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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, we discussed the potential outcomes of the US presidential election what it could mean for policy and the markets. TD Epoch's Kevin Hebner joins us. Money talks and Nicole is going to give us a preview of what to expect from Friday's Canadian GDP report, the last big economic data point before we get a rate decision out of our central bank next week.
And in today's a broker education segment, but Ryan Masson is going to show us how to do stop orders here on the platform.
Here's how you can get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get to all that and our guest of the day, let's get you an update on the markets.
We will start here at home with the TSX Composite Index. We are down about 96 points, a little shy of half a percent.
Noticing some weakness and some of the mining names. We are in the thick of bank earnings season, we had a couple report today, including national bank. The street seems to like what they saw, the stock now up a little more than 5%, at $126.34 per share. The price of gold is down, silver down, coppers down today. Some pressure on the mining, materials. The stuff to take out of the ground. You know what I'm trying to say. The material stocks are down as well. The metals, that's the esoteric word I am looking for, metals are under pressure today. Baruch is down to the tune of about 3%.
South of the border, it is a cliché for people in my business to say all eyes are on something but if you're an investor, all eyes are on Nvidia today after the closing bells, we have some caution in the markets, particularly in tech stocks out of the report, the S&P 500 down 34 points, little more than half a percent. The tech heavy NASDAQ sharing a little worse to the downside, down right now about 1 1/4%.
Let's check in on Nvidia itself before those earnings come in after the close of trade today. At $125.29 per share, it is down about 2.3%. And that's your market update.
As we head towards the fall, the US presidential election will be top of mind for investors but in a race that's already had plenty of twists and turns, how might things play out in what might mean for policy in the markets? Joining us now to discuss is Kevin Hebner, global market strategist with TD epic.
>> Good to be here.
>> We are almost done with what we call the unofficial summer and we head into the fall. Obviously the US presidential election is front and centre. What are we seeing right now? What are the different poles telling us?
>> So we look at prediction markets a lot.
It's an interesting, sensual I, the production markets have doubled the likelihood of a Democratic candidate winning. Around 27% in July to about 54% now.
It's about 50-50 between Trump and Harris.
>> Tone down the degree of confidence.
Those were the betting sites. I want to show a few more to the audience. One about the polling's as well. Sort of looks like the betting site to me.
>> Polling has Harris about two percentage points ahead of Trump and that might sound good but ultimately, the US election is about the electoral college, not the popular vote. If you recall in 2016, Hillary Clinton was ahead by 4 to 6 percentage points and so because you've got great big states like California and New York, they are going to vote for the Democratic candidate by 20 to 30% points, so a lot, so ultimately there's a big gap between the popular vote and what matters to the electoral college so two percentage points, it's nice, it's a lot better than where Democrats were a month ago, but it probably isn't enough to win in November.
As you bring up an important point. We are talking about 50 states but there are only so many that actually matter. You say 44 don't matter, it's up to six swing states.
>> In 2016, there were 11 states that sort of matter. In 2020, it was 98. This time, Max, is going to be seven, it may be fewer and of those seven, 3 Are Wisconsin, Michigan, PA, to or from the Southeast, Georgia and South Carolina, and two from the Southwest, Arizona and Nevada.
The rest of the country, which is over 80% of the population and GDP, in some sense, don't matter. In some sense, is not a national election. It's about a few states and so for example, if you think of Wisconsin, Trump one Wisconsin in 20 16 x 20,000 votes.
Biden won it by 20,000 votes, so it's a really small number of votes when you're thinking about the election as 150 billion people going to the polls and this time, it could well be everything comes down to Pennsylvania which I think is a state that Canadians know quite well and has quite a diverse telegraphic.
>> I think we may have a picture to in terms of some of those swing states and some of the changes we have seen since Pres. Biden said I will not be candidate.
What is this telling us?
>> The red bar show how much Trump was ahead in each of the swing states, the southern swing states, in July. He was ahead in all seven. That's why in our view at that point was a 75% chance that Trump would win. Since then, we have had a new candidate step up, Harris, you can see the green bars, those of the more recent polls, and it shows that all seven swing states are now in place that's a really dramatic difference in a couple of weeks.
It comes down to a couple of bold predictions. I would be careful about, my guess is that November 5, we are all watching the TV, watching the electoral college votes come in and it's going to be pretty tight.
>> Back in my days before business journalism, I would have season political reporters tell me that the only poll that matters is the election day pull. Some days it would play out that way. We have another picture to you about the states that Biden managed to flip.
>> These are states that Trump one in 2016 and Biden managed to win in 2020 and it's five of the seven swing states so a couple of southern states like Georgia and Arizona and then the three Great Lakes states, Wisconsin, Michigan and Pennsylvania.
So these are the states that move the rest of the states, New York and California, are not going to move and there are at least 10 states in the middle of the country that Trump will win by over 30 percentage points so when the campaigns are trying to decide where to spend their time and money, 95% of it will go in the seven swing states so they will ignore California, New York, and they will be spending a lot of time here, 95% of the money, 95% of their time will be in a small number of states and just emphasizing to some extent, it's very different than a parliamentary system like we have here in Canada.
The electoral college system, is just a small number of states and it might come down to a few counties in some of the states making all the difference.
>> That's an incredible landscape at a great breakdown of the backdrop we have right now. Given all of that, we think that the presidential race, fairly tight, you said don't make any bold prediction.
What about Congress can mark this is important for anyone who gets into the White House in terms of getting an agenda through.
>> For the White House, we thought 75% to Trump, now it's pared down to about 55 but this is a number that's going to change and in particular the September temp debate is important for that. For the Senate, we had 75% of the GOP takes the Senate and we stick with that 75. The house continues to look very 50-50 so it's a coin toss and then what's important overall is does a party get a sweet?
You have both the White House and Congress? Because Congress controls the purse strings and Congress also initiates the legislation so that's really important. And we have a 30% probability of a GOP sweep and a very small probability, 10%, of a democratic sweep.
Ultimately, what the market would like, I think, to see is a divided government because then you don't get measures that need to be ratcheted back later.
I think a more determined approach to policy, and that seems to us to be 60% likely.
>> What we think that policy going forward? In the end, that sort of informs what's going to happen in the markets.
>> A lot of the discussion is on fiscal policy and nobody is talking about fiscal austerity.
Candidate Harris, VP Harris, she had talked a lot about child tax credits, income tax credits, the sorts of things, paid for by higher taxes on wealthier people, also higher corporate tax rates.
The market would be very unhappy about higher corporate tax rates but that would only actually happen if you had a democratic sweep which we think is unlikely. Fiscal policy for Trump, he wants to cut taxes on everything, corporate tax rates, individual tax rates, taxes on tipping, and he's been arguing that if you cut taxes, those can create so much growth that they will more than pay for itself.
I don't think anyone aside from ex-president Trump believes that's true and so it could end up if you had a GOP sweep and he managed to enact those proposals, you have about $5 trillion added to the US deficit, it's a very big number. In either case, we are going to have deficits continue to be over $1 trillion a year.
These are enormous numbers in an economy that's pretty strong.
>> Let's talk about another part of the economy catching your attention south of the border. All we talk about in Canada's housing. But the states, it started to become a more potent issue.
>> It's interesting. Since the housing crash in 2007, there's been a lot of discussion about housing but nobody has really done anything in the last week, during the DNC in Chicago, ex-president Obama gave a speech, it was a very good speech, but the first policy measure he mentioned was housing and that took a lot of people by surprise because it's not something the Democrats have really talked about on the national stage. One reason for that, and as the chart that you will have up shows, affordability. This is affordability for first-time homebuyers, and I think this is something which Canadians have a lot of empathy for, housing is the least affordable it's ever been in the United States. That partly reflects higher mortgage rates, partly reflects higher home prices but the big driver has been less supply of housing since 2007.
>> We had that mantra here in Canada, build more homes, but they look at the starts, what are the starts telling us can mark >> This looks at housing starts and I have adjusted this for increases in the population but the rate of housing starts currently is 50% of the pre-2007 level.
This means the US is probably 2 million to 8 million homes short of what it needs for its population. That's a big deal, and 2 million to 8 million people. I think ultimately this is what's driving the affordability issues and in the focus groups that both the Republicans and Democrats are having, in all cases, housing is one of the number-one issues that people are concerned about.
>> Interesting stuff.
We are going to get back to your questions for Kevin Hebner 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 shares of super microcomputer in the spotlight today, right now down to the tune of about 25%.
The company, which makes AI servers, is delaying the filing of its annual report.
In a news release, super microcomputer says it needs more time to assess the quote effectiveness of its internal controls over financial reporting.
This development from super microcomputer comes after short seller Hindenburg research issued a report making allegations about the company's accounting practices.
Abercrombie and Fitch is under pressure despite handing in a solid earnings beat.
Sales were up more than 20% in its most recent quarter, but the retailer says it's operating in an uncertain economic environment.
Abercrombie and Fitch shares had rallied almost 90% the day before coming under pressure today.
Investors wanted to see more out of that earnings report. Let's check in on Berkshire Hathaway, it's become the First American non-tech company to break into the trillion dollar market cap club.
Shares of Orange Buffett's conglomerate have jumped some 27% this year, outperforming the broader market.
Reaching this milestone could be interpreted as a pretty decent birthday present for Buffett, who turns 94 years old on Friday.
Quick check on the markets, we will start here on Bay Street with the TSX Composite Index. We have some mining stocks under pressure today.
We are done 114 points, almost half a percent. South of the border, we await Nvidia. And there's a bit of caution out there on the markets, particularly in some of the tech names. Got the broader read of the market, the S&P 500, down 33 points, a little more than half a percent now.
We are back now with Kevin Hebner from TD Epoch talking about market trends. First one. Do you see any signs of a bubble in AI stocks after this remarkable run that we've had?
>> That is something we are concerned about and there are a number of signs that there's a bubble, one is valuations, but the most extreme they have been since 2000, the tech bus. Second is the degree of concentration in gains this year.
The third is the euphoric tone of commentary about AI. The fourth would be the Boom that we are seeing in Extending by the big hyper scalars, so Microsoft, Google, and Facebook has doubled just in the last three years, is tripled in the last 5 to 6 years.
So there is a lot of concern about, this chart shows Spending by them, including the company's estimates for the next two years. You can see really enormous numbers and in Q2 results season, a number of CEOs came out and made statements like the risk to under investing are much greater than the risk to over investing because we are in this. Where there is a fear of missing out, winner takes most and you have to be at the table so it's been an AI capex arms race. This chart, is AI another bubble, you can see over the last 25 years or so, during the period where we've had relatively low interest rates, there have been a number of bubbles that resulted, the tech bubble in the late 90s, the housing bubble leading up to 2007, and now with the Mag 7 numbers and whether it's a bubble or not, and I think it's difficult to say but there are certainly a number of reasons to believe it could be and so there's reason for caution.
>> We think about caution in the markets of the past couple of days because Nvidia reports after the closing bills today. Is this a media driven story, that one stock is the supporter, or is Nvidia occupying that rarefied space where everyone looks to them to tell everything about everything you might >> If we think about where AI it is going to be in the next 15 years, we need a lot of infrastructure built out. We've been talking a lot about the need for electricity for AI. Also, semiconductors, tech hardware for AI and different software products. So it turns out the semiconductor part, that seems to be right now all about Nvidia.
In the hyper scalars capex, 35% goes directly to Nvidia. They have a great ecosystem, great software products.
Leagues ahead of everybody in terms of chips. The next couple of years, he does look like they have a lot of immediate competitors.
So yes, Nvidia is absolutely critical to the story and after closing today, we will hear about Nvidia's results but I think more important is going to be there guidance and how they see sales going forward and I think that's going to be a good indication of what hyper scalars capex plans are for the next year or two.
>> I think you and I have talked about the next leg of this. As you said, this is building the understructure part of the story, this is a long story that will play out, at some point, someone's going to come up with the killer app that we have not seen. Is that the next thank you Mark >> That's the big issue is where is the killer app, where is the return on all this investment, the $180 billion of investment that we are showing in the next chart?
If you remember the tech Boom in the late 90s, they were spending money on all the right things and eventually there was a return on that but it took a decade longer than investors expected at that point and there is some chance this will happen this time as well that there will be returned, we will get not just one killer app but let a thousand flowers bloom, there could be a lot of killer apps coming out and it could change so much of what we do in education, healthcare, legal services and our personal life so when we get these general-purpose technologies, it takes a lot longer than people expect. So right now, it looks like we are investing too quickly, we are not really showing the patients that we need. Ultimately, there will be returns but I think we've gone a bit too far.
>> Fascinating stuff.
As always, make sure you do your own research before making any investment decisions.
we will get back to your questions for Kevin Hebner on market trends in just a moment's time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get to our educational segment of the day.
In times of market volatility, you may consider using stoploss orders. Joining us now to discuss how they work and how to use them here on the platform is Ryan Massad, Senior client education instructor with TD Direct Investing.
Great to see you, let's talk about what a stop order is and when it's appropriate to use them.
>> Definitely.
A stop order will be helpful in these days. Imagine that you want to sell something when it's going down. Generally speaking, what you would do is hit that cell button. You want to sell it right now.
But what if you don't want to sell it right now? What if you want to sell it as it's going down but just in case you're not there in front of your computer? Let's use the backdrop of an order entry ticket to show what that order really is so I'm going to go here into a broker right now and I'm going to go into an order entry ticket. Let's imagine that we own a stock here.
We own it in our account. And we want to sell it as it goes down. We have an order, we are ready to go.
If we want to sell it as the price goes up, it's really easy. We set a limit order and wait for that to happen but we want to catch it and stop those losses as they go down.
On a regular order if we put a market order and we hit sell, we go to the market and sell, if we put a limit order, it would sell at the price or better. But what we want to do here is if we put a stop market order, what's going to happen is we are going to now introduce something called a trigger price. The trigger price will decide at what time that order will be sent to the market.
If it's a sell stop market, we are putting a price that's below, so right now, Nvidia is 125. If we were to put it out 100, for example, what this would mean is that you are asking why broker to send a market order but only when the bid for Nvidia hits 100. It allows you to plan and really have a triggering price for this market order. We also have a stop limit. So you can have the same thing, we want this order to be triggered and sent to the market when the price of Nvidia, the bid of Nvidia gets to $100 but we also might want to say, well, don't sell it less than a certain amount, let's say $99 per share.
So it allows us to kind of stop those losses or crystallize any profits and not have to be in front of the computer to hit the cell button as the market goes down.
It's a very useful order.
>> Great explanation there. We've been looking at using a stop order and concentrating on that cell button. What if you want to do a buy instead?
>> Well, buy is possible as well. It's not as common as the cell, but think about it this way. If you have a stock in mind, and you say to yourself, I think when it hits a certain point, things were to take off.
I don't necessarily want to buy it now, I want to buy when it takes off in a couple dollars worth so the same thing goes here.
Let's say in what broker we have a buy order. Let's click the by stop order. We have a triggering event or a triggering price. This time it's going to be on the asking price because we are buying so we are saying is right now, Nvidia's $125 but I know when it hits 130 or what I think here in this hypothetical situation, when it hits 130, I want at that point for you to buy at the market price.
So it allows us to catch it when it goes up to that price and when we feel it's going to gather momentum and not necessarily buy it right now, buy it at a price higher than the current price.
So equally as useful, not as much use as the sell stop order but it's out there if it's something that you want to use.
>> Interesting stuff as always.
Thanks for that.
>> My pleasure.
>> Ryan Massad, Senior client education instructor with TD Direct Investing.
For more educational resources, you can check out the learning centre on why broker or use this QR code. It will navigate to TD Direct Investing's YouTube page and once there, you will find more informative videos.
Before you get back to your questions about market trends for Kevin Hebner, a reminder of how you can get in touch with us.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, 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.
We are back with Kevin Hebner, taking your questions about market trends. Lots coming in in the past couple of moments. Here's one for you. If the Republicans when the next election and they proceed with tariffs, will any sectors benefit?
>> That's a good question. The view from the Democrats is basically a continuation of what they have in place which was a continuation of what from putting in his first term. If Trump wins a second term, he has been saying two things, one is there could be a 10% universal import tariff, so on all goods, all countries.
This would be very bad for the country, it would be stagflationary, inflation would grow by 1%, GDP would go down by 1%.
It would hurt consumer staples, they would have less discretionary income. In terms of sectors that would benefit, I think this depends upon their approach to industrial policy.
We saw this as introduced by Trump in his first term focused on semiconductors, then energy. And going forward, there is a host of sectors in which they want to home shore manufacturing and I think it's difficult to know exactly what he's going to be focusing on but a lot of talk has been on electric vehicles, solar panels, new energy. Even though Trump is not the biggest fan of those. And then a lot of the industrial facilities, some related to defence, drones, one thing that's important would be the healthcare sector, and we learned during COVID that there is a real national security issue with for example active pharmaceutical ingredients being produced abroad.
I don't think we are totally clear what sectors Trump would tend to favour but at least one position is 10% universal import, stagflationary, I don't think it's gonna be great for markets at all. A second thing at we are talking about is a 60% tariff on imports from China. This would be enormously stagflationary. There are so many goods that we import from China that we don't have alternative sources. This would definitely be a tax on consumers. Some domestic producers would benefit from that but I think this would be overwhelmed by the damage done to the economy and to markets.
>> Next question. Should we be worried about how a trade war with China could impact?
>> I think already the tensions in trade with China are really important. To some extent, Trump initiated that in 2017 but also China has doubled down and they have fairly weak domestic demand, the real estate sector has imploded, and they responded by lots of subsidies to their industrial base to exports. Their export growth is very strong. The domestic economy is very weak and so they are flooding the world with their exports.
That's particularly hurting some emerging market countries that are trying to get their industrial manufacturing bases up, it's not happening. It's really hurting Germany.
I would say the tensions are very big.
Industrial policy, whether it's a Democrat or Republican administration, gets ramped up, I don't know if the word trade war is the right one but we have this period of hyper- globalization from 1990 to around 2007, we are in a very different world now, we are reinventing globalization, that's our preferred term, but some aspects of it, if there's a lot of conflict and tension, I think this only gets ratcheted up. Really regardless of who wins the White House, but particularly in a trumpet ministration.
>> When you talk about the reinvention of global trade, what are we talking about in terms of timelines?
>> I think it does take a long time because you have to read jig supply chain.
Supply chains have been put in place from 1980 for the next 25 years, they are complex, lots of different products, inputs, lots of countries as well. But for example, just in the last 3 to 4 years, we made major changes to the stomach active.
The investment in the United States and producing semiconductors, that has increased 17 fold in the last three years, so we brought this back home really quickly and so if there are targeted measures in a particular sector, that can be done very quickly but for the overall economy and the degree of outsourcing that we have done, and I think it is a broad realization that America and to some extent in Canada, we have outsourced our manufacturing capabilities, we have forgotten how to make things and we need to reassess that.
But broadly, it happens slowly, took several decades for the outsourcing to happen. It will take several decades I would think to reinvent that.
>> Another question from the audience. A viewer wants to know if you are seeing any signs of major stress in the US labour market or the global economy?
>> Many markets are looking like they are late stage, and of cycle. We are seeing this in the US, Canada, the UK, Germany within Europe and also in China. A lot of the focus in the United States has been on the labour market.
Particularly, we had a July labour market report that was relatively weak.
And this chart shows private sector employment growth, that's the green line.
You can see it's been decelerating over the last couple of years and it's now below trend. The red line represents the average employment growth from the previous decade so we are seeing employment growth slowdown and we are seeing the unemployment rate take up from 3.7 to 4.3 but our view is that the labour market is bending, not breaking. This is what this chart tries to emphasize.
Year in year, almost 2% employment growth.
Effective to zero, that is always associated with the recession. That has happened every time during the post-World War II cycles. But we still have decent employment growth. It is slowing, so our preference is to think about it not as a breaking but slowing in employment growth.
There's a lot of talk about recession out there. We think there are some reasons to worry but we are less concerned than many about that.
>> What do you make of that revision that came out? When they said it turns out the US economy did not create those 800,000+ jobs over the 12 month period. The market was saying, should we care, it's backward looking?
>> So the way the Bureau of Labor and statistics gets these numbers, they have a fair number of surveys that code either to households or to establishments and these things do get revised pretty majorly.
Ultimately, part of it was because the way that undocumented immigrants are treated in the surveys and their biases in both the survey of firms and the survey of households.
It results probably net net in their being about 40% less, 40,000 jobs less each month and we have been thinking so the number goes down roughly from 200,000 260,000 so still okay employment growth but maybe not as strong as we were thinking before.
>> Interesting stuff indeed. We will get back your questions for Kevin Hebner on market trends in just a moment's time.
As always, make sure you do your own research before making any investment decisions.
and 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.
We are a week away from the next Bank of Canada rate announcement. Of course, has that, we are going to get second-quarter GDP for this country and if you are interested, the earnings from central bank policy, you will be instant in that.
Anthony Okolie joins us now with TD Securities Outlook. They are calling for real GDP in the second quarter to come in at 1.7%. That slightly below consensus estimates for 1.8%'s, seasonally adjusted annual rate. Now, this would mark the second straight advance. It does build on the .4% rise that we saw in the first quarter, but we will see quarterly GDP pullback on a per capita basis as excess supply continues to build.
When you look back to the first quarter, we saw a higher household spending on services, mainly on things like telecom services, rent and air travel. Those were the top contributors to the increase in GDP in the first quarter of 2024. Slower inventory accumulation, that was a bit of a drag on overall GDP. When we look at Q2 growth, TD Security says it will likely be driven by another strong quarter from both business investment and government spending. Offsetting some of that growth in the second quarter, TD Securities sees heavy pressure on retail sales as well as weakness in merchandise trade. On an interesting level GDP should also confirm a weak performance in the month of June.
TD Security sees June GDP pretty much unchanged from what we saw in May and so they expect a we can draw from the second quarter to the third quarter.
In the month of June, they again see retail wholesale trade as a drag on GDP as well as manufacturing headwind for the good sector as well. Taking a look at the flash estimate for July, they expected to hit a modest rebound in the month of July.
This will have some big implications for the Bank of Canada which meets next week and TD Securities expects the Bank of Canada to deliver another 25 basis point cut to 4 1/4% at the September 4 meeting.
If we do see a big mess on Q2 GDP growth, TD Securities believes that could add pressure on the Bank of Canada to consider a larger cut of perhaps 50 basis points.
However, they believe that it's a very high threshold for such a move to be given the lingering inflation concerns or risks that continue.
>> Interesting thoughts there on what the Bank of Canada could get up to. What about the rest of this year and into 2025 when it comes to interest rate?
>> Beyond September, TD Securities is calling for another rate hike in October… >> Rate cut.
>> Rate cut! Exactly, they are looking for another rate cut and then in October they will cause and they're looking for interest rates to come down to 4% by the end of the year. Looking ahead to 2025, they are looking for another hundred basis points of cuts that would bring the interest rate down to 3% by year end 2025.
>> Interesting stuff. Thanks for that.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, for an update on the markets.
We are having a look at TD's Advanced Dashboard, a platform designed for active traders available through TD Direct Investing.
This is the heat map function, and I see if the market movers.
We know we are to the downside on both they and Wall Street's today, let's dig in deeper. We will look at the TSX 60 by Price and volume. We are still in the thick of bank earnings season. With Royal and National Bank today. You can see our white, royal, a little more than 2.5% and National Bank, NA, up about 5 1/2%. Where is the weakness? Clearly in some of those mining stocks in the basic materials bucket there. You got very Kinross Tech also the downside and Shopify right now down about 2 1/2%.
As he looks as the border, let's hone in on the S&P 100.
We all await Nvidia earnings after the closing bells today. Right now, Nvidia is taking up a lot of real estate on the screen. That is indicative of the volume of traded shares compared to the other names on the S&P 100. It's down to the tune of a little less than 2%. We are seeing weakness among other tech plays and chipmakers. Where is their strength? There has to be some green on the screen. We are seeing a bit in the financials, Bank of America a modest half percent, Wells Fargo up more than 1%.
We are back now is Kevin Hebner from TD Epoch. Which US president is better for the US China relationship?
>> I think from China's perspective, neither is great. One good thing about Trump is he's pretty transactional. One less good thing from the perspective of Beijing is that he's really on predict will. For a Harrison ministration, they would view it as a continuation of the policies under the Biden administration and those have not been helpful to Beijing and also tensions continue to build through the Biden administration as they did through the Trump administration and I think whoever's in the White House, the issues between the United States and China, they are pretty fundamental and that chasm will continue to grow.
It's not just between China and the United States, the same tensions are between China and Canada, certainly in Japan, China has a lot of issues. Europe, particularly Germany. It's a broad concern, and our view is this just keeps getting more of an issue for geopolitics going forward and we don't see any scenario, certainly no political realignment, in which these concerns would be less important for the geopolitical reality.
>> Interesting stuff there. Someone also wants to know, what do you make of the recent volatility we saw in the yen carry trade? Take us back to earlier in the month.
>> We have had a period of extremely low interest rates for a long time. When that happens, people borrow, they build up leverage. One place that they were taking leverage was in Japan because Japanese interest rates were so low. In particular, speculative participants in the market, people who are not using the trade to hedge, they borrow in the end and then invest in different momentum trades. It could be tech, Japanese equities, US equities and so forth and as the chart here shows, these yen shorts were the most extreme they had ever been a month ago.
Since then, a lot of those have been close. We heard earlier about how you have to manage your stops pretty tightly on some of these trades and definitely on the is the stops are very tight and so the trade is very nice, when markets are moving certainly. But then we had the dollar yen move from 160 to 144 and all of these trades suddenly did not look brilliant and everybody has the same trade on, everyone has the same stops in the trade reverse very quickly so this is 14 leverage unwinding quickly. There's lots of other forms of leverage out there, many and relatively opaque, less regulator parts of the market, private markets for example. I don't think this is the last example of something happening in markets that gets us into very choppy I think unpredictable situations like we had five weeks ago.
>> We have covered a lot of ground here on the show, Kevin. A lot of great insights but it tells me that we have a lot of things to you, I don't like to use the word worry, but keep an eye on. Their concerns out there. What do we make of it as we head into the fall as investors?
>> Ultimately we are constructed on equities, particularly US equities because we think it's being driven by tech and tech is ultimately the number one place we are seeing innovation and that's what drives value creation going forward.
The equity market we like the least is China and maybe that's not surprising given the comments that we've made in the last couple minutes but still, pretty constructive view and we see broadly interest rates declining at least for the next few months and I think that's constructive for bond market so a lot of choppiness, both in interest rates and equity markets but overall, I think still constructive perspective for the next 6 to 12 months.
>> At least for the next couple of months, interest rates falling. What is the thinking on 2025?
Too many unknowns to really hostess >> Say get into a scenario in which we have the GOP sweep and we are going to enact some of these big tax cuts and add to the deficit and bond issuance, feeding, stimulus for the economy, I think that something which the bond market might not react well to. So we are still a few months from knowing how that's gonna play out but that's something to worry about beyond November.
>> Always fascinating having you. I really enjoyed the conversation and look forward to next time.
>> Thank you.
>> Our thanks to Kevin Hebner, global market strategist at TD Epoch. As always, make sure you do your own research before making any investment decisions.
if we did not get to your question today, we are going to aim to get into future shows. Stay tuned for tomorrow. Julien Nono-Womdim, VP for portfolio research at TD Asset Management will be our guest. He wants to take your questions about healthcare and retail stocks.
A reminder that you can get a head start with those questions.
Just email MoneyTalkLive@TD.com.
That's all the time we have for the show today. Thanks for watching. Thanks for setting in your questions. And 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, we discussed the potential outcomes of the US presidential election what it could mean for policy and the markets. TD Epoch's Kevin Hebner joins us. Money talks and Nicole is going to give us a preview of what to expect from Friday's Canadian GDP report, the last big economic data point before we get a rate decision out of our central bank next week.
And in today's a broker education segment, but Ryan Masson is going to show us how to do stop orders here on the platform.
Here's how you can get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get to all that and our guest of the day, let's get you an update on the markets.
We will start here at home with the TSX Composite Index. We are down about 96 points, a little shy of half a percent.
Noticing some weakness and some of the mining names. We are in the thick of bank earnings season, we had a couple report today, including national bank. The street seems to like what they saw, the stock now up a little more than 5%, at $126.34 per share. The price of gold is down, silver down, coppers down today. Some pressure on the mining, materials. The stuff to take out of the ground. You know what I'm trying to say. The material stocks are down as well. The metals, that's the esoteric word I am looking for, metals are under pressure today. Baruch is down to the tune of about 3%.
South of the border, it is a cliché for people in my business to say all eyes are on something but if you're an investor, all eyes are on Nvidia today after the closing bells, we have some caution in the markets, particularly in tech stocks out of the report, the S&P 500 down 34 points, little more than half a percent. The tech heavy NASDAQ sharing a little worse to the downside, down right now about 1 1/4%.
Let's check in on Nvidia itself before those earnings come in after the close of trade today. At $125.29 per share, it is down about 2.3%. And that's your market update.
As we head towards the fall, the US presidential election will be top of mind for investors but in a race that's already had plenty of twists and turns, how might things play out in what might mean for policy in the markets? Joining us now to discuss is Kevin Hebner, global market strategist with TD epic.
>> Good to be here.
>> We are almost done with what we call the unofficial summer and we head into the fall. Obviously the US presidential election is front and centre. What are we seeing right now? What are the different poles telling us?
>> So we look at prediction markets a lot.
It's an interesting, sensual I, the production markets have doubled the likelihood of a Democratic candidate winning. Around 27% in July to about 54% now.
It's about 50-50 between Trump and Harris.
>> Tone down the degree of confidence.
Those were the betting sites. I want to show a few more to the audience. One about the polling's as well. Sort of looks like the betting site to me.
>> Polling has Harris about two percentage points ahead of Trump and that might sound good but ultimately, the US election is about the electoral college, not the popular vote. If you recall in 2016, Hillary Clinton was ahead by 4 to 6 percentage points and so because you've got great big states like California and New York, they are going to vote for the Democratic candidate by 20 to 30% points, so a lot, so ultimately there's a big gap between the popular vote and what matters to the electoral college so two percentage points, it's nice, it's a lot better than where Democrats were a month ago, but it probably isn't enough to win in November.
As you bring up an important point. We are talking about 50 states but there are only so many that actually matter. You say 44 don't matter, it's up to six swing states.
>> In 2016, there were 11 states that sort of matter. In 2020, it was 98. This time, Max, is going to be seven, it may be fewer and of those seven, 3 Are Wisconsin, Michigan, PA, to or from the Southeast, Georgia and South Carolina, and two from the Southwest, Arizona and Nevada.
The rest of the country, which is over 80% of the population and GDP, in some sense, don't matter. In some sense, is not a national election. It's about a few states and so for example, if you think of Wisconsin, Trump one Wisconsin in 20 16 x 20,000 votes.
Biden won it by 20,000 votes, so it's a really small number of votes when you're thinking about the election as 150 billion people going to the polls and this time, it could well be everything comes down to Pennsylvania which I think is a state that Canadians know quite well and has quite a diverse telegraphic.
>> I think we may have a picture to in terms of some of those swing states and some of the changes we have seen since Pres. Biden said I will not be candidate.
What is this telling us?
>> The red bar show how much Trump was ahead in each of the swing states, the southern swing states, in July. He was ahead in all seven. That's why in our view at that point was a 75% chance that Trump would win. Since then, we have had a new candidate step up, Harris, you can see the green bars, those of the more recent polls, and it shows that all seven swing states are now in place that's a really dramatic difference in a couple of weeks.
It comes down to a couple of bold predictions. I would be careful about, my guess is that November 5, we are all watching the TV, watching the electoral college votes come in and it's going to be pretty tight.
>> Back in my days before business journalism, I would have season political reporters tell me that the only poll that matters is the election day pull. Some days it would play out that way. We have another picture to you about the states that Biden managed to flip.
>> These are states that Trump one in 2016 and Biden managed to win in 2020 and it's five of the seven swing states so a couple of southern states like Georgia and Arizona and then the three Great Lakes states, Wisconsin, Michigan and Pennsylvania.
So these are the states that move the rest of the states, New York and California, are not going to move and there are at least 10 states in the middle of the country that Trump will win by over 30 percentage points so when the campaigns are trying to decide where to spend their time and money, 95% of it will go in the seven swing states so they will ignore California, New York, and they will be spending a lot of time here, 95% of the money, 95% of their time will be in a small number of states and just emphasizing to some extent, it's very different than a parliamentary system like we have here in Canada.
The electoral college system, is just a small number of states and it might come down to a few counties in some of the states making all the difference.
>> That's an incredible landscape at a great breakdown of the backdrop we have right now. Given all of that, we think that the presidential race, fairly tight, you said don't make any bold prediction.
What about Congress can mark this is important for anyone who gets into the White House in terms of getting an agenda through.
>> For the White House, we thought 75% to Trump, now it's pared down to about 55 but this is a number that's going to change and in particular the September temp debate is important for that. For the Senate, we had 75% of the GOP takes the Senate and we stick with that 75. The house continues to look very 50-50 so it's a coin toss and then what's important overall is does a party get a sweet?
You have both the White House and Congress? Because Congress controls the purse strings and Congress also initiates the legislation so that's really important. And we have a 30% probability of a GOP sweep and a very small probability, 10%, of a democratic sweep.
Ultimately, what the market would like, I think, to see is a divided government because then you don't get measures that need to be ratcheted back later.
I think a more determined approach to policy, and that seems to us to be 60% likely.
>> What we think that policy going forward? In the end, that sort of informs what's going to happen in the markets.
>> A lot of the discussion is on fiscal policy and nobody is talking about fiscal austerity.
Candidate Harris, VP Harris, she had talked a lot about child tax credits, income tax credits, the sorts of things, paid for by higher taxes on wealthier people, also higher corporate tax rates.
The market would be very unhappy about higher corporate tax rates but that would only actually happen if you had a democratic sweep which we think is unlikely. Fiscal policy for Trump, he wants to cut taxes on everything, corporate tax rates, individual tax rates, taxes on tipping, and he's been arguing that if you cut taxes, those can create so much growth that they will more than pay for itself.
I don't think anyone aside from ex-president Trump believes that's true and so it could end up if you had a GOP sweep and he managed to enact those proposals, you have about $5 trillion added to the US deficit, it's a very big number. In either case, we are going to have deficits continue to be over $1 trillion a year.
These are enormous numbers in an economy that's pretty strong.
>> Let's talk about another part of the economy catching your attention south of the border. All we talk about in Canada's housing. But the states, it started to become a more potent issue.
>> It's interesting. Since the housing crash in 2007, there's been a lot of discussion about housing but nobody has really done anything in the last week, during the DNC in Chicago, ex-president Obama gave a speech, it was a very good speech, but the first policy measure he mentioned was housing and that took a lot of people by surprise because it's not something the Democrats have really talked about on the national stage. One reason for that, and as the chart that you will have up shows, affordability. This is affordability for first-time homebuyers, and I think this is something which Canadians have a lot of empathy for, housing is the least affordable it's ever been in the United States. That partly reflects higher mortgage rates, partly reflects higher home prices but the big driver has been less supply of housing since 2007.
>> We had that mantra here in Canada, build more homes, but they look at the starts, what are the starts telling us can mark >> This looks at housing starts and I have adjusted this for increases in the population but the rate of housing starts currently is 50% of the pre-2007 level.
This means the US is probably 2 million to 8 million homes short of what it needs for its population. That's a big deal, and 2 million to 8 million people. I think ultimately this is what's driving the affordability issues and in the focus groups that both the Republicans and Democrats are having, in all cases, housing is one of the number-one issues that people are concerned about.
>> Interesting stuff.
We are going to get back to your questions for Kevin Hebner 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 shares of super microcomputer in the spotlight today, right now down to the tune of about 25%.
The company, which makes AI servers, is delaying the filing of its annual report.
In a news release, super microcomputer says it needs more time to assess the quote effectiveness of its internal controls over financial reporting.
This development from super microcomputer comes after short seller Hindenburg research issued a report making allegations about the company's accounting practices.
Abercrombie and Fitch is under pressure despite handing in a solid earnings beat.
Sales were up more than 20% in its most recent quarter, but the retailer says it's operating in an uncertain economic environment.
Abercrombie and Fitch shares had rallied almost 90% the day before coming under pressure today.
Investors wanted to see more out of that earnings report. Let's check in on Berkshire Hathaway, it's become the First American non-tech company to break into the trillion dollar market cap club.
Shares of Orange Buffett's conglomerate have jumped some 27% this year, outperforming the broader market.
Reaching this milestone could be interpreted as a pretty decent birthday present for Buffett, who turns 94 years old on Friday.
Quick check on the markets, we will start here on Bay Street with the TSX Composite Index. We have some mining stocks under pressure today.
We are done 114 points, almost half a percent. South of the border, we await Nvidia. And there's a bit of caution out there on the markets, particularly in some of the tech names. Got the broader read of the market, the S&P 500, down 33 points, a little more than half a percent now.
We are back now with Kevin Hebner from TD Epoch talking about market trends. First one. Do you see any signs of a bubble in AI stocks after this remarkable run that we've had?
>> That is something we are concerned about and there are a number of signs that there's a bubble, one is valuations, but the most extreme they have been since 2000, the tech bus. Second is the degree of concentration in gains this year.
The third is the euphoric tone of commentary about AI. The fourth would be the Boom that we are seeing in Extending by the big hyper scalars, so Microsoft, Google, and Facebook has doubled just in the last three years, is tripled in the last 5 to 6 years.
So there is a lot of concern about, this chart shows Spending by them, including the company's estimates for the next two years. You can see really enormous numbers and in Q2 results season, a number of CEOs came out and made statements like the risk to under investing are much greater than the risk to over investing because we are in this. Where there is a fear of missing out, winner takes most and you have to be at the table so it's been an AI capex arms race. This chart, is AI another bubble, you can see over the last 25 years or so, during the period where we've had relatively low interest rates, there have been a number of bubbles that resulted, the tech bubble in the late 90s, the housing bubble leading up to 2007, and now with the Mag 7 numbers and whether it's a bubble or not, and I think it's difficult to say but there are certainly a number of reasons to believe it could be and so there's reason for caution.
>> We think about caution in the markets of the past couple of days because Nvidia reports after the closing bills today. Is this a media driven story, that one stock is the supporter, or is Nvidia occupying that rarefied space where everyone looks to them to tell everything about everything you might >> If we think about where AI it is going to be in the next 15 years, we need a lot of infrastructure built out. We've been talking a lot about the need for electricity for AI. Also, semiconductors, tech hardware for AI and different software products. So it turns out the semiconductor part, that seems to be right now all about Nvidia.
In the hyper scalars capex, 35% goes directly to Nvidia. They have a great ecosystem, great software products.
Leagues ahead of everybody in terms of chips. The next couple of years, he does look like they have a lot of immediate competitors.
So yes, Nvidia is absolutely critical to the story and after closing today, we will hear about Nvidia's results but I think more important is going to be there guidance and how they see sales going forward and I think that's going to be a good indication of what hyper scalars capex plans are for the next year or two.
>> I think you and I have talked about the next leg of this. As you said, this is building the understructure part of the story, this is a long story that will play out, at some point, someone's going to come up with the killer app that we have not seen. Is that the next thank you Mark >> That's the big issue is where is the killer app, where is the return on all this investment, the $180 billion of investment that we are showing in the next chart?
If you remember the tech Boom in the late 90s, they were spending money on all the right things and eventually there was a return on that but it took a decade longer than investors expected at that point and there is some chance this will happen this time as well that there will be returned, we will get not just one killer app but let a thousand flowers bloom, there could be a lot of killer apps coming out and it could change so much of what we do in education, healthcare, legal services and our personal life so when we get these general-purpose technologies, it takes a lot longer than people expect. So right now, it looks like we are investing too quickly, we are not really showing the patients that we need. Ultimately, there will be returns but I think we've gone a bit too far.
>> Fascinating stuff.
As always, make sure you do your own research before making any investment decisions.
we will get back to your questions for Kevin Hebner on market trends in just a moment's time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now, let's get to our educational segment of the day.
In times of market volatility, you may consider using stoploss orders. Joining us now to discuss how they work and how to use them here on the platform is Ryan Massad, Senior client education instructor with TD Direct Investing.
Great to see you, let's talk about what a stop order is and when it's appropriate to use them.
>> Definitely.
A stop order will be helpful in these days. Imagine that you want to sell something when it's going down. Generally speaking, what you would do is hit that cell button. You want to sell it right now.
But what if you don't want to sell it right now? What if you want to sell it as it's going down but just in case you're not there in front of your computer? Let's use the backdrop of an order entry ticket to show what that order really is so I'm going to go here into a broker right now and I'm going to go into an order entry ticket. Let's imagine that we own a stock here.
We own it in our account. And we want to sell it as it goes down. We have an order, we are ready to go.
If we want to sell it as the price goes up, it's really easy. We set a limit order and wait for that to happen but we want to catch it and stop those losses as they go down.
On a regular order if we put a market order and we hit sell, we go to the market and sell, if we put a limit order, it would sell at the price or better. But what we want to do here is if we put a stop market order, what's going to happen is we are going to now introduce something called a trigger price. The trigger price will decide at what time that order will be sent to the market.
If it's a sell stop market, we are putting a price that's below, so right now, Nvidia is 125. If we were to put it out 100, for example, what this would mean is that you are asking why broker to send a market order but only when the bid for Nvidia hits 100. It allows you to plan and really have a triggering price for this market order. We also have a stop limit. So you can have the same thing, we want this order to be triggered and sent to the market when the price of Nvidia, the bid of Nvidia gets to $100 but we also might want to say, well, don't sell it less than a certain amount, let's say $99 per share.
So it allows us to kind of stop those losses or crystallize any profits and not have to be in front of the computer to hit the cell button as the market goes down.
It's a very useful order.
>> Great explanation there. We've been looking at using a stop order and concentrating on that cell button. What if you want to do a buy instead?
>> Well, buy is possible as well. It's not as common as the cell, but think about it this way. If you have a stock in mind, and you say to yourself, I think when it hits a certain point, things were to take off.
I don't necessarily want to buy it now, I want to buy when it takes off in a couple dollars worth so the same thing goes here.
Let's say in what broker we have a buy order. Let's click the by stop order. We have a triggering event or a triggering price. This time it's going to be on the asking price because we are buying so we are saying is right now, Nvidia's $125 but I know when it hits 130 or what I think here in this hypothetical situation, when it hits 130, I want at that point for you to buy at the market price.
So it allows us to catch it when it goes up to that price and when we feel it's going to gather momentum and not necessarily buy it right now, buy it at a price higher than the current price.
So equally as useful, not as much use as the sell stop order but it's out there if it's something that you want to use.
>> Interesting stuff as always.
Thanks for that.
>> My pleasure.
>> Ryan Massad, Senior client education instructor with TD Direct Investing.
For more educational resources, you can check out the learning centre on why broker or use this QR code. It will navigate to TD Direct Investing's YouTube page and once there, you will find more informative videos.
Before you get back to your questions about market trends for Kevin Hebner, a reminder of how you can get in touch with us.
Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, 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.
We are back with Kevin Hebner, taking your questions about market trends. Lots coming in in the past couple of moments. Here's one for you. If the Republicans when the next election and they proceed with tariffs, will any sectors benefit?
>> That's a good question. The view from the Democrats is basically a continuation of what they have in place which was a continuation of what from putting in his first term. If Trump wins a second term, he has been saying two things, one is there could be a 10% universal import tariff, so on all goods, all countries.
This would be very bad for the country, it would be stagflationary, inflation would grow by 1%, GDP would go down by 1%.
It would hurt consumer staples, they would have less discretionary income. In terms of sectors that would benefit, I think this depends upon their approach to industrial policy.
We saw this as introduced by Trump in his first term focused on semiconductors, then energy. And going forward, there is a host of sectors in which they want to home shore manufacturing and I think it's difficult to know exactly what he's going to be focusing on but a lot of talk has been on electric vehicles, solar panels, new energy. Even though Trump is not the biggest fan of those. And then a lot of the industrial facilities, some related to defence, drones, one thing that's important would be the healthcare sector, and we learned during COVID that there is a real national security issue with for example active pharmaceutical ingredients being produced abroad.
I don't think we are totally clear what sectors Trump would tend to favour but at least one position is 10% universal import, stagflationary, I don't think it's gonna be great for markets at all. A second thing at we are talking about is a 60% tariff on imports from China. This would be enormously stagflationary. There are so many goods that we import from China that we don't have alternative sources. This would definitely be a tax on consumers. Some domestic producers would benefit from that but I think this would be overwhelmed by the damage done to the economy and to markets.
>> Next question. Should we be worried about how a trade war with China could impact?
>> I think already the tensions in trade with China are really important. To some extent, Trump initiated that in 2017 but also China has doubled down and they have fairly weak domestic demand, the real estate sector has imploded, and they responded by lots of subsidies to their industrial base to exports. Their export growth is very strong. The domestic economy is very weak and so they are flooding the world with their exports.
That's particularly hurting some emerging market countries that are trying to get their industrial manufacturing bases up, it's not happening. It's really hurting Germany.
I would say the tensions are very big.
Industrial policy, whether it's a Democrat or Republican administration, gets ramped up, I don't know if the word trade war is the right one but we have this period of hyper- globalization from 1990 to around 2007, we are in a very different world now, we are reinventing globalization, that's our preferred term, but some aspects of it, if there's a lot of conflict and tension, I think this only gets ratcheted up. Really regardless of who wins the White House, but particularly in a trumpet ministration.
>> When you talk about the reinvention of global trade, what are we talking about in terms of timelines?
>> I think it does take a long time because you have to read jig supply chain.
Supply chains have been put in place from 1980 for the next 25 years, they are complex, lots of different products, inputs, lots of countries as well. But for example, just in the last 3 to 4 years, we made major changes to the stomach active.
The investment in the United States and producing semiconductors, that has increased 17 fold in the last three years, so we brought this back home really quickly and so if there are targeted measures in a particular sector, that can be done very quickly but for the overall economy and the degree of outsourcing that we have done, and I think it is a broad realization that America and to some extent in Canada, we have outsourced our manufacturing capabilities, we have forgotten how to make things and we need to reassess that.
But broadly, it happens slowly, took several decades for the outsourcing to happen. It will take several decades I would think to reinvent that.
>> Another question from the audience. A viewer wants to know if you are seeing any signs of major stress in the US labour market or the global economy?
>> Many markets are looking like they are late stage, and of cycle. We are seeing this in the US, Canada, the UK, Germany within Europe and also in China. A lot of the focus in the United States has been on the labour market.
Particularly, we had a July labour market report that was relatively weak.
And this chart shows private sector employment growth, that's the green line.
You can see it's been decelerating over the last couple of years and it's now below trend. The red line represents the average employment growth from the previous decade so we are seeing employment growth slowdown and we are seeing the unemployment rate take up from 3.7 to 4.3 but our view is that the labour market is bending, not breaking. This is what this chart tries to emphasize.
Year in year, almost 2% employment growth.
Effective to zero, that is always associated with the recession. That has happened every time during the post-World War II cycles. But we still have decent employment growth. It is slowing, so our preference is to think about it not as a breaking but slowing in employment growth.
There's a lot of talk about recession out there. We think there are some reasons to worry but we are less concerned than many about that.
>> What do you make of that revision that came out? When they said it turns out the US economy did not create those 800,000+ jobs over the 12 month period. The market was saying, should we care, it's backward looking?
>> So the way the Bureau of Labor and statistics gets these numbers, they have a fair number of surveys that code either to households or to establishments and these things do get revised pretty majorly.
Ultimately, part of it was because the way that undocumented immigrants are treated in the surveys and their biases in both the survey of firms and the survey of households.
It results probably net net in their being about 40% less, 40,000 jobs less each month and we have been thinking so the number goes down roughly from 200,000 260,000 so still okay employment growth but maybe not as strong as we were thinking before.
>> Interesting stuff indeed. We will get back your questions for Kevin Hebner on market trends in just a moment's time.
As always, make sure you do your own research before making any investment decisions.
and 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.
We are a week away from the next Bank of Canada rate announcement. Of course, has that, we are going to get second-quarter GDP for this country and if you are interested, the earnings from central bank policy, you will be instant in that.
Anthony Okolie joins us now with TD Securities Outlook. They are calling for real GDP in the second quarter to come in at 1.7%. That slightly below consensus estimates for 1.8%'s, seasonally adjusted annual rate. Now, this would mark the second straight advance. It does build on the .4% rise that we saw in the first quarter, but we will see quarterly GDP pullback on a per capita basis as excess supply continues to build.
When you look back to the first quarter, we saw a higher household spending on services, mainly on things like telecom services, rent and air travel. Those were the top contributors to the increase in GDP in the first quarter of 2024. Slower inventory accumulation, that was a bit of a drag on overall GDP. When we look at Q2 growth, TD Security says it will likely be driven by another strong quarter from both business investment and government spending. Offsetting some of that growth in the second quarter, TD Securities sees heavy pressure on retail sales as well as weakness in merchandise trade. On an interesting level GDP should also confirm a weak performance in the month of June.
TD Security sees June GDP pretty much unchanged from what we saw in May and so they expect a we can draw from the second quarter to the third quarter.
In the month of June, they again see retail wholesale trade as a drag on GDP as well as manufacturing headwind for the good sector as well. Taking a look at the flash estimate for July, they expected to hit a modest rebound in the month of July.
This will have some big implications for the Bank of Canada which meets next week and TD Securities expects the Bank of Canada to deliver another 25 basis point cut to 4 1/4% at the September 4 meeting.
If we do see a big mess on Q2 GDP growth, TD Securities believes that could add pressure on the Bank of Canada to consider a larger cut of perhaps 50 basis points.
However, they believe that it's a very high threshold for such a move to be given the lingering inflation concerns or risks that continue.
>> Interesting thoughts there on what the Bank of Canada could get up to. What about the rest of this year and into 2025 when it comes to interest rate?
>> Beyond September, TD Securities is calling for another rate hike in October… >> Rate cut.
>> Rate cut! Exactly, they are looking for another rate cut and then in October they will cause and they're looking for interest rates to come down to 4% by the end of the year. Looking ahead to 2025, they are looking for another hundred basis points of cuts that would bring the interest rate down to 3% by year end 2025.
>> Interesting stuff. Thanks for that.
>> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now, for an update on the markets.
We are having a look at TD's Advanced Dashboard, a platform designed for active traders available through TD Direct Investing.
This is the heat map function, and I see if the market movers.
We know we are to the downside on both they and Wall Street's today, let's dig in deeper. We will look at the TSX 60 by Price and volume. We are still in the thick of bank earnings season. With Royal and National Bank today. You can see our white, royal, a little more than 2.5% and National Bank, NA, up about 5 1/2%. Where is the weakness? Clearly in some of those mining stocks in the basic materials bucket there. You got very Kinross Tech also the downside and Shopify right now down about 2 1/2%.
As he looks as the border, let's hone in on the S&P 100.
We all await Nvidia earnings after the closing bells today. Right now, Nvidia is taking up a lot of real estate on the screen. That is indicative of the volume of traded shares compared to the other names on the S&P 100. It's down to the tune of a little less than 2%. We are seeing weakness among other tech plays and chipmakers. Where is their strength? There has to be some green on the screen. We are seeing a bit in the financials, Bank of America a modest half percent, Wells Fargo up more than 1%.
We are back now is Kevin Hebner from TD Epoch. Which US president is better for the US China relationship?
>> I think from China's perspective, neither is great. One good thing about Trump is he's pretty transactional. One less good thing from the perspective of Beijing is that he's really on predict will. For a Harrison ministration, they would view it as a continuation of the policies under the Biden administration and those have not been helpful to Beijing and also tensions continue to build through the Biden administration as they did through the Trump administration and I think whoever's in the White House, the issues between the United States and China, they are pretty fundamental and that chasm will continue to grow.
It's not just between China and the United States, the same tensions are between China and Canada, certainly in Japan, China has a lot of issues. Europe, particularly Germany. It's a broad concern, and our view is this just keeps getting more of an issue for geopolitics going forward and we don't see any scenario, certainly no political realignment, in which these concerns would be less important for the geopolitical reality.
>> Interesting stuff there. Someone also wants to know, what do you make of the recent volatility we saw in the yen carry trade? Take us back to earlier in the month.
>> We have had a period of extremely low interest rates for a long time. When that happens, people borrow, they build up leverage. One place that they were taking leverage was in Japan because Japanese interest rates were so low. In particular, speculative participants in the market, people who are not using the trade to hedge, they borrow in the end and then invest in different momentum trades. It could be tech, Japanese equities, US equities and so forth and as the chart here shows, these yen shorts were the most extreme they had ever been a month ago.
Since then, a lot of those have been close. We heard earlier about how you have to manage your stops pretty tightly on some of these trades and definitely on the is the stops are very tight and so the trade is very nice, when markets are moving certainly. But then we had the dollar yen move from 160 to 144 and all of these trades suddenly did not look brilliant and everybody has the same trade on, everyone has the same stops in the trade reverse very quickly so this is 14 leverage unwinding quickly. There's lots of other forms of leverage out there, many and relatively opaque, less regulator parts of the market, private markets for example. I don't think this is the last example of something happening in markets that gets us into very choppy I think unpredictable situations like we had five weeks ago.
>> We have covered a lot of ground here on the show, Kevin. A lot of great insights but it tells me that we have a lot of things to you, I don't like to use the word worry, but keep an eye on. Their concerns out there. What do we make of it as we head into the fall as investors?
>> Ultimately we are constructed on equities, particularly US equities because we think it's being driven by tech and tech is ultimately the number one place we are seeing innovation and that's what drives value creation going forward.
The equity market we like the least is China and maybe that's not surprising given the comments that we've made in the last couple minutes but still, pretty constructive view and we see broadly interest rates declining at least for the next few months and I think that's constructive for bond market so a lot of choppiness, both in interest rates and equity markets but overall, I think still constructive perspective for the next 6 to 12 months.
>> At least for the next couple of months, interest rates falling. What is the thinking on 2025?
Too many unknowns to really hostess >> Say get into a scenario in which we have the GOP sweep and we are going to enact some of these big tax cuts and add to the deficit and bond issuance, feeding, stimulus for the economy, I think that something which the bond market might not react well to. So we are still a few months from knowing how that's gonna play out but that's something to worry about beyond November.
>> Always fascinating having you. I really enjoyed the conversation and look forward to next time.
>> Thank you.
>> Our thanks to Kevin Hebner, global market strategist at TD Epoch. As always, make sure you do your own research before making any investment decisions.
if we did not get to your question today, we are going to aim to get into future shows. Stay tuned for tomorrow. Julien Nono-Womdim, VP for portfolio research at TD Asset Management will be our guest. He wants to take your questions about healthcare and retail stocks.
A reminder that you can get a head start with those questions.
Just email MoneyTalkLive@TD.com.
That's all the time we have for the show today. Thanks for watching. Thanks for setting in your questions. And we will see you tomorrow.
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