They just received some positive analyst reports, chipmakers, bit of a mixed picture for the chipmakers.

Nvidia has seen some weakness but we are seeing some strength and Intel as well as AMD, some bidding there. Looking at cyclical consumers, goods and services, Tesla seeing strong bids, a lot of green on the screen there. It is up more than 5%.

Okay, we are back now with John Eade, president of Argus Research. We will go to the next question. This is on the Fed and inflation.

Do you see inflation easing and enough to give us more than one Fed cut this year? I think you touched on this but what are your thoughts on that?

>> So that's a great question.

We are forecasting to cuts this year but it could easily be one this year and we are right now again to this year into next year so for for the first part of this cut cycle but instead of having one in December, maybe they have three in the first half of next year.

I am not sure it really matters so much about the timing, rather that they just get it started.

Certainly they've got room to cut.

The Fed wants to stay ahead of this inflation curve and, right now, let's call the Fed funds rate five and three eights and inflation running at about 2 1/2 so they have almost 275 basis point gap above inflation. That's really tight! I would like to see them get it to like 150 basis points at some point next year so that's four or five cuts or if inflation is declining, maybe even more than that. They definitely have the room to do that.

However, I said a couple of times that the Fed is ahead of the inflation curve.

Back in 2021 and 2022, they were behind the inflation curve. That was not a good look for the Federal Reserve and I really think they want to burnish their reputation as effective inflation fighters so instead of cutting twice this year, which they can do, maybe it'll just be once. But if that's the case, I would expect them to catch up early next year.

So I am saying to you I'm not going to be surprised with one, but if it is one, I think it will be three next year to catch up.

>> John, thanks very much for joining us.

Good to have you.

>> Thank you, Anthony. Thanks for the opportunity.

>> Our thanks to John Eade, president of Argus Research.

As always, make sure you do your own research before making any investment decisions.

if we didn't have time to get your questions today, we will aim to get them into future shows.

Stay tuned. On Tuesday show, Robert Both, senior macro strategist with TD Direct Investing will be our guests giving us a breakdown of the latest Canadian inflation report, taking your questions about interest rates in the economy.

And a reminder that you can get a head start.

Just email MoneyTalkLive@TD.com.

That's all for our show today.

Take care.

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