Justin Flowerday – 07/26/2022

[Music] Hello Greg Bonell welcome to MoneyTalk Live which is brought to you by TD direct investing. It's a new program broadcast daily on Webbroker. Every day I'll be joined by guests from across TD, many of them whom you will only see here. We'll take you thoughts on what's moving at the market and answer questions about investing. Coming up on today so call and will discuss whether earnings season is pointing to a recession had with Justin Flowerday from TD asset management. And in today's Webbroker education segment, will have a look at what inverse exchange traded funds are and how they work. So here's how you can get in touch with us with your questions. Just email MoneyTalkLive@td.com, Philip the viewer response box under the video player here on Webbroker. Before we get to our guests today let's get you an update on the markets. We are on the fifth of earnings season, it's really helping drive the trade south of the border. We want to start here with the TSX Composite Index. We are data hundred and 76 points. Shopify saying they want to cut 10% of their staff. … We will dive into that in a few moments time. I want to take a look at the energy trade. Because earlier, with some of the energy names fighting back against the downward pressure of tech and some other sectors but now they are sort of sliding back into negative territory. Athabasca is now down a little more than 1% at this hour benchmark crude pulling back as well, roughly 95 for a buck. TSX down more than a percent now so bit of a shift in the trading day in that space. South of the border, the S&P 500, that brought a read of the American market down one of 1/4%. You're getting some vibrations running through the retail sector South of the border. Let's check in on the tech heavy NASDAQ. Of course Shopify is weighing on things here, they have a few other concerns and south of the border. Shopify the American listing is down as well. 1. 7% on the NASDAQ and let's check out General Motors. Their net profit following a 40% year-over-year in the face of supply chain snarls. That stock down 3 1/2%. Let's talk about Walmart sending a bit of a shock wave through some of the retail names, also weighing on the trade on Wall Street. And that's a market update. It's a big week for earning some of the largest names in business delivering their latest numbers. Adjoining snuffer and updatable we've been hearing so far from these companies from the state of the economy and perhaps even our portfolios, Justin Flowerday, head of public equities at TD asset management. Just great to have you on the show. I did a quick little thing on the markets there, clearly we have some concerns on what we're hearing from corporate America and even on companies at the side of the border about the path forward. How should we be reading it? >> Yeah I'd say heading into earnings, a few themes that we had in mind that we are paying close attention to. First we are trying to get a better understanding of patterns and demand for both consumers and businesses, trying to understand changing and preferences. This kind of speaks to how fragile is overall demand for the economy. So we're getting some good reads on that. Margins are a big focus. Incremental margins which describe the profitability of the incremental dollar of sales for companies. it tells us quite a bit about how companies are managing the cost of the American environment. And also quite a bit about how competitive industries and sectors are. Then the last thing I'd say is that we are paying close attention to what management teams are saying what the future. And this is a really important one because management teams currently have all the excuses in the world to start to provide a little bit of a more realistic picture of the future that they've got. They have a stronger US dollar. They've got currency volatility they have higher oil prices, they have higher inflations, higher interest rates… So we are really hoping that we are starting to see some incrementally more negative things coming out of management teams. >> When it comes to that, perhaps more realistic view of the future and what lies ahead for us, that's where the big question is right? With soaring inflation, very aggressive central banks, we felt a recession don't we? What are corporate America he was telling us so far? >> I'd say so far we've had, I think, about 1/4 of the S&P 500, speaking of the US report so far. They are beating probably not as much as they typically beat. So I think it's about two thirds of the companies that report the beating. They are handling the cost pressures decently. It's not a disaster. But we have started to hear some changing tones from management teams. They're starting to talk about some of the challenges they are seeing in terms of inventory bills and overall demand. I would say that this is a very, very positive thing. Any bottom cycle or process has to have a reset of expectations and it's kind of medicine that the market has to take the companies have to take. And were making some progress on that front. >> The hard part, obviously, is trying to figure out when we've had our medicine and when we've had it done. Very near impossible for the markets. Maybe the worst of this is behind us? >> I think it relates to overall expectations and revenue. If you look at 2023, going into the quarter, your sing estimates for the S&P 500 around $245-$250. That needs to come down. I think what you're starting to see, more recently in the last couple of days, is that those numbers are trying to start to trickle downwards. I think management teams need to start being more realistic about their cost structure and protecting margins. You're starting to hear a little bit more about rational investments they're making in terms of people, in terms of projects. So all that is really good stuff and again, it's medicine that the company is in the market have to take. >> Of course, part of the discussion on all this is what we have seen peak inflation on. There are so many different unknowns in this market right now, I feel. If we knew this and perhaps we could have a strategy. But at the core, what should we be watching there to try to make a determination? >> I'd say we have probably seen peak inflation or are at peak inflation. I'd say going forward, there's probably a couple of different phases that we go through over the next 18 months. The first phase, which will probably see in the next six months, is this easy diss inflationary phase. Where you see the prices of goods and the prices of commodities start to roll over and that does a bunch of the work for headline the CBI and that would be a positive. The next phase is a little bit of a tougher one. It relates to some of the stickier prices of services which relates to stick your wages…I think that's one where it's in a take a little bit longer. We have a Phillips curve right now that's probably a little bit different in the past more asymmetrical than in the past. So yes, some challenges ahead but I think were to make progress in the next six months from going from at 9% headline number down to something on the four or five range. That move from 4 to 5%, down to that Goldilocks two, three will be more challenging. >> So we get there, obviously the central banks including ours and of course the US Federal Reserve on deck as well, has been pretty aggressive in doing these you know jumbo sized, supersize whatever you want to call them, hikes that nobody was anticipating just one year ago. How reactive are they to this sort of first indications? Company say "okay we pull down our expectations and we see us often of some of the data…" They have to keep going forward at this point? >> Yeah. I would say the Fed has gone through a couple of different phases where, first of all they lost that ability. Because they missed some of the signs of inflation becoming a problem. I don't think it's can it take one inflationary data point to change and essentially cause a pivot like it's in a take two, three, four, five of those data points for Powell to come out and say they have the inflation problem under control and they will start to think about pivoting. I don't think that's next month of the month after. I think that's probably six months away. >> Now a pivot of course could be all right. We've done the work we need to do in raising the cost of… We will flow through the economy and give some time to see the effects. Some segments of the market seem to be thinking that the pivot even goes further at some point. By the time you get into next year, 2023 even though we've been living with the supersize hikes, were going to see cutting. Is that too far? If someone wants to see that and that's part of their investment thesis, is that too optimistic? >> I don't think that's too optimistic. That's probably a base case for me right now. The feds will do their work. They're gonna try to increase unemployment and the gonna try to bring down overall demand. And I think once they get there the minister think more about the balance that they have to strike in terms of their dual mandate. Their dual mandate is around managing inflation but also managing for maximum long-term employment. And it's always a balance. Right now inflation is right in front of them and staring in the face. They are dealing with that. Once they start to see that he's, I think we will start to see, once the economy starts to weaken frankly, which it will. I think we'll start see a little bit more talk about turning the other way. > Interesting stuff. Indeed a great start to the show. We will get your questions about the markets with Justin Flowerday and just moments time. A reminder of course get in touch with us at any time just email MoneyTalkLive@td.com. Or you can fill of that viewer response box at the bottom of the video player here on Webbroker. Let's get you updated on some of the top stories in the world of business and a look at how the markets are trading. Shopify is cutting 10% of its staff saying it made the wrong call on strong e-commerce demand would be coming out of the pandemic. In a letter to employees, CEO Tobias Lutke said is that that online shopping penetration had permanently leapt ahead by several years didn't pay off. He says the mix of e-commerce and brick-and-mortar retailers return to levels anticipated before the pandemic. Stay-at-home orders and lockdowns triggered an online shopping boom that propelled Shopify to record highs. But the stock is law some 80% of its value since last year. A warning from Walmart that inflation will be pressure the profit line this year and being felt across the retail sector. Walmart says the high price is changing consumer behaviour and that shoppers are forced to spend more on food and cut back on merchandise purchases. The retail giant says that's forcing it to cut prices on apparel to keep inventory in check. The news was pressuring other big retail names in the early going including Target and Amazon. It's another downgrade for the global economy, the International Monetary Fund is cutting its global growth forecast again. The agency now sees 3. 2% GDP growth this year. Down from 3.6% it had penciled and in the spring. IMF says the conduct in Ukraine is taking its toll and warnings of a global recession cannot be ruled out. Now on Bay Street, the TSX index, obviously Shopify taking space off the table. We had the energy space fighting back early in the session but the pullback of American benchmark crude is starting to weigh on some of our big energy names. Triple digit in Toronto by 169 points. Almost a full percent to the downside. The S&P 500, let's check in of course. Were getting a lot of big heavyweight corporate earnings. Walmart turning on profit is hitting one of the retailers as we are saying. GM under of some pressure as well. Down to 1 1/4% of the S&P 500 with 3917. We are back there with Justin Flowerday with TD asset management. Taking your questions but the markets. We will start right here. In the healthcare space, from a platform. What's your outlook on healthcare stocks if we are in a recession environment? >> That's a great question. Healthcare typically has been a little more defensive in nature and typically performs better in general throughout a recession. But we need to remember that the healthcare sector has a whole bunch of different components. Some are to be a little more defensive and some a little more cyclical. I would say there's been some pretty positive trends coming out of healthcare recently. We have seen the ability for a lot of these providers to actually keep up with the price increases through this inflationary environment. We had a colleague of mine who attended a conference down in the US, healthcare conference, made a comment to me where he was talking about healthcare companies who used a kind of, set price once a year. They would now start setting prices… This was probably six months ago… Every six months and then they moved to quarterly and now they are saying that they are setting prices weekly. So a company called Danahur talked about how their increasing prices every week. They had 4% price increases. And so, you get a combination of companies that increase prices and manage rising… And have a bit of a defensible revenue stream in terms of some of the more cyclical parts of the market. I think it's a recipe for at least stable multiples and potentially some audible expansion if earnings can show double jittered double-digit earnings. >> Does that kind of pricing power, that kind of pricing environment that you are describing put them in the crosshairs of politics? I think about previous US election cycles where they say "hey, we are to go after them and go after drug prices and put them under some pressure." At least it has in the past. >> It does. I think that's can remain in the spotlight in particular for the Pharma and Biotech spaces with the cost of big-ticket drugs. When you get down to the cost of some of the smaller, kind of, tools and consumables that somebody's companies are providing to operate bigger machinery, I think that flies under the radar a little bit more. So I don't think that's can be of as much of an issue. But I don't think drug prices will be in the political. >> As you are mentioning, I'm thinking the US healthcare sector. We seem to have a very different kind of healthcare sector composition in this country. Really to relate to what's happening in the states. > Really. I should preface that. Those comments I was making were in relation to the US which is just a much more mature, more diversified, larger healthcare sector than we have in Canada. >> Exactly. In our audience knows full well from their time on Webbroker and doing the research, obviously we are pretty heavily imposed in our healthcare to some of those marijuana names. Let's get to another question on the platform right now. What you make of the recent slowdown in digital ad sales in companies like Snap and Twitter. Does this bode poorly for the tech sector? >> Yeah. Snap is seeing some pain and company start to cut their budgets. The one comment I make about Snap, they are a lot smaller to a company like Google or Facebook. They cater to different service they cater to a different kind of advertising. They are not using Snap as their core advertising basis. They're using Google and Facebook. I think Snap has around 50,000 customers. Facebook and Google have 5 to 10 to 15 billion advertising customers. I think Snap is going to be the first companies to feel pain in terms of reducing these advertising budgets. But I don't think we'll see it is meaningful as a hit to Google and Facebook in this quarter. If this continues and we see quarter after quarter slowing, Google and Facebook will start to feel more of that pain. For now, I don't expect them to get hit like Snap did. > Digital advertising, we started to see more more money flow from traditional ad space, the traditional newspaper press to digital ad space. Still the dominant game in town. We pull back an ad spending but is a good a shift somewhere else or is it still about the digital spend? > It's definitely still at the digital spend. There was a stat I read somewhere in the last week the talked about Amazon and their growing but small advertising business. Amazon currently generates, I think, about $30 billion in advertising revenue annually. And that was in 2021. In 2021 the entire newspaper category globally generated less than $30 billion in advertising sales. So Amazon, which is even the biggest digital advertiser, is bigger than the newspaper. So the makeshift has happened. There's probably still a little bit more to go but all major companies are advertising digitally. All small companies are advertising digitally and that's where the budgets will shift. >> As a former wire service guy years ago, I used to service the newspapers. It still hurts me a little bit to hear that but that is the rhythm we live in. Let's get to another question off the platform. It will the Fed, and we are on the eve of this decision, follow the Bank of Canada and give us a full 1% rate increase? The market spending? Can we roll it out? >> I don't think we can rule it out. I think will be seen this week in some of these companies that have been around, some hiring freezes, some data points that they have… As well as some of the leading indicators that may support the fact that peak inflation is either here or behind us. I think that gives them the right to do 75 and 100. So my base case is 75. That said, they may take another view and feel comfortable at getting ahead of everything and doing 100. That gives them a little more option alley down the road to do a little less if they do deteriorate as much. I guess we'll see you tomorrow at 215. >> Indeed we will. As always make sure you do your own research for you make any investment decisions. When you get back your questions with Justin Flowerday from TD asset management on the markets in just a moment. A reminder that you get in touch with us at any time. Just email MoneyTalkLive@td.com. Now let's get to today's educational segment. Exchange traded funds offer many possible strategies for investors in today's educational segment, we are taking a look at what reverse ETF's are and how they work. Joining us now is Here-In Amin, Senior Client Education Instructor with TD Direct Investing. So tell us how this works. >> Global slowdowns happening, we are seeing various trends emerging across the markets. First of all, let's break it down. An inverse ETF is an exchange… Benchmark or index it attracts. Now most investors will use these reverse NTF's to speculate from market declines while others may use it to hedge their portfolio against falling prices that they have. Let's take an example Greg. Let's say an investor owns an S&P 500 ETF as part of their portfolio and they want to hedge decline against that broad market index. They can do so by owning an inverse ETF other S&P 500. If the market falls, the ETF would basically rise roughly by the same value as the decline in that market. So in other words, if S&P drops by 2%, we will see roughly a 2% gain on that inverse ETF. Inverse ETF's are akin to holding various short positions. Shorting really involves more securities, selling the securities and hoping to repurchase them at a lower price. In other words, the investor can potentially make money when the market declines but when it comes to inverse ETF's, you actually do this without actually selling anything short yourself. Since these products are various by nature, We should mention a word of caution though. Inverse ETF's may not be ideal for long-term investments since derivative contracts and constructs are bought and sold on a daily basis. In other words the funds of these products get reset daily. Now, this means there is no way to guarantee that inverse ETF's are going to be able to track the long-term performance of the underlying index of a stock that it tracks. This also means since there is more trading happening, the fund is going to incur more expenses and usually this will translate to inverse ETF's potentially having higher expense ratios, usually in excess of 1%. So really, inverse ETF's are going to be more suited as short-term trading instruments. And they should be well time for investors to make money. There's a chance of significant risk of losses especially if you allocate too much money into inverse ETF's. Also timing their entries and exits there. >> All right. Great primer there on the inverse ETF's and very important in the caveats and the risks there. If someone wants to use Webbroker to explore the space, how would they do that? >> Absolutely. Let's go to our research tab over here. We can actually go to the screen. That's where you want to search those. Under the tools, we are gonna click on screeners over here. Once we get to the screeners told us going to allow us to filter and sort through all the ETF world over here. We're gonna click on this ETF tab that we have over here. We want to be able to click on the customer screen to really narrow down our search. Working to keep research fairly simple. Just to find out the inverse ETF that we have. To begin, we are to have the country selector available for us. We are going to select candidates to find out the inverse ETF's available in our market. Next you will notice there is an inverse criteria here which is perfect for us it will click on that and go ahead and add that. We only want to show these inverse funds and there's one more on that ad which is index. Because I do want to based on some index funds. Click criteria. Now, we're gonna click to show those index funds and we have 14 results that are populated. So I will click to view those matches. Once the show up, you will see a mixed array of different inverse ETF's and not only are they good to be on these benchmark indexes but there can be on various products like oil and some sort of commodity. But we are just going to look for the benchmarks. Song and assorted and this is the one that I want to focus on. It is HI X which is an inverse on the TSX 60 index. I'll can run a comparison. I want to show you that performance I was talking about. Long-term versus short-term and how there could be some tracking issues. Salinity was I'm actually going to track in XIU. If you go to the three-month performance chart,… You can see that more or less they are tracking each other similarly. We can see XIU as being down in the past three months and the inverse ETF is up by that same percentage. However if we move this up to a longer-term performance over one year, now you can see significant differences. You can see that the XIU has been down about 6% while our inverse has been pretty much at one or 2%. So we are noticing there is quite a bit of difference when it comes to long-term investments. So keep in mind these are really short-term traded products. >> Very interesting stuff and thank you so much for joining us. >> It was my pleasure Greg thank you. >> Here-In Amin, Senior Client Education Instructor with TD Direct Investing. Always make sure you do your own research when making investment decisions. We will get back your questions for Justin Flowerday TD asset management in a moment's time. A mind a reminder you can get in touch with us if you email MoneyTalkLive@td.com. 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 writing your question and hit send. We'll see if one of our guests can get you the answer right here at MoneyTalk Live. We are back now with TD asset management's Justin Flowerday. Were taking your questions with the market. Our here is an interesting one. A very active space, natural gas has had a high not seen since 2008. What you expect from the oil and gas in that sector going forward? >> So, to similar sectors but also to different sectors in many ways. We'll start with oil. I think oil has support. You've heard some whispers that it's going to crack. I don't think it happens like it used to. I think it's related to supply and there is been massive underinvestment. OPEC is near max supply. Russia is invested. We could see a range of oil they could get down to 65 or 70. I think that becomes its range in the next year… It would take something extraordinary such as a really deep recession to break through that range. In terms of natural gas, yeah, unprecedented times. I think in a very difficult situation, at least in the next, I would say, 18 months for the natural gas market, I would say it relates what's going on in Europe particularly Russia and Ukraine. Spot prices for natural gas… Very tight market. I think strip for 2023 is $30. An absurd number. Spot number for natural gas is 50 Dollars in Europe. Part of the issue is that a lot of the investments that companies want to make to bring in more LNG and make sure we get the pipelines to supply it if in parts such as Germany, they take a long time. So we've got some excess capacity coming in 2023 and 2024 and 2025. But when we think of overall consumption of natural gas and what's needed to continue to run the German economies and the European economies, we need to replace over 100 billion BCF and that can take years. >> Does that geopolitical crisis in Ukraine make it much harder to try to figure out a company that wants to invest in the natural gas space or make expansionary plans? What is the world look like in a few years from now? We don't even know what it looked like six months from now. > Yes and companies are trying to deal with us every single day. I think Vermillion is a company the talk but this recently and they have natural gas production in Europe. I think it's strip prices, they are trading at about two times per cash flow. There are obviously risks. We don't know if strip prices are going to exist. But there trying to figure out "okay, should be Lockean and hedge future pricing?" The investment community is always been a little bit tentative when companies try to hedge up the curve and try to lock in future prices. But companies are trying to deal with this every single day. They are also trying to think "all right, I have some excess free cash flow… Do I start drilling new wells adjacent to my current… " And that's an expensive proposition that could pay off really well. But if we get some sort of negotiated settlement later this year with Russia and Ukraine, and the pipeline start flowing again, it could be a really difficult situation. So, yeah, that geopolitical issues in Europe are dominating natural gas and things will be volatile until we get a full resolution and they will be volatile in my view, even after that. > Here's another question we having after that. What is your view on grocery stocks question mark like Loblaw right now? >> So grocery stocks have been very very strong performers. They have been strong performers because they have the ability to pass on price increases that they get from buying the food themselves. They get passed on to consumers. They get to pass it on everything all day. They get to adjust prices. And so that's allowed them to not only maintain margins but to expand margins. So a company like Loblaw's, it has performed extremely well. The stock has performed extremely well. It's outperformed the TSX massively over the last 3 to 5 months. I don't see the current trends of baiting. I see them continuing to be able to pass along price. I see them continuing to be able to, kind of, manage their operational efficiency quite well. They got a lot better at that. It's a matter of what the market is willing to pay for that income stream. I'm not sure though multiple expands from here. But it probably can hold steady. And it's a good company in a high-quality company that you're not in a blow the lights out. But you might be able to get 6 to 8 to 10%. >> During the pandemic they saw their sales search. We were not dining. We were staying at home and cooking at home. Either we would rush to get out of our houses again and never pick up a frying pan which, I like to cook, so that's not me. Or those habits would stick. In all things maybe things just balance themselves out? >> Yes and I think we are making progress towards reopening in Canada and I don't think we are all the way there. But we are probably 60, 70, 80% of the way there. People are starting to eat out again. People are to continue that trend and get more comfortable with going to restaurants. But the grocers are protected. They sell goods to small restaurants. They sell… There is going to be continued demand for the base groceries. So I don't see it having a huge impact. >> Interesting stuff. Here's another one, we touched on Amazon briefly and obviously Amazon in our conversation about what we heard from Walmart and Shopify, what's your opinion of Amazon? In this, I guess, post pandemic world. I hope it's post pandemic. >> Amazon is an interesting one because you hear about retail sales. They get compared to Walmart. It really is an AWS business which is providing data and storage services to large corporations. Cloud services. There is massive amounts of growth taking place in that industry. I think that's can be the ultimate driver of the future of the company. That said, they made huge investments. Around 5%. So you think about 5% going to 4 1/2%, just a little bit, 50 basis points margin contraction. That results in 10% EPS reduction. And so, Amazon has an even lower margin profit in the retail business so it's really tight. They need to be careful about how much capital expenditures they get to make to continue to build and grow that business knowing that AWS is really the key to their future. >> Interesting stuff indeed. Will be adding back your questions with Justin Flowerday on the market that just a moment's time. As always, make sure you do your own research before making any investment decisions. A reminder that you can get in touch with us anytime. You have a question about investing or what's driving the markets? Our guests are eager to hear what's on your mind. So sinister questions. There are two ways you can get in touch with us. You can send us an email anytime@moneytalklivetd. com. Or you can use the question box right below the screen here on Webbroker. Just writing your question and hit send. We'll see if one of our guests can get you the answer right here in MoneyTalk Live. >> Right in our focus is on earnings that we are waiting for a decision of the US Federal Reserve. Joining us now is Anthony Okolie. >> Yeah 75 basis points later this week. … June, that would lift its Target rate for the Fed points between 2. 25 to 2 1/2%. In doing so, the committee brings down to its estimate of longer run neutral level. Now, TSI is also looking for option alley by leaving the door open for an additional 75 basis point increase. With a 75 basis point hike for July, investors will now look ahead to what the Fed does next after reaching neutral. The potential for more hikes, given the sticky inflation backdrop, is likely to put pressure on front and rates and according to TD securities, but flattening pressure on the yield curve going forward. Greg? >> Our audience in the program earlier, Anthony, put the question in what of what the chances are for 100 basis point hike. What are we getting from TD? >> Despite the hottest US inflation report we've seen yet, TSI says it has been pushing back 100 basis point rate hike in favour of 75 basis points. This might be in part to lessen or ease the pressure on other currencies. Like the euro which is currently suffering from high import price inflation. While the implied rate did jump after the June inflationary report, it still below the post June high of 4%. >> Interesting stuff as always. It will get very interesting tomorrow afternoon. Thank you Anthony. >> Thank you. >> Anthony Okolie. And now on Bay Street and Wall Street we have the TSX to 18,964. Of course Shopify, getting hit pretty hard today. Also the pullback with the price of crude heading into lunch hour. … $0.60 a share along with other gold miners out there. Canadian Tire, it's interesting we are talking about how Walmart is warning on profit because inflation is changing consumer habits, sort of reverberating through some of the big US retail names. We seem to have some pressure on some Canadian retellings as well. You have Canadian Tire with 160 bucks and change down 6% at this hour. Let's check in the S&P 500 of course. Walmart, warning of few other big corporate earnings perhaps not pleasing investors today. The S&P 500 down 4%, the tech heavy NASDAQ, let's see what the situation is there. Even more pressure to the downside. 1.9% right now off of yesterday's. Let's check in on those Walmart shares. Some pressure at 122 bucks and change. Down 7 1/2. That profit warning of inflation shifting consumers are shopping. If you gotta pay more for food, maybe you're not in a by some other things at Walmart. At least that's overhearing from executive management there. Were back now it Justin Flowerday from TD asset management. We want to get your questions. This one coming in off the website just a couple moments ago. What an industrial reits in this environment? >> It's been a really strong performance in an impressive sector. In terms of the past several years. There are not any signs of that growth is slowing in the short term. If you look at the major metrics, rents are growing phenomenally across Canada. I think on average up in the 20 to 25% average range. Vacancies remain really low. When you think about what could damage in the future, some of the supply and demand, done recently in the industry, the new supplied square footage coming up… It's coming. It's just not coming as fast as the need for disrupting the industry. (. . . . . ) … Take a little more risk with that type of investment. >> Here is an interesting one to in terms of financials. We have of you were saying they are interested in the financial space so how do US and Canadian banks look right now in this environment? We've Artie heard from the US banks earning season and they've put aside some money for a possibility of a rainy day. >>Yan it's an interesting dynamic for Canadian and US banks. US banks are little more driven by IPO market,… Canada a lot more bite. Kind of retail banking. The wealth divisions insurance. We obviously have capital markets divisions but in both cases, both banks are going to see PCL's rise. Provisions for credit losses. That will arise. It's not a bad thing. The banks have their models. The models try and predict the type of pressure that some of their customers are to be under in their ability to pay their loans on time. They can start taking provisions. So you saw that in the US. You're gonna see some of that in Canada over the next few quarters for the Canadian banks. When you think about what that does to offset some of the positives that they have going on, which is instant expansions and net interest margins expanding on the back of higher interest rates, I think it probably offsets some of the growth. But the banks have been penalized by the market. And the Canadian banks on average are probably trading around 10 times. So the market isn't really expecting a ton of positive things over the next few quarters. We will have to see what they provide. But keep your eye on PCL's. >> Indeed. Provisions for credit losses. The big overhanging question. Justin, thank you for coming we hope you come back to us. > Thank you so much. >> Thank you Justin Flowerday head of equity it TD asset management. Later this week will be with Ben Gossack taking your questions. We will go at noon Eastern time to give you a head start. If you have questions email money talk@tdlive.com. That's all the time we have a show today. Thanks for watching. We will see you tomorrow. [music]