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[theme music] >> Hello, I'm Greg Bonnell. Welcome to MoneyTalk Live, brought to you by TD Direct Investing.
Every day, I'll be joined by guests from across TD, many of whom you'll 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's show, TD Asset Management's Justin Flowerday joins us. We are going to talk about what sectors might be receiving the baton from tech if there is a rotation that could move the markets higher from here. MoneyTalk's Anthony Okolie is going to give us a preview of the big Fed rate decision coming this Wednesday. We get an inflation update to, it's a big doubleheader. Anthony breaks it all down. And in today's WebBroker education segment, Caitlin Cormier is going to show us how to use the watchlist and tracker tool you're on the platform.
So here's how you can get touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before he gets all of that in our Guest of the day, let's get you an update on the markets. First trading day of the week. Let's check in on the TSX Composite Index and see how we are faring at this hour. Modest green on the screen, we are up 56 points, 1/4 of a percent.
Price of crude stabilizing after a choppy week last week.
Cenovus Energy is up a little more than 2%.
Another energy play, Denison Mines, a uranium play, the nuclear story, up about 2.6%. South of the border, it was a moneymaking week for the SP500 last week.
Inflation coming out on Wednesday morning and then a Fed announcement in the afternoon, a lot of uncertainty around that. You're up a whopping four points right now, not a lot of activity, up a little shy of 1/10 of a percent.
Tech heavy NASDAQ, let's check in. A little bit more strength, up about one third of a percent. Nvidia trading today, 10 for one stock split.
$121.82 per share, it's up three quarters of a percent.
And that's your market update.
The performance of big tech stocks like Nvidia have helped push the markets to new highs this year, but cannot run continue and if not, which acted as the baton get past to? Joining us now discusses Justin Flowerday, Managing Director and at a public equities at TD Asset Management. Welcome back.
>> Great to be here.
>> We are not at the halfway point but people are thinking about summer vacations, getting into that mindset.
AI is still all the rage, tech as well. How are you reading this market?
>> Obviously, AI themes have been carrying the baton this far, have driven the markets to all-time highs and, look, there's reasons to believe that there is potentially some legs left to go with this. If you think about what has led the tech sector, I mean, it really is kind of AI and semiconductors. What hasn't been moving as strongly has been other areas like software and services and if you had participation and had those sectors join the leadership, that would absolutely help with the move in tech hire. The other reason I would point to, to be optimistic, is overall earnings-per-share across technology remain really strong, and do you have a line of sight towards the back half of this year with continued revisions. The lesson I would say is this AI revolution, this is a once-in-a-lifetime thing that's happening and if you think about the size of the opportunity and what's happened, you have a $1 trillion installed base in data centre. Right now, Nvidia is holding about $100 million, that's the run rate, revenue every single year, so it's still early days in terms of replacing the data centre which needs to be enabled for AI. The pushback you're going to hear is all around, okay, but what's the killer app?
>> Is that why the software is legging?
>> Yeah, because we haven't had one. We need one to justify spending hundreds of billions of dollars that people are making an capex to build these things out.
In terms of passing the baton, look, I think there's a few sectors that could be interesting but it's not one big, big theme, it's a mishmash.
>> Let's get into the mishmash then. I know that at TD Asset Management, we've been hearing about industrials not getting some of the recognition in terms of what they've shown so far.
>> Yeah, industrials is a very interesting sector and it's a great sector for colleagues that end up covering it, like analyst Juliana Faircloth, Terence Chung.
There are a number of themes in industrials that are going to continue empowering certain areas of industrials higher, one is aerospace defence.
It has been the beneficiary of a return in passenger airline travel and the backlog of planes that need to continue to get built. There is electrical equipment, so with the buildout of all these data centres, you need a whole bunch of different components to go into building data centres, helping power the grid to allow for the new power consumption that's required. So look, there's going to be continued trends there. Some of the other sectors around the early cyclical's, we saw PMI data last week that wasn't that strong in terms of goods, we are seeing some sluggishness across different sectors that are traditional end markets, automation and even rails and transportations. I think there's a chance for some of those to improve if we see a bit of a return to the shorter cycle PMI activity.
>> Interesting areas that might show some strength and help out with this rally. What about the weakness?
I think we've been watching pretty carefully the consumer for a long time, trying to figure out how in a high inflation environment that we've lived through and high borrowing cost environment, how are they hanging in there?
Are we seeing some weakness?
>> Consumer situation is interesting. Everyone is watching it to figure out, is the consumer going to crack? Have they been spending too much? Have they depleted their excess savings? I would say, look, there has been a general-- I wouldn't call it weakening but just slow down in terms of overall confidence of the consumer. And then, when you look into different pockets of the consumer, there is cohorts that are not doing as well as others, so the lower income cohort which has depleted much of their excess savings, we are seeing delinquencies and credit cards start to go up and delinquencies in auto loans. In terms of investing, there is a slight trade down taking place in terms of consumers shifting their consumption bucket to something more value-oriented. Companies that can offer really good value for the products they are selling and run their operations efficiently stand to benefit. On the other end of the spectrum, you have a group of consumers that really don't care about price and really just want to go out and buy what they want to buy, they are not sensitive to price.
And so when you think about investing there, there are some great luxury brands, companies with a really, really strong brands are going to continue to do well.
>> One with the big events of this week will be another inflation report out of the United States, another Fed rate decision. No expectation that the Fed is about to move anytime soon.
The market is obviously so sensitive to any of these data points.
I think of last week, you talked about week PMI's in the market couldn't decide whether the bad news was good news or the bad news was bad news or the good news was good news. I feel like a market translation machine is trying to figure out what should be getting spit out of the other end.
>> People are really looking forward to some easing in the interest rate environment to allow some pressure off of balance sheets and that's going to help improve consumer confidence. At the same time, anytime you ease, the reason for easing is because the outlook for the economy has weakened. It will be really interesting as we had to the summer to start to determine when the first rate cut is going to come from the Fed and when the next rate cuts are going to come from central banks.
>> Interesting stuff in a great start to the show. We are going to get your questions about the markets for Justin Flowerday from TD Asset Management in just a moment's time.
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.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
We have some activist investor activity in the airline industry today. Elliott Management taking a $1.9 billion stake in Southwest Airlines, that does make it one of the airlines largest shareholders now. Eliot is pushing to replace Southwest's CEO in the chair of the board. Right now, the stock is up about 8 1/2% in the wake of that news. Here at home, we have shares of routes under pressure today. The retailers posting a loss of $8.9 million for its most recent quarter, that on a slowdown in sales for its online and brick-and-mortar businesses. Roots also says it faced inventory challenges and couldn't meet demand for its Cooper fleece offerings. Right now, you got routes down about 3%.
And the S&P 500 is getting three new members: KKR, CrowdStrike and GoDaddy will join the index as of June 24 as part of a quarterly rebalancing.
The three stocks leaving the S&P 502 bigger for those are Robert Half, Comerica and Illumina.
A quick check on the markets, first trading day of the week. We will start here at home on Bay Street. The price of crude oil stabilizing a bit, a modest bit into some energy names. A bit of a modest headline. 53 points to the upside, 22,060 points for the TSX Composite Index, up one quarter of a percent. South of the border, it was a moneymaking week last week the S&P 500. Got some big announcements in the offing, inflation, the Fed meeting. You are up a modest seven points, little more than 1/10 of a percent on the S&P 500.
We are back now Justin Flowerday, head of public markets at TD Asset Management, take your questions about the markets.
Let's get to the question. A lot of companies that did well during the pandemic have been stagnant.
Are there any signs of a turnaround?
>> That's an interesting one. When you think about some of these COVID beneficiaries that really had an incredible run throughout the early days of COVID, a lot of them have fallen off dramatically so the classic ones are Peloton and Zoom, Wayfair.
A lot of these companies that have really benefited have come back down and the reality is is that there are only so many Peloton's you can sell and there are a lot of folks who bought one who don't use it sustainably. I think there were excess valuation set of come back down to earth. I would put those in one bucket and then in the other bucket I would put a group of companies that are really great companies that have beautiful futures that saw a surge and then things of come back down to earth. So a Home Depot for example is one of those companies, Thermo Fisher is another company. These are companies where a lot of people renovated their home so you saw an uptick… >> It pulled forward that activity. I was one of those.
I had nothing else to do.
I worked on the house.
>> And Thermo Fisher, with a lot of the activity going on in hospitals, with a lot of the devices being used, they obviously benefited.
What happened with those, I would put Home Depot and Thermo Fisher in the same bucket, what is happen with those is demand for their products has gone down, it will probably reset to a new level where you can see some sustainable growth revenue.
The market has yet to I would say recognize that, yet to reward that. I think there is an opportunity over the next couple of years as we make it through this downturn in the economy, we reset expectations for the great companies that have a future like a Home Depot or Thermo Fisher, I think there is potential for decent upside ahead.
>> While paint on the walls will last a certain amount of time, my wife's appetite for the colour that was painted three or four years ago and what she wants to see now does change with time, so I've got some work in my future.
>> No comment.
>> No comment! You're not dragging me down with you, buddy. Next audience question. With your outlook on uranium and uranium stocks?
>> Okay, yeah.
When you think about demand for uranium, we are in this kind of new renaissance for nuclear energy and it's been driven quite a bit by something we talked about earlier, data centres and in demand for power.
In the US right now, it's around 20%, the base load. I think there is more appetite to see that grow over time and see new reactors be developed. What that means is you have a perspective of the future that you haven't had for a long time in terms of demand for utilities that are going to continue to try and get their hands on uranium. And so uranium's doubled in price over the last we will call it 18 months.
I think we probably don't have another doubling in the next 18 months but we have produced a floor where you have a supply demand imbalance where you're going to see supply still be below demand for the foreseeable future. When you think about supply increases, anytime you get it in commodity land, an increase in demand and a market that has been kind of stagnant for: a decade, companies get really attracted and they want to start producing more commodity to generate more cash flow.
The big countries that are out there producing, Canada, obviously, is one of them, the US, Australia. I think you're going to start to see some new projects and some expansions of existing projects that are going to start to build a supply but that imbalance is not going to go away this year, it's not going to go away next year.
2027, 2028, we could start to see the market get back into balance but it's a nice new environment for nuclear energy and uranium will continue to participate.
>> That's uranium as part in the sort of hunger for electricity. I think of EVs and how much electricity they will use. Is there an infrastructure argument two, we have to build more transmission lines?
>> Absolutely.
It pulls along a lot of different commodities along the way. Copper obviously is one of them that gets pulled into this as you are building out infrastructure, power grids and transmission lines, you need more copper.
There are other commodities as well. This isn't a one year phenomenon, this is something that's going to take place over the next five, 10 years.
>> Let's get to another audience question, this one timely considering that if you are watching politics in Ottawa, this is the issue before them this week. The increase, the proposed increase in capital gains inclusion rate. The viewer wants to know, is going to affect the income of companies and also their increase in dividend annually paid out? For example, TC Energy is expected to sell assets to raise capital?
>> So look, I think the big fear out there is that corporations are now going to have a higher tax on any capital gains that they generate and they are going to potentially avoid or reallocate capital in order to minimize the tax.
I don't think there's going to be a sustainable medium or longer-term impact. There will probably be some things that happened in the next little bit to minimize tax payments for this year but beyond that, there isn't going to BA, first of all, a huge hit for corporations on the level of taxes. Second of all, I think folks are wondering, do dividends become more attractive because capital gains taxes have gone up?
On the margin, you might argue so but I don't think this is going to be a meaningful driver of capital allocation decisions for corporations or capital returns between dividends and obviously just generating capital gains. The thing that concerns me, really, is just around what this means for the smaller businesses and what this means for entrepreneurship because these are the ones that really stand to benefit, right, from kind of you build up your business, you bill at the capital in that business, eventually you sell it and you, there is a very meaningful advantage to having that capital gains inclusion rate at 50%. If it goes to 66, does it start to kind of on the margin put a message out that maybe it's not Canada I want to be building this company up in?
People can go anywhere, capital is mobile. I'm hoping this isn't the result of this is something I struggle with in terms of, we want to continue to incentivize that risk-taking culture on an individual level, it helps with productivity, it helps with building new companies that can become bigger companies over time.
>> Interesting stuff.
As always, make sure you do your own research before making any investment decisions.
We will get back to your questions for Justin Flowerday on the markets and just moments time. And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Analyst guitar educational segment.
If you're looking to test out an investment idea before buying, Weber crystals can help. Joining a standard status is Caitlin Cormier, Senior client education instructor at TD Direct Investing.
>> Let's hop into what broker and see where you can find the watchlist tool to help with this.
Top right hand side of the screen, there is this little watchlist icon which is just a little star and you will notice that it shows up with 10 lists that you are able to create for yourself, so 10 different watch lists.
You can put up to 10 different securities on each watchlist.
You will notice appear that I have stocks and ETF listed.
So I will just add a couple of different companies here.
Wrong button there.
There we go.
And we will add just a couple of more here. I could also at ETFs. For example, I will pick a common one here.
Again, we are just kind of typing in either names or kind of the symbols for those companies. You will notice in the drop-down you can choose mutual funds, options and indices as well to add to the list so you don't have to stick to just stocks and ETF's.
For today I will stick to that from a portfolio. I will notice that I have five security, I have up to 10 on my list. 10 lists, 10 different securities. I can rename my lists.
Here I can click the top part and rename this my list, for example. Click save.
The other thing I can do is click this drop-down and see additional information on these companies.
For this company, for example, I have a little chart where I can kind of go through and see different time periods and see how the stock is performed. I can see over here quote information, with the bid and ask is, how many orders are out there at those prices, as well as kind of our range for 52 weeks and midday. We have a quick analyst recommendation over here as well as some fundamental information, so that ex dividend date and those sorts of things. The other thing we can do is we can click this little fundamental tab and then instead of showing us on the main screen what we had before under the quote, we are seeing that more fundamental information if that is more important to us. So lots of information that you can see in sort of a quick little screen as far as your watchlist so you can check together any different securities you are interested in and kind of keep track of them a little better there.
>> So I'm building the list, I can look at it on a daily basis to see what's going up and what's going down, see some of the fundamentals. What if I think, wow, I was interested in this three months ago and I wonder how would've done if I had made that move three months ago.
>> Absolutely. Last week, I showed the portfolio manager with an advanced >> So there's something similar to that within web broker and it's this tracker. You may have noticed this kind of third tab here. With the tracker does is you could actually act as if you put in a trade for one of the securities. So for example, let's just pick this one here, and I'm going to say maybe I purchased 100 of this particular stock and then I have to put in an average cost.
You can put in three months ago, three weeks ago, if I bought the stock, how would I have performed? I can go back in time, find at the historical price for the stock, let's it was $20, keep it nice round even number, and click save. And then it's actually going to show me how my portfolio would've performed, so it gives me my current market value, my book cost, any sort of gain or loss, I can do that with different securities too. I could do that through 50 shares of this one, let's say about it now at 52.85 for example, click save and then as time goes by, I can click this refresh button. It will update the prices as they update and it will show me any changes that are happening within the market with the securities that I have.
So it's kind of interesting how you can build a mock portfolio almost, track it, see your gains and losses and then as time goes on you can see whether that decision was a good one or may be a bad one.
>> I can see if I'm as smart as I think I am. You know why?
As an investor, I have been humbled. I'm not as smart as I think I am.
>> It's probably more of a 50-50, if that.
>> 50-50 is not too bad. Thanks that, Caitlin.
>> No problem, thanks, Greg.
>> Our thanks to Caitlin Cormier, Senior client education instructor at TD Direct Investing. And reminder that all of June is Options Education Month.
[upbeat music] Okay, we are back with Justin Flowerday, head of public equities at TD Asset Management, taking your questions about the markets. Here's another one for you, it just came in in the past couple of moments. With interest rate starting to come down and demand for energy going up, what do you think the future looks like for renewable power?
>> So the renewable power phenomenon is not a new one and, you know, we have seen many, many years of build out of infrastructure to support renewable power.
That's not going to stop anytime soon and it'll just continue to build and build and build and we are going to need diversified sources, whether it's wind or solar or Hydro. These are going to be really, really important parts of the power production going forward.
What we need to be careful about is to make sure that any time you have let's say companies that get involved in renewable power, you're looking at what is the long term ROI for these types of products that they are selling? And then, do they get impacted by the kind of sways and government policy? And if you start to see governments providing huge amounts of incentives that are kind of going to be really effective in the next two years or four years that will go away in the next five or 10 years, you may not have a really economically viable product there. We just need to be careful about how companies make kind of overproduced to take advantage of incentives but there is no question that we are going to see a continued trend higher in terms of renewable energy and demand to have that as part of the power production, some being baseload, some solving for peak demand.
>> When I think about that question, interest rate sensitivity for certain names, we know either they have to build out and perhaps take on debt to do that or even the fact if they offer dividends, the dividends might start looking a little more attractive, if last week's rate cut is not a one and done but the beginning of the cycle.
>> Absolutely, that notion of lower interest rates being a catalyst for risk-taking and companies that are able to fund more projects through debt when they have lower interest rates, the balance sheet doesn't become too heavy, that's a positive and so you will get more activity and more investment, both in equity and in debt in those environments where interest rates are coming down.
We will have to see. We were at zero rates and you could, as a company, get your cost of debt capital might have been three, 3 1/2, 4%, that was a completely different environment where there was a lot of investment being made that didn't have a tangible our allies so I would always go back to what is the ROI for the project and what is the ROI over the next 10 years, not just two or four years? But lower interest rates will help for sure this sector.
>> You want to keep an eye on that return on investment.
Next question. What's your view of the impact of the completion of the Trans Mountain Pipeline expansion project on the Canadian energy sector?
>> Right, so this is a big deal for Canadian energy and for a few different reasons.
First of all, it's another outlet for higher production, so support higher production from major producers out West. If you think about what hurt some of the majors in the past, it's the differentials between Western Canadian select and branch or WTI. And what this allows for is the differentials to tighten up, when it was 25 or 30 back in the day, we know how wrote range that's probably going to be supported at the $10-$15 differential range. When you transport a barrel of oil on TMX, the total is eight dollars, so it's never going to be zero, but we have a period of time where that differentials should be narrower, and that supports higher production. I think we have 560,000 barrels per day that needs to get, to fill the pipeline and that will happen over the next few years and I think the other thing that happens is you have some of the heavy producers that anytime you send heavy crude to the pipeline, it needs compensation. Some of the heavy producers that have condensate production as well should benefit from the TMX, a little disproportionately from some of the lighter producers.
>> Good break down there on the TMX project.
Question now about divergence and what it could mean for currency and investment. What sectors will benefit or suffer from divergence in the US dollar versus CAD?
>> First principles is always going to tell you that if you have an interest rate differential between the two currencies, the currency that will generate a higher rate of return and higher interest rate should perform a little better going forward.
I'm not sure that's going to necessarily hold in Canada.
And the reason is the starting point. Canada has been in such a difficult position in terms of it economically having a little less productivity and a little more challenges let's say in terms of consumer debt and the impact that interest rates have, higher interest rates are going to have on people's ruling over mortgages.
And so there's potential that people see in Canada and global investors see a little bit of pressure coming off the Canadian consumer, a little bit of pressure coming off the Canadian economy.
First pencils would say lower interest rates in Canada, CAD should we can. I'm not sure this time.
I think there's potential for CAD to remain solid despite the differential going forward.
>> Interesting stuff indeed. We'll get back to questions for Justin Flowerday on the markets in just a moment's time.
As always, make sure you do your own research before making any investment decisions.
And a reminder that you can get in touch with us at any time.
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.
If you like it data and central-bank intrigue, this is your week. We got a doubleheader on Wednesday, we are getting US inflation in the morning and then we get a fed decision in the afternoon, all of this on the heels of that stronger-than-expected US jobs report on Friday. There's a lot going on, lucky for us, as equally joins us now to break it down and what TD Securities things about this.
>> TD Securities things that core CPI in the US will slow further to a soft .3% month over month and that translates to three month annualized return of still high 3.7% in May. And as the chart shows, if it does transpire where inflation, core inflation does cool, it would be the first drop under 4% in 2024. For headline CPI, they are looking for another soft print which is in line with consensus estimates of .1% month over month increase.
Now, when we look deeper into the details, they do see energy pulling back due to the drop in gas prices and food prices they expect to remain fairly muted as well.
On the good side, they say used cars are likely to add to inflation in May after two big pullbacks in the previous two months, March and April, of about 1%.
Taking a look at core services, they expect a cooling in May as well. Car insurance, a key contributor to inflation, likely stayed stronger in May as well.
Airfares they see pulling back, they see lodgings away from home rebounding, all in all, they see super core inflation edging lower by .3% month over month and that's down slightly from the .4% we saw in April.
Looking ahead, TD Securities continues to expect core inflation will likely cool to an even lower .2% after June partly due to the continued drag from the good sector for these slowing in the core services inflation. All told, headline CPI should make little inroads.
They do see headline CPI ending at around 3% year-over-year by the end of the year, but core should slow down to about 3.2% by the fourth quarter of this year. That is down from the 4% that we saw in the third quarter of 2023.
>> That's the anticipation for where inflation is headed south of the border. What about the Fed? I don't think there big bets this week that the Fed is going to do much other than just say be patient guys. But we are eventually trying to look for a cut.
>> I think that's exactly right.
TD Security sees the Federal Reserve being patient on interest rates. They do not expect any changes this week. However, moving further down the road, they see in terms of inflation cooling, they expect the Fed to cut interest rates twice this year, in September and December, which would bring the Fed funds rate to about 4.75 percent by the end of the year.
We will have a media reaction to the Fed's decision on Wednesday. I will be interviewing to the economics on that day.
>> Great stuff. Thanks that, Anthony.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, for an update on the markets.
We are having look at TD's Advanced Dashboard, a PlatForm active traders available through TD Direct Investing. This is a heat map function. CNQ they are using up some real estate, up about 1 1/2%.
Not the only stocks that are moving today. In the materials bucket two, it was a choppy week last week for some of the metal prices and it really took the mining stocks along for a ride.
Today you've got some modest rain.
Barrick's up about 1%. Shopify, the tech basket, a little more than 2%.
South of the border, ahead of that big one say that Anthony was just telling us about when you get it inflation report in the morning and a fed decision, what is going on?
Look at Nvidia hugging up all that space.
The bigger amount of real estate you take, we are talking volume there. You've got the tempter one split taking hold today, see clearly some activity in the name. The stock is up a little more than 1%.
Some of the automakers, GM up over 4%, Ford up 2.5%.
Will it seems to be good in the technology bucket for Nvidia is good for rival AMD. But they are down about 3.5%.
We are back with Justin Flowerday from TD Asset Management. Look at your questions about the markets.
Someone wants to know if you see any true large-cap value plays currently?
>> Okay, yeah, this is a tricky one because my view of how we define value might be a little bit different than some of the style buckets that are used elsewhere.
What I mean by that is value, when you think about the sectors that typically comprise value, value, you are talking about companies that have multiples which are lower than let's say their peers were the market.
So the company is or sectors that have typically been value oriented would be companies that or sectors that have low average rates, the energy sector in general, it's a cyclical sector and typically a lower price to earnings or price to cash flow. Thanks and financials, it typically higher leverage, equates to a lower multiple.
And so a lot of the value companies are going to come from the sectors which are just a little bit more cyclical.
And so when you think about interesting large-cap value plays, look, all he would say is that valuation matters as a starting point, particularly if you are thinking about returns over a longer time period, not just over 1/4 or two quarters or year. If you are thinking about a 5 to 10 year standpoint, valuation matters.
All I would suggest is that identify really good businesses that have really attractive starting valuations and I'm not going to go in for names here but that's a really good starting point for future returns.
What I would say is that we have gone through. Where people have talked about growth over value. Growth has outperformed value. What that means is that some of the secular growth sectors in the market, such as technology and AI, we talked about some industrial components, their different ones in healthcare, these are sector growers that have performed very, very well.
There will be another time where energy and financials in some of these other more traditional value plays are going to have really great times in the market but it doesn't necessarily mean you try to find it in one quarter a couple quarters, you want to find really great companies with good starting valuations that you can hold for 5 to 10 years.
>> Okay, we will squeeze in one more question. This takes us back to the top of the show. If you are saying, once you get your view on the AI trend.
>> Right, so I think I mentioned that he says or she says trend, I will call it revolution. This is an incredible development for kind of the market and, in a sense, humanity, and a lot of folks would be pro-AI and a lot of folks would be at CAI and it causes debate, but in terms of the trend, it's not going to slow.
There's going to be continued investment because, at the end of the rainbow is some version of the future which is a more productive society, a society that can allow for people to have more free time because they are becoming more efficient at work and it should all end up in a really good place. What we need is we need those killer apps, though software companies come up with applications which harness the power of AI and you're seeing it on the margin from companies like Microsoft and copilot, other companies are making use of AI to allow for greater insights into some of the data but there still hasn't been that really strong killer app. Once that happens, they'll be phase 2.
Right now we are in phase 1 and at some point phase I is going to roll over and slow down.
That doesn't mean the AI revolution is done.
It just means we now need to let that sit for a little bit, marinate and wait for that killer app to be produced by the software giants.
>> Apple has its developer conference today. In about 20 minutes, they are going to kick off. There is an expectation that while all these other tech companies talk about AI, apples would have to say something about it too.
>> Absolutely. I think they will. I think everybody is in the same boat which is how can we provide a differentiated AI experience for our end-users?
They are all trying to. Matt is trying to, Apple is trying to, Alphabet and Google are trying to, so it will be exciting to see what Apple has to say.
>> You got about 20 minutes before the kickoff on that event. It just in, always a pleasure to have you here.
I look forward to the next one.
>> Thanks very much.
>> Thanks to Justin Flowerday, managing Dir. and head of public equities at TD Asset Management.
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 into future shows.
You want to stay tuned for tomorrow show as well. Chris Whelan, Senior Canada rate strategist and head of portfolio and ESG strategy with TD Securities is going to be our guest. He wants to take your questions about interest rates in the economy. You can always get those questions in ahead of time. Just email moneytalklive@td.com. That's all the time we have for today's program. Thanks for watching. We will see you tomorrow.
[theme music]
Every day, I'll be joined by guests from across TD, many of whom you'll 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's show, TD Asset Management's Justin Flowerday joins us. We are going to talk about what sectors might be receiving the baton from tech if there is a rotation that could move the markets higher from here. MoneyTalk's Anthony Okolie is going to give us a preview of the big Fed rate decision coming this Wednesday. We get an inflation update to, it's a big doubleheader. Anthony breaks it all down. And in today's WebBroker education segment, Caitlin Cormier is going to show us how to use the watchlist and tracker tool you're on the platform.
So here's how you can get touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before he gets all of that in our Guest of the day, let's get you an update on the markets. First trading day of the week. Let's check in on the TSX Composite Index and see how we are faring at this hour. Modest green on the screen, we are up 56 points, 1/4 of a percent.
Price of crude stabilizing after a choppy week last week.
Cenovus Energy is up a little more than 2%.
Another energy play, Denison Mines, a uranium play, the nuclear story, up about 2.6%. South of the border, it was a moneymaking week for the SP500 last week.
Inflation coming out on Wednesday morning and then a Fed announcement in the afternoon, a lot of uncertainty around that. You're up a whopping four points right now, not a lot of activity, up a little shy of 1/10 of a percent.
Tech heavy NASDAQ, let's check in. A little bit more strength, up about one third of a percent. Nvidia trading today, 10 for one stock split.
$121.82 per share, it's up three quarters of a percent.
And that's your market update.
The performance of big tech stocks like Nvidia have helped push the markets to new highs this year, but cannot run continue and if not, which acted as the baton get past to? Joining us now discusses Justin Flowerday, Managing Director and at a public equities at TD Asset Management. Welcome back.
>> Great to be here.
>> We are not at the halfway point but people are thinking about summer vacations, getting into that mindset.
AI is still all the rage, tech as well. How are you reading this market?
>> Obviously, AI themes have been carrying the baton this far, have driven the markets to all-time highs and, look, there's reasons to believe that there is potentially some legs left to go with this. If you think about what has led the tech sector, I mean, it really is kind of AI and semiconductors. What hasn't been moving as strongly has been other areas like software and services and if you had participation and had those sectors join the leadership, that would absolutely help with the move in tech hire. The other reason I would point to, to be optimistic, is overall earnings-per-share across technology remain really strong, and do you have a line of sight towards the back half of this year with continued revisions. The lesson I would say is this AI revolution, this is a once-in-a-lifetime thing that's happening and if you think about the size of the opportunity and what's happened, you have a $1 trillion installed base in data centre. Right now, Nvidia is holding about $100 million, that's the run rate, revenue every single year, so it's still early days in terms of replacing the data centre which needs to be enabled for AI. The pushback you're going to hear is all around, okay, but what's the killer app?
>> Is that why the software is legging?
>> Yeah, because we haven't had one. We need one to justify spending hundreds of billions of dollars that people are making an capex to build these things out.
In terms of passing the baton, look, I think there's a few sectors that could be interesting but it's not one big, big theme, it's a mishmash.
>> Let's get into the mishmash then. I know that at TD Asset Management, we've been hearing about industrials not getting some of the recognition in terms of what they've shown so far.
>> Yeah, industrials is a very interesting sector and it's a great sector for colleagues that end up covering it, like analyst Juliana Faircloth, Terence Chung.
There are a number of themes in industrials that are going to continue empowering certain areas of industrials higher, one is aerospace defence.
It has been the beneficiary of a return in passenger airline travel and the backlog of planes that need to continue to get built. There is electrical equipment, so with the buildout of all these data centres, you need a whole bunch of different components to go into building data centres, helping power the grid to allow for the new power consumption that's required. So look, there's going to be continued trends there. Some of the other sectors around the early cyclical's, we saw PMI data last week that wasn't that strong in terms of goods, we are seeing some sluggishness across different sectors that are traditional end markets, automation and even rails and transportations. I think there's a chance for some of those to improve if we see a bit of a return to the shorter cycle PMI activity.
>> Interesting areas that might show some strength and help out with this rally. What about the weakness?
I think we've been watching pretty carefully the consumer for a long time, trying to figure out how in a high inflation environment that we've lived through and high borrowing cost environment, how are they hanging in there?
Are we seeing some weakness?
>> Consumer situation is interesting. Everyone is watching it to figure out, is the consumer going to crack? Have they been spending too much? Have they depleted their excess savings? I would say, look, there has been a general-- I wouldn't call it weakening but just slow down in terms of overall confidence of the consumer. And then, when you look into different pockets of the consumer, there is cohorts that are not doing as well as others, so the lower income cohort which has depleted much of their excess savings, we are seeing delinquencies and credit cards start to go up and delinquencies in auto loans. In terms of investing, there is a slight trade down taking place in terms of consumers shifting their consumption bucket to something more value-oriented. Companies that can offer really good value for the products they are selling and run their operations efficiently stand to benefit. On the other end of the spectrum, you have a group of consumers that really don't care about price and really just want to go out and buy what they want to buy, they are not sensitive to price.
And so when you think about investing there, there are some great luxury brands, companies with a really, really strong brands are going to continue to do well.
>> One with the big events of this week will be another inflation report out of the United States, another Fed rate decision. No expectation that the Fed is about to move anytime soon.
The market is obviously so sensitive to any of these data points.
I think of last week, you talked about week PMI's in the market couldn't decide whether the bad news was good news or the bad news was bad news or the good news was good news. I feel like a market translation machine is trying to figure out what should be getting spit out of the other end.
>> People are really looking forward to some easing in the interest rate environment to allow some pressure off of balance sheets and that's going to help improve consumer confidence. At the same time, anytime you ease, the reason for easing is because the outlook for the economy has weakened. It will be really interesting as we had to the summer to start to determine when the first rate cut is going to come from the Fed and when the next rate cuts are going to come from central banks.
>> Interesting stuff in a great start to the show. We are going to get your questions about the markets for Justin Flowerday from TD Asset Management in just a moment's time.
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.
Right now, let's get you updated on the top stories in the world of business and take a look at how the markets are trading.
We have some activist investor activity in the airline industry today. Elliott Management taking a $1.9 billion stake in Southwest Airlines, that does make it one of the airlines largest shareholders now. Eliot is pushing to replace Southwest's CEO in the chair of the board. Right now, the stock is up about 8 1/2% in the wake of that news. Here at home, we have shares of routes under pressure today. The retailers posting a loss of $8.9 million for its most recent quarter, that on a slowdown in sales for its online and brick-and-mortar businesses. Roots also says it faced inventory challenges and couldn't meet demand for its Cooper fleece offerings. Right now, you got routes down about 3%.
And the S&P 500 is getting three new members: KKR, CrowdStrike and GoDaddy will join the index as of June 24 as part of a quarterly rebalancing.
The three stocks leaving the S&P 502 bigger for those are Robert Half, Comerica and Illumina.
A quick check on the markets, first trading day of the week. We will start here at home on Bay Street. The price of crude oil stabilizing a bit, a modest bit into some energy names. A bit of a modest headline. 53 points to the upside, 22,060 points for the TSX Composite Index, up one quarter of a percent. South of the border, it was a moneymaking week last week the S&P 500. Got some big announcements in the offing, inflation, the Fed meeting. You are up a modest seven points, little more than 1/10 of a percent on the S&P 500.
We are back now Justin Flowerday, head of public markets at TD Asset Management, take your questions about the markets.
Let's get to the question. A lot of companies that did well during the pandemic have been stagnant.
Are there any signs of a turnaround?
>> That's an interesting one. When you think about some of these COVID beneficiaries that really had an incredible run throughout the early days of COVID, a lot of them have fallen off dramatically so the classic ones are Peloton and Zoom, Wayfair.
A lot of these companies that have really benefited have come back down and the reality is is that there are only so many Peloton's you can sell and there are a lot of folks who bought one who don't use it sustainably. I think there were excess valuation set of come back down to earth. I would put those in one bucket and then in the other bucket I would put a group of companies that are really great companies that have beautiful futures that saw a surge and then things of come back down to earth. So a Home Depot for example is one of those companies, Thermo Fisher is another company. These are companies where a lot of people renovated their home so you saw an uptick… >> It pulled forward that activity. I was one of those.
I had nothing else to do.
I worked on the house.
>> And Thermo Fisher, with a lot of the activity going on in hospitals, with a lot of the devices being used, they obviously benefited.
What happened with those, I would put Home Depot and Thermo Fisher in the same bucket, what is happen with those is demand for their products has gone down, it will probably reset to a new level where you can see some sustainable growth revenue.
The market has yet to I would say recognize that, yet to reward that. I think there is an opportunity over the next couple of years as we make it through this downturn in the economy, we reset expectations for the great companies that have a future like a Home Depot or Thermo Fisher, I think there is potential for decent upside ahead.
>> While paint on the walls will last a certain amount of time, my wife's appetite for the colour that was painted three or four years ago and what she wants to see now does change with time, so I've got some work in my future.
>> No comment.
>> No comment! You're not dragging me down with you, buddy. Next audience question. With your outlook on uranium and uranium stocks?
>> Okay, yeah.
When you think about demand for uranium, we are in this kind of new renaissance for nuclear energy and it's been driven quite a bit by something we talked about earlier, data centres and in demand for power.
In the US right now, it's around 20%, the base load. I think there is more appetite to see that grow over time and see new reactors be developed. What that means is you have a perspective of the future that you haven't had for a long time in terms of demand for utilities that are going to continue to try and get their hands on uranium. And so uranium's doubled in price over the last we will call it 18 months.
I think we probably don't have another doubling in the next 18 months but we have produced a floor where you have a supply demand imbalance where you're going to see supply still be below demand for the foreseeable future. When you think about supply increases, anytime you get it in commodity land, an increase in demand and a market that has been kind of stagnant for: a decade, companies get really attracted and they want to start producing more commodity to generate more cash flow.
The big countries that are out there producing, Canada, obviously, is one of them, the US, Australia. I think you're going to start to see some new projects and some expansions of existing projects that are going to start to build a supply but that imbalance is not going to go away this year, it's not going to go away next year.
2027, 2028, we could start to see the market get back into balance but it's a nice new environment for nuclear energy and uranium will continue to participate.
>> That's uranium as part in the sort of hunger for electricity. I think of EVs and how much electricity they will use. Is there an infrastructure argument two, we have to build more transmission lines?
>> Absolutely.
It pulls along a lot of different commodities along the way. Copper obviously is one of them that gets pulled into this as you are building out infrastructure, power grids and transmission lines, you need more copper.
There are other commodities as well. This isn't a one year phenomenon, this is something that's going to take place over the next five, 10 years.
>> Let's get to another audience question, this one timely considering that if you are watching politics in Ottawa, this is the issue before them this week. The increase, the proposed increase in capital gains inclusion rate. The viewer wants to know, is going to affect the income of companies and also their increase in dividend annually paid out? For example, TC Energy is expected to sell assets to raise capital?
>> So look, I think the big fear out there is that corporations are now going to have a higher tax on any capital gains that they generate and they are going to potentially avoid or reallocate capital in order to minimize the tax.
I don't think there's going to be a sustainable medium or longer-term impact. There will probably be some things that happened in the next little bit to minimize tax payments for this year but beyond that, there isn't going to BA, first of all, a huge hit for corporations on the level of taxes. Second of all, I think folks are wondering, do dividends become more attractive because capital gains taxes have gone up?
On the margin, you might argue so but I don't think this is going to be a meaningful driver of capital allocation decisions for corporations or capital returns between dividends and obviously just generating capital gains. The thing that concerns me, really, is just around what this means for the smaller businesses and what this means for entrepreneurship because these are the ones that really stand to benefit, right, from kind of you build up your business, you bill at the capital in that business, eventually you sell it and you, there is a very meaningful advantage to having that capital gains inclusion rate at 50%. If it goes to 66, does it start to kind of on the margin put a message out that maybe it's not Canada I want to be building this company up in?
People can go anywhere, capital is mobile. I'm hoping this isn't the result of this is something I struggle with in terms of, we want to continue to incentivize that risk-taking culture on an individual level, it helps with productivity, it helps with building new companies that can become bigger companies over time.
>> Interesting stuff.
As always, make sure you do your own research before making any investment decisions.
We will get back to your questions for Justin Flowerday on the markets and just moments time. And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Analyst guitar educational segment.
If you're looking to test out an investment idea before buying, Weber crystals can help. Joining a standard status is Caitlin Cormier, Senior client education instructor at TD Direct Investing.
>> Let's hop into what broker and see where you can find the watchlist tool to help with this.
Top right hand side of the screen, there is this little watchlist icon which is just a little star and you will notice that it shows up with 10 lists that you are able to create for yourself, so 10 different watch lists.
You can put up to 10 different securities on each watchlist.
You will notice appear that I have stocks and ETF listed.
So I will just add a couple of different companies here.
Wrong button there.
There we go.
And we will add just a couple of more here. I could also at ETFs. For example, I will pick a common one here.
Again, we are just kind of typing in either names or kind of the symbols for those companies. You will notice in the drop-down you can choose mutual funds, options and indices as well to add to the list so you don't have to stick to just stocks and ETF's.
For today I will stick to that from a portfolio. I will notice that I have five security, I have up to 10 on my list. 10 lists, 10 different securities. I can rename my lists.
Here I can click the top part and rename this my list, for example. Click save.
The other thing I can do is click this drop-down and see additional information on these companies.
For this company, for example, I have a little chart where I can kind of go through and see different time periods and see how the stock is performed. I can see over here quote information, with the bid and ask is, how many orders are out there at those prices, as well as kind of our range for 52 weeks and midday. We have a quick analyst recommendation over here as well as some fundamental information, so that ex dividend date and those sorts of things. The other thing we can do is we can click this little fundamental tab and then instead of showing us on the main screen what we had before under the quote, we are seeing that more fundamental information if that is more important to us. So lots of information that you can see in sort of a quick little screen as far as your watchlist so you can check together any different securities you are interested in and kind of keep track of them a little better there.
>> So I'm building the list, I can look at it on a daily basis to see what's going up and what's going down, see some of the fundamentals. What if I think, wow, I was interested in this three months ago and I wonder how would've done if I had made that move three months ago.
>> Absolutely. Last week, I showed the portfolio manager with an advanced >> So there's something similar to that within web broker and it's this tracker. You may have noticed this kind of third tab here. With the tracker does is you could actually act as if you put in a trade for one of the securities. So for example, let's just pick this one here, and I'm going to say maybe I purchased 100 of this particular stock and then I have to put in an average cost.
You can put in three months ago, three weeks ago, if I bought the stock, how would I have performed? I can go back in time, find at the historical price for the stock, let's it was $20, keep it nice round even number, and click save. And then it's actually going to show me how my portfolio would've performed, so it gives me my current market value, my book cost, any sort of gain or loss, I can do that with different securities too. I could do that through 50 shares of this one, let's say about it now at 52.85 for example, click save and then as time goes by, I can click this refresh button. It will update the prices as they update and it will show me any changes that are happening within the market with the securities that I have.
So it's kind of interesting how you can build a mock portfolio almost, track it, see your gains and losses and then as time goes on you can see whether that decision was a good one or may be a bad one.
>> I can see if I'm as smart as I think I am. You know why?
As an investor, I have been humbled. I'm not as smart as I think I am.
>> It's probably more of a 50-50, if that.
>> 50-50 is not too bad. Thanks that, Caitlin.
>> No problem, thanks, Greg.
>> Our thanks to Caitlin Cormier, Senior client education instructor at TD Direct Investing. And reminder that all of June is Options Education Month.
[upbeat music] Okay, we are back with Justin Flowerday, head of public equities at TD Asset Management, taking your questions about the markets. Here's another one for you, it just came in in the past couple of moments. With interest rate starting to come down and demand for energy going up, what do you think the future looks like for renewable power?
>> So the renewable power phenomenon is not a new one and, you know, we have seen many, many years of build out of infrastructure to support renewable power.
That's not going to stop anytime soon and it'll just continue to build and build and build and we are going to need diversified sources, whether it's wind or solar or Hydro. These are going to be really, really important parts of the power production going forward.
What we need to be careful about is to make sure that any time you have let's say companies that get involved in renewable power, you're looking at what is the long term ROI for these types of products that they are selling? And then, do they get impacted by the kind of sways and government policy? And if you start to see governments providing huge amounts of incentives that are kind of going to be really effective in the next two years or four years that will go away in the next five or 10 years, you may not have a really economically viable product there. We just need to be careful about how companies make kind of overproduced to take advantage of incentives but there is no question that we are going to see a continued trend higher in terms of renewable energy and demand to have that as part of the power production, some being baseload, some solving for peak demand.
>> When I think about that question, interest rate sensitivity for certain names, we know either they have to build out and perhaps take on debt to do that or even the fact if they offer dividends, the dividends might start looking a little more attractive, if last week's rate cut is not a one and done but the beginning of the cycle.
>> Absolutely, that notion of lower interest rates being a catalyst for risk-taking and companies that are able to fund more projects through debt when they have lower interest rates, the balance sheet doesn't become too heavy, that's a positive and so you will get more activity and more investment, both in equity and in debt in those environments where interest rates are coming down.
We will have to see. We were at zero rates and you could, as a company, get your cost of debt capital might have been three, 3 1/2, 4%, that was a completely different environment where there was a lot of investment being made that didn't have a tangible our allies so I would always go back to what is the ROI for the project and what is the ROI over the next 10 years, not just two or four years? But lower interest rates will help for sure this sector.
>> You want to keep an eye on that return on investment.
Next question. What's your view of the impact of the completion of the Trans Mountain Pipeline expansion project on the Canadian energy sector?
>> Right, so this is a big deal for Canadian energy and for a few different reasons.
First of all, it's another outlet for higher production, so support higher production from major producers out West. If you think about what hurt some of the majors in the past, it's the differentials between Western Canadian select and branch or WTI. And what this allows for is the differentials to tighten up, when it was 25 or 30 back in the day, we know how wrote range that's probably going to be supported at the $10-$15 differential range. When you transport a barrel of oil on TMX, the total is eight dollars, so it's never going to be zero, but we have a period of time where that differentials should be narrower, and that supports higher production. I think we have 560,000 barrels per day that needs to get, to fill the pipeline and that will happen over the next few years and I think the other thing that happens is you have some of the heavy producers that anytime you send heavy crude to the pipeline, it needs compensation. Some of the heavy producers that have condensate production as well should benefit from the TMX, a little disproportionately from some of the lighter producers.
>> Good break down there on the TMX project.
Question now about divergence and what it could mean for currency and investment. What sectors will benefit or suffer from divergence in the US dollar versus CAD?
>> First principles is always going to tell you that if you have an interest rate differential between the two currencies, the currency that will generate a higher rate of return and higher interest rate should perform a little better going forward.
I'm not sure that's going to necessarily hold in Canada.
And the reason is the starting point. Canada has been in such a difficult position in terms of it economically having a little less productivity and a little more challenges let's say in terms of consumer debt and the impact that interest rates have, higher interest rates are going to have on people's ruling over mortgages.
And so there's potential that people see in Canada and global investors see a little bit of pressure coming off the Canadian consumer, a little bit of pressure coming off the Canadian economy.
First pencils would say lower interest rates in Canada, CAD should we can. I'm not sure this time.
I think there's potential for CAD to remain solid despite the differential going forward.
>> Interesting stuff indeed. We'll get back to questions for Justin Flowerday on the markets in just a moment's time.
As always, make sure you do your own research before making any investment decisions.
And a reminder that you can get in touch with us at any time.
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.
If you like it data and central-bank intrigue, this is your week. We got a doubleheader on Wednesday, we are getting US inflation in the morning and then we get a fed decision in the afternoon, all of this on the heels of that stronger-than-expected US jobs report on Friday. There's a lot going on, lucky for us, as equally joins us now to break it down and what TD Securities things about this.
>> TD Securities things that core CPI in the US will slow further to a soft .3% month over month and that translates to three month annualized return of still high 3.7% in May. And as the chart shows, if it does transpire where inflation, core inflation does cool, it would be the first drop under 4% in 2024. For headline CPI, they are looking for another soft print which is in line with consensus estimates of .1% month over month increase.
Now, when we look deeper into the details, they do see energy pulling back due to the drop in gas prices and food prices they expect to remain fairly muted as well.
On the good side, they say used cars are likely to add to inflation in May after two big pullbacks in the previous two months, March and April, of about 1%.
Taking a look at core services, they expect a cooling in May as well. Car insurance, a key contributor to inflation, likely stayed stronger in May as well.
Airfares they see pulling back, they see lodgings away from home rebounding, all in all, they see super core inflation edging lower by .3% month over month and that's down slightly from the .4% we saw in April.
Looking ahead, TD Securities continues to expect core inflation will likely cool to an even lower .2% after June partly due to the continued drag from the good sector for these slowing in the core services inflation. All told, headline CPI should make little inroads.
They do see headline CPI ending at around 3% year-over-year by the end of the year, but core should slow down to about 3.2% by the fourth quarter of this year. That is down from the 4% that we saw in the third quarter of 2023.
>> That's the anticipation for where inflation is headed south of the border. What about the Fed? I don't think there big bets this week that the Fed is going to do much other than just say be patient guys. But we are eventually trying to look for a cut.
>> I think that's exactly right.
TD Security sees the Federal Reserve being patient on interest rates. They do not expect any changes this week. However, moving further down the road, they see in terms of inflation cooling, they expect the Fed to cut interest rates twice this year, in September and December, which would bring the Fed funds rate to about 4.75 percent by the end of the year.
We will have a media reaction to the Fed's decision on Wednesday. I will be interviewing to the economics on that day.
>> Great stuff. Thanks that, Anthony.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, for an update on the markets.
We are having look at TD's Advanced Dashboard, a PlatForm active traders available through TD Direct Investing. This is a heat map function. CNQ they are using up some real estate, up about 1 1/2%.
Not the only stocks that are moving today. In the materials bucket two, it was a choppy week last week for some of the metal prices and it really took the mining stocks along for a ride.
Today you've got some modest rain.
Barrick's up about 1%. Shopify, the tech basket, a little more than 2%.
South of the border, ahead of that big one say that Anthony was just telling us about when you get it inflation report in the morning and a fed decision, what is going on?
Look at Nvidia hugging up all that space.
The bigger amount of real estate you take, we are talking volume there. You've got the tempter one split taking hold today, see clearly some activity in the name. The stock is up a little more than 1%.
Some of the automakers, GM up over 4%, Ford up 2.5%.
Will it seems to be good in the technology bucket for Nvidia is good for rival AMD. But they are down about 3.5%.
We are back with Justin Flowerday from TD Asset Management. Look at your questions about the markets.
Someone wants to know if you see any true large-cap value plays currently?
>> Okay, yeah, this is a tricky one because my view of how we define value might be a little bit different than some of the style buckets that are used elsewhere.
What I mean by that is value, when you think about the sectors that typically comprise value, value, you are talking about companies that have multiples which are lower than let's say their peers were the market.
So the company is or sectors that have typically been value oriented would be companies that or sectors that have low average rates, the energy sector in general, it's a cyclical sector and typically a lower price to earnings or price to cash flow. Thanks and financials, it typically higher leverage, equates to a lower multiple.
And so a lot of the value companies are going to come from the sectors which are just a little bit more cyclical.
And so when you think about interesting large-cap value plays, look, all he would say is that valuation matters as a starting point, particularly if you are thinking about returns over a longer time period, not just over 1/4 or two quarters or year. If you are thinking about a 5 to 10 year standpoint, valuation matters.
All I would suggest is that identify really good businesses that have really attractive starting valuations and I'm not going to go in for names here but that's a really good starting point for future returns.
What I would say is that we have gone through. Where people have talked about growth over value. Growth has outperformed value. What that means is that some of the secular growth sectors in the market, such as technology and AI, we talked about some industrial components, their different ones in healthcare, these are sector growers that have performed very, very well.
There will be another time where energy and financials in some of these other more traditional value plays are going to have really great times in the market but it doesn't necessarily mean you try to find it in one quarter a couple quarters, you want to find really great companies with good starting valuations that you can hold for 5 to 10 years.
>> Okay, we will squeeze in one more question. This takes us back to the top of the show. If you are saying, once you get your view on the AI trend.
>> Right, so I think I mentioned that he says or she says trend, I will call it revolution. This is an incredible development for kind of the market and, in a sense, humanity, and a lot of folks would be pro-AI and a lot of folks would be at CAI and it causes debate, but in terms of the trend, it's not going to slow.
There's going to be continued investment because, at the end of the rainbow is some version of the future which is a more productive society, a society that can allow for people to have more free time because they are becoming more efficient at work and it should all end up in a really good place. What we need is we need those killer apps, though software companies come up with applications which harness the power of AI and you're seeing it on the margin from companies like Microsoft and copilot, other companies are making use of AI to allow for greater insights into some of the data but there still hasn't been that really strong killer app. Once that happens, they'll be phase 2.
Right now we are in phase 1 and at some point phase I is going to roll over and slow down.
That doesn't mean the AI revolution is done.
It just means we now need to let that sit for a little bit, marinate and wait for that killer app to be produced by the software giants.
>> Apple has its developer conference today. In about 20 minutes, they are going to kick off. There is an expectation that while all these other tech companies talk about AI, apples would have to say something about it too.
>> Absolutely. I think they will. I think everybody is in the same boat which is how can we provide a differentiated AI experience for our end-users?
They are all trying to. Matt is trying to, Apple is trying to, Alphabet and Google are trying to, so it will be exciting to see what Apple has to say.
>> You got about 20 minutes before the kickoff on that event. It just in, always a pleasure to have you here.
I look forward to the next one.
>> Thanks very much.
>> Thanks to Justin Flowerday, managing Dir. and head of public equities at TD Asset Management.
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 into future shows.
You want to stay tuned for tomorrow show as well. Chris Whelan, Senior Canada rate strategist and head of portfolio and ESG strategy with TD Securities is going to be our guest. He wants to take your questions about interest rates in the economy. You can always get those questions in ahead of time. Just email moneytalklive@td.com. That's all the time we have for today's program. Thanks for watching. We will see you tomorrow.
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