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[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 are going to discuss whether we are seeing enough signs of economic slowing to keep the Bank of Canada on pause.
Leslie Preston from TD Economics joins us.
MoneyTalk's Anthony Okolie is going to have a look at a new TD Cowen report on the outlook for the agricultural sector.
And in today's abrupt education segment, Hiren Amin is going to show us how moving averages work and how you can use them here 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 we get our guest of the day, let's get you an update on the markets. First trading day of the week.
We will start at home with the TSX Composite Index.
Bottom of the screen on the screen to start the trading week. About hundred and six points to the upside on my screen, or half a percent.
On the most actively traded names on the TSX at this hour include B2Gold. We've seen the price of gold up modestly.
There is some weakness in the US back to start the trading week so perhaps that's having a bit of a play there. Got B2Gold up about 3% at $4.23 per share.
First Quantum minerals also on the move today. They averted a strike in the 11th hour at a copper mine in Panama, so those shares have been feeling the pressure of that overhang last week, jumping 4% today.
Now south of the border, still all about interest rates and the direction of central banks, inflation. Of course, we got the Fed later this month.
So it's a modest gain to start the week. You're about 14 points on the S&P 500, 1/3 of a percent. Let's check in on the tech heavy NASDAQ and see how it's pacing against the broader market. A little bit stronger.
You're about 84 points were almost 2/3 of a percent.
And Tesla is one of those names on the move today. Some improving sentiment on Wall Street. You've got Tesla at 271 bucks and change per share, jumping a little more than 9% on the session. And that's your market update.
The Bank of Canada is back on pause, but are there are no signs of the economy cooling to keep it from hiking rates again?
Joining us now to discuss is Leslie Preston, Senior economist at TD. Great to have you back on the program.
>> My pleasure.
Great to have you on because I want to take the temperature. A lot happening last week in terms of not only hearing from the Bank of Canada, getting the pause from them, we have labour market information, and two days later, more jobs than expected. How do we run the cells of the calculus and try to figure out where we are headed?
>> Well, I think I will start the last thing you mentioned there on the job market.more jobs and were expected but I think when you dig a little deeper, under the hood, you see a lot of those jobs were self-employment which can be great for an individual to be self-employed, but we generally don't think of that as a sign of economic strength.
When we look at private-sector jobs,that trend continues to slow, so you characterize the job market as job growth is slowing and the fact that the unemployment rate remained at 5.5%, which is an uptick from the pandemic rebound low as consistent with a labour market that's cooling gradually.
>> A lot has been said to about while we do get, if you do get a month of labour market gains, which we did, so there good reasons to dig beneath that headline number, also migration, did the rate at which the population is growing compared to the labour force growth?
>> Exactly, I think market watchers and forecasters need to adjust their expectations of thinking a typical month, 15 to 20,000 jobs, that number is higher now.
That said, I think economists and forecasters who forecast this number a month ahead were looking for a bigger slowdown than they saw it, so 40,000 new jobs was just sort of keeping pace with growth in the population, but forecasters had expected it to be more like 15 to 20, so that was the upside surprise there, but still on net, I think when you look at the characteristic of the job gains underneath and that, Canada's labour market data is always volatile and the unemployment rate has ticked up in recent months, so I think the fact, to my mind, that it didn't give back, shows that this cooling we've seen in recent months in the labour market is a bit more persistent.
>> That was Friday. I feel we have to roll back in time because we got the rate decision on Wednesday, but we didn't hear from the bank really apart from the statement until Thursday and that speech in Calgary that the Gov., Tiff Macklem, gay.
Anymore colour on that as to what they are thinking? I thought it was one of those days where whatever you want the headline to say, you could find something in that speech.
>> Yeah, that certainly the case. The Bank of Canada is not a tricky point in terms of setting monetary policy.
They know they have raised interest rates a lot.
They know that the impact of all that monetary tightening is still working to the system.
At the same time, they don't want markets to get ahead of themselves and start pricing and cuts to aggressively because inflation still needs to come down. They want to keep market interest rates elevated to help enable that to slow, but overall, I think it's interesting you use the word pause in your first question and I think Gov.
Macklem was very careful not to use the word pause in any of his or March.
>> Don't call it a pause.
>> We have a situation earlier in the year when they were on pause and housing reignited momentum in the housing market which the bank does not want to see, things started to pick up.
But I think they are in wait-and-see mode definitely.
The next couple of data releases particularly on inflation are very important to confirm that we are continuing to see that gradual slowdown in inflation.
Well, I mean, friendly, the bank would prefer perhaps more rapid slowdown in inflation but we are expecting inflation to continue to come down as economic growth slows. So we think that, or TD Economics view is that the Bank of Canada is at the height of the rate hiking cycle, but they are going to maintain this hawkish stance and rhetoric until they are more convinced on inflation.
We have a forecast for growth to slow quite a bit in the second half of the year and into next year, and we think that will be enough to turn the temperature down on inflation and enable the Bank of Canada to stay on hold for a prolonged period of time.
>> We are going to get another inflation print in the coming days out of Canada. The thing I found interesting about the statement that came at the rate decision last week is that they said, don't excited to be, and I don't think they were told this would be a straight path from up high to download,you get a bit of a bomb, we got back about 3% in the summer, a bit of a warming on gasoline prices, could be a bumpy ride here?
>> It could and the bank was wise to warn about that because we are expecting headline inflation in August to take up to 3.7%.
He mentioned being back above three, so said to get a little further above 3% and that's what you mention on those higher gasoline prices that we've been seeing at the pump reflecting higher oil prices in international markets.
that's headline inflation. The bank focuses, when they are setting monetary policy, on their core measures of underlying inflation because oil and gasoline are one of those places where they swing up, they swing down and could provide a misleading signal on where inflation is headed so we do expect that the core inflation measures will continue to decelerate slightly, but on a year on year basis, to remain above 3%, so sort of what we have been seeing which is core inflation is coming down but it's very slow. Sort of the easy gains and weaker inflation are really in the rearview mirrorand it's those services prices that have been quite hot and we need to see those gains cool and that's only being happening slowly.
That's our view. If we see A much different outcome, as I say, the Bank of Canada's kind of at a critical juncture.
If the report comes in a lot hotter than we are expecting,we might be starting to consider whether we would see the bank hike again.
So we are very much, us and the Bank of Canada, very much in data dependent mode right now.
>> My next question for you is going to feel like to be the gun if we are talking about harder than expected economic data, the bankcould raise again if they had to, but we get this question a lot, when will they start cutting? When do we get the cuts?
>> I think those are long way away and I think the Gov.
was right to say it's way too early to be talking about that. Given the last question you in our discussion,the potential that they could hike again. We don't think they will be ready to cut into the middle of last year until they see a more convincing slowing and inflation and inflation kind of on a three month annualized basis getting much closer or that they can see that inflation is headed closer to their 2% target.
> We are going to get the Fed later this month to, their interest rate decision.
Obviously, it's a huge market mover globally.
Are they sort of in the same camp as the Bank of Canada or do they have a sort of different path ahead?
>> Well, from the perspective of our forecast, it's a very similar path.
We also expect that in line with our economic forecast for the US economy to slow not so much in the third quarter but come the fourth quarter of this year for economic growth to slow, that the Fed is on hold, but again, in data dependent mode, we have seen some more encouraging slowing in the inflation metrics on the US side.
Now, US inflation got to a higher point in Canada so they've kind of had further to come down, but there are we have seen the labour market gains slowly in the United States and we think there is a… The Fed is on high alert for renewed inflation pressures or if they don't see the cooling they are expecting in the labour market.
> Interesting times.
A lot at stake.
We are going to get your questions about the economy for Leslie Preston in just a moment 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.
First Quantum minerals among the best performing stocks on the TSX today. The copper producer reached 1/11 hour labour agreement to avert a strike at its mine in Panama.
the strike was scheduled to start over the weekend at its Cobre Panama copper mine. You can see the shares that were feeling the pressure of that overhang last week at 4 1/2% today.
You've got shares of Twinkies maker Hostess Brands and Smalley today, the company being acquired by Jam and peanut butter maker, J.M. Smucker, for some US$5.6 billion including debt.
The US food industry has been going through consolidation phase as companies or for growth in a post-pandemic world. You see J.M. Smucker's down about 6% but hostess, definitely pop on the steel, 3350 per share, up on the news.
Qualcomm says it will continue to supply 5G modems for Apple iPhones through 2026. This is somewhat unexpected development as Apple develops its own motive for smart phones but they are apparently not ready. Wall Street analysts had expected Apple to start using their own modem technology as early as next year.
Qualcomm shares got a boost on the open and they are holding onto them. At 109 bucks and change per share, their of the 3 1/2%. A quick check in on Bay Street and Wall Street. We'll start here at home with the TSX Composite Index. A triple digit gain of 123 points, almost 2/3 of a percent to the upside to start the trading week.
So the border, after a bit of a challenging one last week, that shorten holiday weekend, got that brought a read of the American market, the S&P 500, we will be generous and call the 17 points jump, a little more than 1/3 of a percent.
We are back with TD's Leslie Preston, taking your questions about the economy so let's get to that.
Someone wants to know how we here in Canada economic -wise are stacking up against the United States.
>> That's really an interesting story. The US economy has been impressively resilient so far this year. First couple quarters of economic growth running around 2% which, in normal times, you think in real terms, that's really nothing to write home about but in an economy that's seen such substantial monetary tightening over the past 18 months, it is, you know, a sign of resilience. Canada, on the other hand, it's been a bit more of a roller coaster when it comes to GDP. We had that great first quarter number, very strong growth, and the second quarter we actually saw a very slight contraction.
Now, there were a lot of special factors in the number.
You had strikes, wildfires, that were sort of distorting the signal a bit but still underlying we think we saw weaker growth in Canada. So you know that matters heading into the third quarter.
The US is looking to have growth potential is high as 4% in real terms in Q3 in the summer quarter. Growth has been coming in quite strong there.
Where is Canada, we are looking at more like sub 2%.
So we are seeing greater resilience in the US economy.
Canada is seeing more solid signs of slowing and, as I mentioned, the unemployment rate is picking up a bit we have seated rise to 5 1/2% in recent months whereas the US, the labour markets been holding steadier.
Done employment rate has oscillated up and down a bit from month-to-month.
Maybe the beginnings of a slight upturn. But Canada is a little farther along on the labour market slowing process that we expect to unfold.
> I don't know whether to be concerned about that or not, personally. When I think about how my, and you understand economics much better than me, but the US, being our biggest trading partner, their economic health affected hours.
Is the fact that we are liking the Americans cause for concern or are we just getting the job done?
>> We are coming at the slowdown with very different sort of set of hands that we have been dull.
The US economy, this consumer had a much larger cushion, you might have heard about excess savings, it's basically just the pandemic nest egg that consumers broadly built up when they were staying home and not spending money.
The US had much more direct fiscal stimulus to household, sending out several rounds of checks.
Canada, we had generous programs like CER BU but we didn't really transfer money to people who still had their jobs which occurred in the United States.
Some Americans had a much larger cushion of excess savings to draw down from.
Canadians are also much more highly indebted than Americans which is a key factor that we think is starting to way.
You are seeing it in survey data that consumers are being more cautious.
Maybe the people who hold mortgages, they haven't renewed yet but they might be looking ahead to their mortgage renewal and might be thinking I need to start cutting down on my spending in other areas because I'm going to have to foot a larger mortgage bill when it comes up. So that higher indebtedness increases Canadian sensitivity to interest rate increases so will you think that's a big part of why Canada is slowing a bit more and sooner than the United States is because Canadians have a greater sensitivity to rate hikes due to their high indebtedness. Americans also, after the global financial crisis, had a huge deleveraging after their housing crash and they haven't really levered up since then.
So debt payments as a share of disposable income is much lower in the United States and also it differences in the mortgage market, most Canadians have a five, you three are for your mortgage term.
Americans luck and for much longer, so they are still enjoying the benefit of their lower rates if they locked in either during the pandemic were immediately prior. Where is Canadians on that five year cycle are starting to feel the higher rates much more quickly.
>> Yes, a mortgage for 30 years definitely takes that worry off your plate. Interesting stuff. Another question. Someone is worried about inflation staying elevated. How long could inflation stay elevated?
>> Well, the central banks are pretty bound and determined to bring inflation down.
In terms of remaining elevated, as we discussed previously, oil prices being up again, so headline inflation could remain elevated for a while. You know, inflation has remained elevated longer than economists would've thought back in 2021 when we first started seeing the surge but in many ways, the best way to bring inflation down his inflation. We are all paying a lot more at the grocery store, that's a lot of money to spend onconsumer discretionary things, retailers seetheir sales drop and they have to lower prices.
How long could it say hi?
We have another shock were more oil price increases.
That's not off the table. But we are getting to the limits of what consumers can bear in terms of higher rates, high inflation. So we do think that that weaker demand will see inflation come down and back to my point about central banks, central banks are getting quite worried about how long inflation has remained elevated because they fought hard battles in previous decades to establish their inflation targets at 2% and they, there is a big negative if they lose their credibility, that they want to get inflation back to 2%. So you know if inflation stays higher then we are currently forecasting, you are going to get more and more rate hikes and that will ensure that inflation comes back down.
> Okay, another question here from the audience. A viewer wants to get your Outlook for our currency, the loonie.
>> Oh, the loonie. The loonie has suffered a bit recently. Largely, it's been a strong US dollar story more than anything particularly negative about Canada's economy.
You've seen that US relatives economic performance to Canada and to other parts of the globe said the US dollar has done well.
Unfortunately in our forecast, we don't expect that to shift too much.
Last I checked, the loonie was at about 73 1/2 cents US. We could see it we can a little bit further down toward $0.72 later this year and we wouldn't expect the loonie's fortunes to change really until the middle of next year when the Fed starts moving towards cutting as well.
>> Finally, we might see the end of a strong US dollar story?
> That's what we are thinking.
At this point, once the Fed moves to talking about cutting rates, loosening monetary policy, then we think that will help the loonie a bit more.
>> Your bang on. 73 and has since on my screen for the Canadian dollar against the US buck.
As always, make sure you do your own research before making any investment decisions.
we are going to back your questions for Leslie Preston on the economy and just a moment's time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now look at our educational segment of the day.
Moving averages are one tool you can use when analysing a stock chart and here to show us how they work and how to use them on WebBroker is Hiren Amin, Senior client education instructor with TD Direct Investing.
Always great to see you, let's start with a bit of a primer for the viewers who are maybe not aware of moving averages, how they work.
Ask Lena to us.
>> Yeah, let's do that, Greg. Before you get into moving averages, I want to talk about trends.
I'm not talking about the fashion kind, the one that you wear or what you do on TikTok.
Although there is a theme behind it because, as investors, we are also looking for trends in the financial world and traders often look towards stock charts to identify those trends and they want to be on the right side of that trend. One of the things that's going to help them be on the right side of the trend is using moving averages. These are indicators or technical indicators, I should say, that help us gauge the trend of the stock price across time. And they also act as what we call dynamic support and resistance levels. Now, that might be a mouthful, but for the ordinary investor, that simply means is a kind of psychological ceiling and floor prices that we have on a stock.
Now I'm going to bring up WebBroker here in the background and we've got the S&P 500 ETF SPY loaded up here. I've got a chart pulled up and we are looking at our five year one day chart.
With a chart, you can see a lot of noise happening.
A bit of erratic movements. You want to smooth out these movements to be able to identify a trend quickly.
So the way I'm going to do that is I'm going to pull up the moving average. If we go into the upper indicators here and we scroll down, we are going to use our simple moving average. There are couple of different ones but this is the one you can get started with that will be the easiest for the ordinary investor there. Now once you can see that it kind of highlights it, we're going to go in here and we are going to adjust some of the settings. Remember, moving average essentially is collecting a number of data points or, in this case, we are talking about closing prices of the stock and adding them together and dividing it by the number of periods that we are looking at.
You can see this one defaults to 15 but I'm way to set it up to 200 and this is a very commonly used moving average time frame because this is a long-term timeframe to really be able to gauge the primary trend a stock might have over 200 days. I'm going to simply hit update chart.
Now you can see in my screen and I'm going to try and get as assumed in here a little bit so we can see this a bit better, but you can see this moving average and we can see the kind of trend it is and where the stock has been going. We can see through the volatile periods in COVID times and then only had a little bit of a market correction coming down where the stock price tipped below the moving average and so traders not only look at trends with the moving average but they use them as signals to trade with. One way they use them as signals as they look for these crossovers and that simply means where you see the price chart of a stock and if it drops either below or crosses abovethe moving average, that usually is a signal that it's either bearish or bullish and then they would kind of make the decision based on that. Now, I should caveat and say that you are not solely relying on just cross over to make your trade decision.
A technician would use other indicators. But in a nutshell, that's what moving averages there.
>> Great primer on the moving average. Anyone who is dabbled with them knows that you can start drilling. If you have a 200 day overlay against the 50 day overlay against the 20 day, they'll start crossing each other against price.
I start to get a little bit, located.
And you're looking for signals, as you said. Where can you look more on WebBroker about these lines crossing each other, with the signals mean?
>> Absolutely.
We just do the basic one. But if you want to learn more about those different types of crossovers adding the signals, we've got you covered here on WebBroker.
If we click on this technical tab, your first one-stop shop that you want to get to here, within the technical area, what we have is a little bit of handholding when it comes to analysing these indicators. What I'm actually going to do is within the screen, you can see an education Which will take you to the learning centre. You can learn different things here. But we can go to our indicators over here for example and you can see under the indicators we have these crossover patterns. We just did a single crossover which is the price crosses moving average which is what we described and to what it does is it gives you a little bit of a primer on what it is, how you would understand that crossover action and how you can trade it. They have trading considerations.
So it's a fantastic resource here.
You can check out those doublecrossing overs and triple crossing over his and know what they mean for your trading. Not only that, if we go to our WebBroker Learning Center and you want to level up your financial knowledge when it comes to technical analysis, we've got you covered.
You can come in here, we can go and check out our video lessons and I'm already applying a filter.
You can go on to the filters and select whatever topic you want.
In this case, we are talking about technical analysis which I've already got on. Once you got that on, it's going to queue all of the videos related to technical analysis. You're going to find one on those trends and understanding crossovers and moving averages there. So that's where you can level up your financial knowledge.
> Always great stuff. Thanks for that.
>> My pleasure.
>> Our thanks to Hiren Amin, Senior client education instructor at TD Direct Investing.
And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
now before we get back to your questions about the economy for Leslie Preston, 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.
Okay, we are back with Leslie Preston, we are taking your questions about the economy. This one just coming in the past couple of minutes. First off, great to see Leslie again. Agreed. The question would be: is there another way to fight inflation that doesn't include raising rates?
>> Yes there is. So the two sort of macro policy levers we have our monetary policy and fiscal policy. So monetary policy is raising interest rates. Also the Bank of Canada normalizing the size of its balance sheet. We don't talk a lot about that anymore but the bank acquired a lot of assets through the pandemic and they, which adds to their balance sheets so they've been doing quantitative tightening and that's monetary policy. The other side of that which, to your point, the quantitative tightening can be going on even though the policy rate isn't rising. That is still monetary tightening. The other side of that, which I suspected the question getting at, is fiscal policy. How much governments are spending. So that is the other lever, federal and provincial governments could be ratcheting back on spending and more fiscal austerity could certainly help to bring down inflation.
>> Fiscal austerity, I mean, I don't want to delve into politics in their different level, provincial, federal, but at the same time, if you start talking about austerity in times when Canadians are struggling to balance the books, that seems a bit of a tough go to.
We talk about how monetary policy, you have this fight against this and that, the fiscal side doesn't seem any easier.
>> No, it's not easier and Canada certainly facing a number of growth strains that would argue for more government spending. We've had a surge in population, which put strains on all sorts of social services and housing.
So it there are a lot of demands on the government to spend. Although the tricky thing is Canadians are struggling under the weight of higher prices of inflation but the on employment rate also remains very low so Canadians, it has, I mentioned, it's ticked up but at 5.
5%, looking over the scope of history, that's still a very tight labour market so Canadians are still working, of where we are in the cycle point, we are still in a pretty good place.
Perhaps austerity was too strong a word, but slowing spending growth, not bringing in new stimulus programs would certainly contribute to weakening inflation.
>> Okay, we better the question here.
You just mentioned briefly. What's the health of the housing market?
>> Well, since the Bank of Canada raised rates two times through June and July, it certainly has had an effect on the housing market.
I would probably characterize the housing market overall is subdued but that depends very much on where you sit or where you are living in Canada.
Toronto and Vancouver, we have pulmonary sales through August, we have seen sales and prices in those sort of higher-priced markets come down since the Bank of Canada's decision. Calgary, on the other hand, which people in Calgary may not feel this way, but relatively speaking, nationally, is more affordable as the housing market we've actually seen Calgary home sales and prices strengthen since the Bank of Canada started resuming raising interest rates, likely reflecting strengthen the resource sector, higher oil prices, more income coming into the province so it seen its housing market do a bit better.
But overall, the market subdued, the latest official data we have is from July and one measure people watch closely is the sales to listings ratio is a measure of how tight the market is and we've seen listings,. So the market, it's not in buyers territory yet but it certainly moved less in favour of sellers through July as sales fell and listings came up and we expect that to continue to be a theme through the remainder of the year for sales at the national level to continue to be weakened for prices on an average basis to continue to fall, but as I mention, it's a bit of a different story across the country with Calgary being one noteworthy big city example where the markets mean bucking the interest rate trend.
>> You mentioned earlier when the Bank of Canada went on a conditional pause, we saw the housing market go off.
I think it seem like the housing market said, oh, they've done, they've pause, let's go and in the hikes resumed in the summer and pulled back with this one save their hand, they stayed their hand last week, would that be enough to get housing going or people a little bit more cautious this time around?
>> I think the market is still digesting you know that recent 50 basis points worth of higher rates still being digested in the market.
I also think, probably more importantly, we are seeing some other economic indicators slow.
in terms of job gains not keeping up with population, we have seen consumer confidence come down a little bit.
So I think the risk of reigniting the housing market with the latest pause, as we may call her, an interest rates, is lower this time around.
>> Pause, stay of the hand, took my hand off… We've got another question here.
What impact is record immigration having on the economy?
>> Well, it's having a number of different impacts, but before I get into them, I just want to say that Canada has an aging population.
Canada needs emigrants at Guaido substantial pace year on year the sort of help us deal with our aging population.
That said, in 2022, we got one 200000 New Arrivals in Canada, new people in the country, that's more than double the pace that we saw in 2019 or the years previous. So it's been quite a surge and, in the short term, that's been a big help for employers who are having trouble to fill positions, it increase the labour supply, so the Bank of Canada certainly heard in some surveys that it's an easier to find workers.
So that's great.
But the challenge is, as I alluded to before, we don't necessarily, we can't keep up from an infrastructure perspective.
It was a big increase. Housing is what gets the most attention in the media but also things like hospital beds, even before the pandemic, Canada had a very, of the OECD, I think we were 30 1/30 fourth in terms of acute-care beds per population, so it's not just housing, it social services broadly in terms of availability of hospitals. How quickly can our social and generally infrastructure keep up with that kind of growth?
So that does prove a challenge. Also for the Bank of Canada, new consumers bring new demand. They are trying to slow inflation so that's a bit… From the monetary policy perspective, it helps increase the labour force but that's increased demand and potentially a higher inflation and higher interest rate so there's a lot of push and pull on that.
I think is a tricky thing for governments is to get that balance right.
>> Because we have long-term needs and short-term dislocations.
>> Somewhere in the middle is probably… What that level is, I don't have… It kind of depends on how quickly we can ramp up housing, healthcare, education, our capacity for all of these things that people who come to Canada need.
>> We will get back to your questions for Leslie Preston on the economy and 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.comor 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.
Let's talk agriculture. Last year, we saw elevated prices for fertilizers but they have dropped during the first half of this year, creating a challenging market for the industry. Our Anthony Okolie has been digging into a TD Securities report on the space and brings us the details. Anthony.
> Thanks very much, Greg.
As you mentioned, fertilizer prices have fallen since the peak reached shortly after the start of the rough Ukraine crisis in February of last year. There are various reasons for this. Chief among them, raw material inputs like natural gas and ammonia are considered cheaper. Countries like Russia continued to export fertilizers over the past year despite sanctions, therefore increasing global supply. Now we her fertilizer prices has also had an impact on sector performance and TD Securities notes that the most recent performance, last month, fertilizer equities were generally lower, giving back strong gains that were realized in July and, on average, the fertilizer pier group that TD Securities covers was down 5% month over month and valuations were also weaker with group member multiples mostly lower month over month. Now, despite the recent weakness, TD Securities is seeing evidence of an upturn in prices, particularly in some regions like Brazil. Potash prices in Brazil began rising in late June after falling over the past year.
prices in Brazil were up a further 4%, building on a 5% gain in July.
August prices were up 12% in the US Midwest. And according to TD Securities, the TD Securities consulting group reported that strong demand entire supply point to a rebound in China support wholesale potash prices. So despite a slow start, TD Security says that there are signs that fertilizer prices are trending higher in some regions of the world.
>> When it comes to farming, fertilizer is a significant input cost.
What have the lower fertilizer prices meant for crop prices?
>> Fertilizers are a major cause for farmers for things like corn, wheat and rice.
They require things like nitrogen, phosphorus and potassium fertilizers. But crop prices were pretty mixed over the past month. Soybeans did gain first-rate month, they were up 4% month over month in August.
However, corn and wheat are both traded lower in August.
TD Security says that weather and crop conditions had a big influence on crop prices. In fact, US crop prices exhibited a degree of strength in July on concerns over dry weather but that by mid August, improve crop soil moisture was seen in various US growing regions. And while crop condition saw some improvements during the first half of August, the percentage of key crops, that's corn, soybeans and wheat, rated as good or excellent by the USDA actually dropped during the second half of the month.
Greg?
> Very interesting stuff.
Thanks, Anthony.
> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now for an update on the markets.
We are having a look at TD's advanced software, platform design for active traders available through TD Direct Investing.
This is the heat malfunction giving a view of the market movers. We are looking at the TSX 60 and we are looking at price and volume. We will start the green on the screen. First Quantum, which would be FM, is the standout, a 4 1/2% following the 11th hour agreement to avoid a strike at its mine in Panama. Had a bit of an overhang on the stock last week soyou are seeing a rise of 4 1/2%.
Materials to the upside.
Appears to be a positive day across financials but mixed on the energy space. Some names up very modestly while some down just modestly as well.
We can use the heat malfunction to screen in a number of ways. We can look at the S&P 100 as well so let's check out what's happening south of the border.
You got a bit of a dominant name down there at the bottom part, taking up a lot of real estate.
That would be tesla up a little bit more than 9%. Some positive momentum for the name and sentiment on Wall Street today. But then you've got our TX, a bit covered by the TD symbol but you got some red, that's a former Raytheon.
It's down about 7% today.
It's warning about problems with engine sent to Airbus.
You can get more information by visiting TD.com/Advanced Dashboard.
We are back there with Leslie Preston from TD Economics.
it's one we've been worried about for a while.
One may we get a recession?
>> Since last summer when the yield curve inverted, that's really when a lot of forecasters started to call for a recession.
we haven't made a recession call in our forecast, although I think it's interesting as well, forecasters disagree on the whole, whether they are calling for a recession or not. Most forecasters do have a rising unemployment rate and therefore cost so the whole recession or not recession me feel a bit academic for those people living and working in the economy because what we are calling for is a prolonged period of subdued growth and rising unemployment rate which isn't gonna feel great, it's not going to feel like boom economic times either particularly for people who lose their jobs. So we don't see the conditions necessary to call for a recession but we called for a period of subdued growth.
>> I want to squeeze this one and before the end of the show because we didn't have a chance to go through this. What percentage do you think the cost of nonfarm payrolls or the labour productivity index plays when the US Fed sets its interest rates?
>> Apologies to the questionnaire if I get Robert what I think they're getting at is I think they're talking at the employment cost Index and sort of what the Fed's preferred wage measure is that they watch.
the Fed is looking for her services inflation to come down. We have seen goods inflation come down and now they are focused on services inflation and a key part of that is the labour market. As the labour market weekends and people's demand for services it reduces, that will help inflation.
So a wage measure they like to look at is the employment cost Index because it corrects for compositional shifts in the labour market and sothose measure of wages are important to the Fed when they set monetary policy but sort of through that in direct path, they are looking at wages is an indication of the labour market or the job market going down which should help with cooling down inflation.
>> We ask the right person the question. Leslie, it was great to have you back on the program.
Hope to have you back again soon.
>> Sure thing.
> Our thanks to Leslie Preston, Senior economist at TD.
As always, make sure you do your own research before making any investment decisions.
stay tuned for tomorrow show. Andres Rincon, head of ETF sales and strategy with TD Securities will be our guest taking your questions about exchange traded funds.
A reminder, course, you get a head start with your questions by emailing moneytalklive@td.com.
That's all the time we have for the show today. Thanks for watching. We will see you tomorrow.
[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 are going to discuss whether we are seeing enough signs of economic slowing to keep the Bank of Canada on pause.
Leslie Preston from TD Economics joins us.
MoneyTalk's Anthony Okolie is going to have a look at a new TD Cowen report on the outlook for the agricultural sector.
And in today's abrupt education segment, Hiren Amin is going to show us how moving averages work and how you can use them here 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 we get our guest of the day, let's get you an update on the markets. First trading day of the week.
We will start at home with the TSX Composite Index.
Bottom of the screen on the screen to start the trading week. About hundred and six points to the upside on my screen, or half a percent.
On the most actively traded names on the TSX at this hour include B2Gold. We've seen the price of gold up modestly.
There is some weakness in the US back to start the trading week so perhaps that's having a bit of a play there. Got B2Gold up about 3% at $4.23 per share.
First Quantum minerals also on the move today. They averted a strike in the 11th hour at a copper mine in Panama, so those shares have been feeling the pressure of that overhang last week, jumping 4% today.
Now south of the border, still all about interest rates and the direction of central banks, inflation. Of course, we got the Fed later this month.
So it's a modest gain to start the week. You're about 14 points on the S&P 500, 1/3 of a percent. Let's check in on the tech heavy NASDAQ and see how it's pacing against the broader market. A little bit stronger.
You're about 84 points were almost 2/3 of a percent.
And Tesla is one of those names on the move today. Some improving sentiment on Wall Street. You've got Tesla at 271 bucks and change per share, jumping a little more than 9% on the session. And that's your market update.
The Bank of Canada is back on pause, but are there are no signs of the economy cooling to keep it from hiking rates again?
Joining us now to discuss is Leslie Preston, Senior economist at TD. Great to have you back on the program.
>> My pleasure.
Great to have you on because I want to take the temperature. A lot happening last week in terms of not only hearing from the Bank of Canada, getting the pause from them, we have labour market information, and two days later, more jobs than expected. How do we run the cells of the calculus and try to figure out where we are headed?
>> Well, I think I will start the last thing you mentioned there on the job market.more jobs and were expected but I think when you dig a little deeper, under the hood, you see a lot of those jobs were self-employment which can be great for an individual to be self-employed, but we generally don't think of that as a sign of economic strength.
When we look at private-sector jobs,that trend continues to slow, so you characterize the job market as job growth is slowing and the fact that the unemployment rate remained at 5.5%, which is an uptick from the pandemic rebound low as consistent with a labour market that's cooling gradually.
>> A lot has been said to about while we do get, if you do get a month of labour market gains, which we did, so there good reasons to dig beneath that headline number, also migration, did the rate at which the population is growing compared to the labour force growth?
>> Exactly, I think market watchers and forecasters need to adjust their expectations of thinking a typical month, 15 to 20,000 jobs, that number is higher now.
That said, I think economists and forecasters who forecast this number a month ahead were looking for a bigger slowdown than they saw it, so 40,000 new jobs was just sort of keeping pace with growth in the population, but forecasters had expected it to be more like 15 to 20, so that was the upside surprise there, but still on net, I think when you look at the characteristic of the job gains underneath and that, Canada's labour market data is always volatile and the unemployment rate has ticked up in recent months, so I think the fact, to my mind, that it didn't give back, shows that this cooling we've seen in recent months in the labour market is a bit more persistent.
>> That was Friday. I feel we have to roll back in time because we got the rate decision on Wednesday, but we didn't hear from the bank really apart from the statement until Thursday and that speech in Calgary that the Gov., Tiff Macklem, gay.
Anymore colour on that as to what they are thinking? I thought it was one of those days where whatever you want the headline to say, you could find something in that speech.
>> Yeah, that certainly the case. The Bank of Canada is not a tricky point in terms of setting monetary policy.
They know they have raised interest rates a lot.
They know that the impact of all that monetary tightening is still working to the system.
At the same time, they don't want markets to get ahead of themselves and start pricing and cuts to aggressively because inflation still needs to come down. They want to keep market interest rates elevated to help enable that to slow, but overall, I think it's interesting you use the word pause in your first question and I think Gov.
Macklem was very careful not to use the word pause in any of his or March.
>> Don't call it a pause.
>> We have a situation earlier in the year when they were on pause and housing reignited momentum in the housing market which the bank does not want to see, things started to pick up.
But I think they are in wait-and-see mode definitely.
The next couple of data releases particularly on inflation are very important to confirm that we are continuing to see that gradual slowdown in inflation.
Well, I mean, friendly, the bank would prefer perhaps more rapid slowdown in inflation but we are expecting inflation to continue to come down as economic growth slows. So we think that, or TD Economics view is that the Bank of Canada is at the height of the rate hiking cycle, but they are going to maintain this hawkish stance and rhetoric until they are more convinced on inflation.
We have a forecast for growth to slow quite a bit in the second half of the year and into next year, and we think that will be enough to turn the temperature down on inflation and enable the Bank of Canada to stay on hold for a prolonged period of time.
>> We are going to get another inflation print in the coming days out of Canada. The thing I found interesting about the statement that came at the rate decision last week is that they said, don't excited to be, and I don't think they were told this would be a straight path from up high to download,you get a bit of a bomb, we got back about 3% in the summer, a bit of a warming on gasoline prices, could be a bumpy ride here?
>> It could and the bank was wise to warn about that because we are expecting headline inflation in August to take up to 3.7%.
He mentioned being back above three, so said to get a little further above 3% and that's what you mention on those higher gasoline prices that we've been seeing at the pump reflecting higher oil prices in international markets.
that's headline inflation. The bank focuses, when they are setting monetary policy, on their core measures of underlying inflation because oil and gasoline are one of those places where they swing up, they swing down and could provide a misleading signal on where inflation is headed so we do expect that the core inflation measures will continue to decelerate slightly, but on a year on year basis, to remain above 3%, so sort of what we have been seeing which is core inflation is coming down but it's very slow. Sort of the easy gains and weaker inflation are really in the rearview mirrorand it's those services prices that have been quite hot and we need to see those gains cool and that's only being happening slowly.
That's our view. If we see A much different outcome, as I say, the Bank of Canada's kind of at a critical juncture.
If the report comes in a lot hotter than we are expecting,we might be starting to consider whether we would see the bank hike again.
So we are very much, us and the Bank of Canada, very much in data dependent mode right now.
>> My next question for you is going to feel like to be the gun if we are talking about harder than expected economic data, the bankcould raise again if they had to, but we get this question a lot, when will they start cutting? When do we get the cuts?
>> I think those are long way away and I think the Gov.
was right to say it's way too early to be talking about that. Given the last question you in our discussion,the potential that they could hike again. We don't think they will be ready to cut into the middle of last year until they see a more convincing slowing and inflation and inflation kind of on a three month annualized basis getting much closer or that they can see that inflation is headed closer to their 2% target.
> We are going to get the Fed later this month to, their interest rate decision.
Obviously, it's a huge market mover globally.
Are they sort of in the same camp as the Bank of Canada or do they have a sort of different path ahead?
>> Well, from the perspective of our forecast, it's a very similar path.
We also expect that in line with our economic forecast for the US economy to slow not so much in the third quarter but come the fourth quarter of this year for economic growth to slow, that the Fed is on hold, but again, in data dependent mode, we have seen some more encouraging slowing in the inflation metrics on the US side.
Now, US inflation got to a higher point in Canada so they've kind of had further to come down, but there are we have seen the labour market gains slowly in the United States and we think there is a… The Fed is on high alert for renewed inflation pressures or if they don't see the cooling they are expecting in the labour market.
> Interesting times.
A lot at stake.
We are going to get your questions about the economy for Leslie Preston in just a moment 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.
First Quantum minerals among the best performing stocks on the TSX today. The copper producer reached 1/11 hour labour agreement to avert a strike at its mine in Panama.
the strike was scheduled to start over the weekend at its Cobre Panama copper mine. You can see the shares that were feeling the pressure of that overhang last week at 4 1/2% today.
You've got shares of Twinkies maker Hostess Brands and Smalley today, the company being acquired by Jam and peanut butter maker, J.M. Smucker, for some US$5.6 billion including debt.
The US food industry has been going through consolidation phase as companies or for growth in a post-pandemic world. You see J.M. Smucker's down about 6% but hostess, definitely pop on the steel, 3350 per share, up on the news.
Qualcomm says it will continue to supply 5G modems for Apple iPhones through 2026. This is somewhat unexpected development as Apple develops its own motive for smart phones but they are apparently not ready. Wall Street analysts had expected Apple to start using their own modem technology as early as next year.
Qualcomm shares got a boost on the open and they are holding onto them. At 109 bucks and change per share, their of the 3 1/2%. A quick check in on Bay Street and Wall Street. We'll start here at home with the TSX Composite Index. A triple digit gain of 123 points, almost 2/3 of a percent to the upside to start the trading week.
So the border, after a bit of a challenging one last week, that shorten holiday weekend, got that brought a read of the American market, the S&P 500, we will be generous and call the 17 points jump, a little more than 1/3 of a percent.
We are back with TD's Leslie Preston, taking your questions about the economy so let's get to that.
Someone wants to know how we here in Canada economic -wise are stacking up against the United States.
>> That's really an interesting story. The US economy has been impressively resilient so far this year. First couple quarters of economic growth running around 2% which, in normal times, you think in real terms, that's really nothing to write home about but in an economy that's seen such substantial monetary tightening over the past 18 months, it is, you know, a sign of resilience. Canada, on the other hand, it's been a bit more of a roller coaster when it comes to GDP. We had that great first quarter number, very strong growth, and the second quarter we actually saw a very slight contraction.
Now, there were a lot of special factors in the number.
You had strikes, wildfires, that were sort of distorting the signal a bit but still underlying we think we saw weaker growth in Canada. So you know that matters heading into the third quarter.
The US is looking to have growth potential is high as 4% in real terms in Q3 in the summer quarter. Growth has been coming in quite strong there.
Where is Canada, we are looking at more like sub 2%.
So we are seeing greater resilience in the US economy.
Canada is seeing more solid signs of slowing and, as I mentioned, the unemployment rate is picking up a bit we have seated rise to 5 1/2% in recent months whereas the US, the labour markets been holding steadier.
Done employment rate has oscillated up and down a bit from month-to-month.
Maybe the beginnings of a slight upturn. But Canada is a little farther along on the labour market slowing process that we expect to unfold.
> I don't know whether to be concerned about that or not, personally. When I think about how my, and you understand economics much better than me, but the US, being our biggest trading partner, their economic health affected hours.
Is the fact that we are liking the Americans cause for concern or are we just getting the job done?
>> We are coming at the slowdown with very different sort of set of hands that we have been dull.
The US economy, this consumer had a much larger cushion, you might have heard about excess savings, it's basically just the pandemic nest egg that consumers broadly built up when they were staying home and not spending money.
The US had much more direct fiscal stimulus to household, sending out several rounds of checks.
Canada, we had generous programs like CER BU but we didn't really transfer money to people who still had their jobs which occurred in the United States.
Some Americans had a much larger cushion of excess savings to draw down from.
Canadians are also much more highly indebted than Americans which is a key factor that we think is starting to way.
You are seeing it in survey data that consumers are being more cautious.
Maybe the people who hold mortgages, they haven't renewed yet but they might be looking ahead to their mortgage renewal and might be thinking I need to start cutting down on my spending in other areas because I'm going to have to foot a larger mortgage bill when it comes up. So that higher indebtedness increases Canadian sensitivity to interest rate increases so will you think that's a big part of why Canada is slowing a bit more and sooner than the United States is because Canadians have a greater sensitivity to rate hikes due to their high indebtedness. Americans also, after the global financial crisis, had a huge deleveraging after their housing crash and they haven't really levered up since then.
So debt payments as a share of disposable income is much lower in the United States and also it differences in the mortgage market, most Canadians have a five, you three are for your mortgage term.
Americans luck and for much longer, so they are still enjoying the benefit of their lower rates if they locked in either during the pandemic were immediately prior. Where is Canadians on that five year cycle are starting to feel the higher rates much more quickly.
>> Yes, a mortgage for 30 years definitely takes that worry off your plate. Interesting stuff. Another question. Someone is worried about inflation staying elevated. How long could inflation stay elevated?
>> Well, the central banks are pretty bound and determined to bring inflation down.
In terms of remaining elevated, as we discussed previously, oil prices being up again, so headline inflation could remain elevated for a while. You know, inflation has remained elevated longer than economists would've thought back in 2021 when we first started seeing the surge but in many ways, the best way to bring inflation down his inflation. We are all paying a lot more at the grocery store, that's a lot of money to spend onconsumer discretionary things, retailers seetheir sales drop and they have to lower prices.
How long could it say hi?
We have another shock were more oil price increases.
That's not off the table. But we are getting to the limits of what consumers can bear in terms of higher rates, high inflation. So we do think that that weaker demand will see inflation come down and back to my point about central banks, central banks are getting quite worried about how long inflation has remained elevated because they fought hard battles in previous decades to establish their inflation targets at 2% and they, there is a big negative if they lose their credibility, that they want to get inflation back to 2%. So you know if inflation stays higher then we are currently forecasting, you are going to get more and more rate hikes and that will ensure that inflation comes back down.
> Okay, another question here from the audience. A viewer wants to get your Outlook for our currency, the loonie.
>> Oh, the loonie. The loonie has suffered a bit recently. Largely, it's been a strong US dollar story more than anything particularly negative about Canada's economy.
You've seen that US relatives economic performance to Canada and to other parts of the globe said the US dollar has done well.
Unfortunately in our forecast, we don't expect that to shift too much.
Last I checked, the loonie was at about 73 1/2 cents US. We could see it we can a little bit further down toward $0.72 later this year and we wouldn't expect the loonie's fortunes to change really until the middle of next year when the Fed starts moving towards cutting as well.
>> Finally, we might see the end of a strong US dollar story?
> That's what we are thinking.
At this point, once the Fed moves to talking about cutting rates, loosening monetary policy, then we think that will help the loonie a bit more.
>> Your bang on. 73 and has since on my screen for the Canadian dollar against the US buck.
As always, make sure you do your own research before making any investment decisions.
we are going to back your questions for Leslie Preston on the economy and just a moment's time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now look at our educational segment of the day.
Moving averages are one tool you can use when analysing a stock chart and here to show us how they work and how to use them on WebBroker is Hiren Amin, Senior client education instructor with TD Direct Investing.
Always great to see you, let's start with a bit of a primer for the viewers who are maybe not aware of moving averages, how they work.
Ask Lena to us.
>> Yeah, let's do that, Greg. Before you get into moving averages, I want to talk about trends.
I'm not talking about the fashion kind, the one that you wear or what you do on TikTok.
Although there is a theme behind it because, as investors, we are also looking for trends in the financial world and traders often look towards stock charts to identify those trends and they want to be on the right side of that trend. One of the things that's going to help them be on the right side of the trend is using moving averages. These are indicators or technical indicators, I should say, that help us gauge the trend of the stock price across time. And they also act as what we call dynamic support and resistance levels. Now, that might be a mouthful, but for the ordinary investor, that simply means is a kind of psychological ceiling and floor prices that we have on a stock.
Now I'm going to bring up WebBroker here in the background and we've got the S&P 500 ETF SPY loaded up here. I've got a chart pulled up and we are looking at our five year one day chart.
With a chart, you can see a lot of noise happening.
A bit of erratic movements. You want to smooth out these movements to be able to identify a trend quickly.
So the way I'm going to do that is I'm going to pull up the moving average. If we go into the upper indicators here and we scroll down, we are going to use our simple moving average. There are couple of different ones but this is the one you can get started with that will be the easiest for the ordinary investor there. Now once you can see that it kind of highlights it, we're going to go in here and we are going to adjust some of the settings. Remember, moving average essentially is collecting a number of data points or, in this case, we are talking about closing prices of the stock and adding them together and dividing it by the number of periods that we are looking at.
You can see this one defaults to 15 but I'm way to set it up to 200 and this is a very commonly used moving average time frame because this is a long-term timeframe to really be able to gauge the primary trend a stock might have over 200 days. I'm going to simply hit update chart.
Now you can see in my screen and I'm going to try and get as assumed in here a little bit so we can see this a bit better, but you can see this moving average and we can see the kind of trend it is and where the stock has been going. We can see through the volatile periods in COVID times and then only had a little bit of a market correction coming down where the stock price tipped below the moving average and so traders not only look at trends with the moving average but they use them as signals to trade with. One way they use them as signals as they look for these crossovers and that simply means where you see the price chart of a stock and if it drops either below or crosses abovethe moving average, that usually is a signal that it's either bearish or bullish and then they would kind of make the decision based on that. Now, I should caveat and say that you are not solely relying on just cross over to make your trade decision.
A technician would use other indicators. But in a nutshell, that's what moving averages there.
>> Great primer on the moving average. Anyone who is dabbled with them knows that you can start drilling. If you have a 200 day overlay against the 50 day overlay against the 20 day, they'll start crossing each other against price.
I start to get a little bit, located.
And you're looking for signals, as you said. Where can you look more on WebBroker about these lines crossing each other, with the signals mean?
>> Absolutely.
We just do the basic one. But if you want to learn more about those different types of crossovers adding the signals, we've got you covered here on WebBroker.
If we click on this technical tab, your first one-stop shop that you want to get to here, within the technical area, what we have is a little bit of handholding when it comes to analysing these indicators. What I'm actually going to do is within the screen, you can see an education Which will take you to the learning centre. You can learn different things here. But we can go to our indicators over here for example and you can see under the indicators we have these crossover patterns. We just did a single crossover which is the price crosses moving average which is what we described and to what it does is it gives you a little bit of a primer on what it is, how you would understand that crossover action and how you can trade it. They have trading considerations.
So it's a fantastic resource here.
You can check out those doublecrossing overs and triple crossing over his and know what they mean for your trading. Not only that, if we go to our WebBroker Learning Center and you want to level up your financial knowledge when it comes to technical analysis, we've got you covered.
You can come in here, we can go and check out our video lessons and I'm already applying a filter.
You can go on to the filters and select whatever topic you want.
In this case, we are talking about technical analysis which I've already got on. Once you got that on, it's going to queue all of the videos related to technical analysis. You're going to find one on those trends and understanding crossovers and moving averages there. So that's where you can level up your financial knowledge.
> Always great stuff. Thanks for that.
>> My pleasure.
>> Our thanks to Hiren Amin, Senior client education instructor at TD Direct Investing.
And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
now before we get back to your questions about the economy for Leslie Preston, 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.
Okay, we are back with Leslie Preston, we are taking your questions about the economy. This one just coming in the past couple of minutes. First off, great to see Leslie again. Agreed. The question would be: is there another way to fight inflation that doesn't include raising rates?
>> Yes there is. So the two sort of macro policy levers we have our monetary policy and fiscal policy. So monetary policy is raising interest rates. Also the Bank of Canada normalizing the size of its balance sheet. We don't talk a lot about that anymore but the bank acquired a lot of assets through the pandemic and they, which adds to their balance sheets so they've been doing quantitative tightening and that's monetary policy. The other side of that which, to your point, the quantitative tightening can be going on even though the policy rate isn't rising. That is still monetary tightening. The other side of that, which I suspected the question getting at, is fiscal policy. How much governments are spending. So that is the other lever, federal and provincial governments could be ratcheting back on spending and more fiscal austerity could certainly help to bring down inflation.
>> Fiscal austerity, I mean, I don't want to delve into politics in their different level, provincial, federal, but at the same time, if you start talking about austerity in times when Canadians are struggling to balance the books, that seems a bit of a tough go to.
We talk about how monetary policy, you have this fight against this and that, the fiscal side doesn't seem any easier.
>> No, it's not easier and Canada certainly facing a number of growth strains that would argue for more government spending. We've had a surge in population, which put strains on all sorts of social services and housing.
So it there are a lot of demands on the government to spend. Although the tricky thing is Canadians are struggling under the weight of higher prices of inflation but the on employment rate also remains very low so Canadians, it has, I mentioned, it's ticked up but at 5.
5%, looking over the scope of history, that's still a very tight labour market so Canadians are still working, of where we are in the cycle point, we are still in a pretty good place.
Perhaps austerity was too strong a word, but slowing spending growth, not bringing in new stimulus programs would certainly contribute to weakening inflation.
>> Okay, we better the question here.
You just mentioned briefly. What's the health of the housing market?
>> Well, since the Bank of Canada raised rates two times through June and July, it certainly has had an effect on the housing market.
I would probably characterize the housing market overall is subdued but that depends very much on where you sit or where you are living in Canada.
Toronto and Vancouver, we have pulmonary sales through August, we have seen sales and prices in those sort of higher-priced markets come down since the Bank of Canada's decision. Calgary, on the other hand, which people in Calgary may not feel this way, but relatively speaking, nationally, is more affordable as the housing market we've actually seen Calgary home sales and prices strengthen since the Bank of Canada started resuming raising interest rates, likely reflecting strengthen the resource sector, higher oil prices, more income coming into the province so it seen its housing market do a bit better.
But overall, the market subdued, the latest official data we have is from July and one measure people watch closely is the sales to listings ratio is a measure of how tight the market is and we've seen listings,. So the market, it's not in buyers territory yet but it certainly moved less in favour of sellers through July as sales fell and listings came up and we expect that to continue to be a theme through the remainder of the year for sales at the national level to continue to be weakened for prices on an average basis to continue to fall, but as I mention, it's a bit of a different story across the country with Calgary being one noteworthy big city example where the markets mean bucking the interest rate trend.
>> You mentioned earlier when the Bank of Canada went on a conditional pause, we saw the housing market go off.
I think it seem like the housing market said, oh, they've done, they've pause, let's go and in the hikes resumed in the summer and pulled back with this one save their hand, they stayed their hand last week, would that be enough to get housing going or people a little bit more cautious this time around?
>> I think the market is still digesting you know that recent 50 basis points worth of higher rates still being digested in the market.
I also think, probably more importantly, we are seeing some other economic indicators slow.
in terms of job gains not keeping up with population, we have seen consumer confidence come down a little bit.
So I think the risk of reigniting the housing market with the latest pause, as we may call her, an interest rates, is lower this time around.
>> Pause, stay of the hand, took my hand off… We've got another question here.
What impact is record immigration having on the economy?
>> Well, it's having a number of different impacts, but before I get into them, I just want to say that Canada has an aging population.
Canada needs emigrants at Guaido substantial pace year on year the sort of help us deal with our aging population.
That said, in 2022, we got one 200000 New Arrivals in Canada, new people in the country, that's more than double the pace that we saw in 2019 or the years previous. So it's been quite a surge and, in the short term, that's been a big help for employers who are having trouble to fill positions, it increase the labour supply, so the Bank of Canada certainly heard in some surveys that it's an easier to find workers.
So that's great.
But the challenge is, as I alluded to before, we don't necessarily, we can't keep up from an infrastructure perspective.
It was a big increase. Housing is what gets the most attention in the media but also things like hospital beds, even before the pandemic, Canada had a very, of the OECD, I think we were 30 1/30 fourth in terms of acute-care beds per population, so it's not just housing, it social services broadly in terms of availability of hospitals. How quickly can our social and generally infrastructure keep up with that kind of growth?
So that does prove a challenge. Also for the Bank of Canada, new consumers bring new demand. They are trying to slow inflation so that's a bit… From the monetary policy perspective, it helps increase the labour force but that's increased demand and potentially a higher inflation and higher interest rate so there's a lot of push and pull on that.
I think is a tricky thing for governments is to get that balance right.
>> Because we have long-term needs and short-term dislocations.
>> Somewhere in the middle is probably… What that level is, I don't have… It kind of depends on how quickly we can ramp up housing, healthcare, education, our capacity for all of these things that people who come to Canada need.
>> We will get back to your questions for Leslie Preston on the economy and 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.
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Let's talk agriculture. Last year, we saw elevated prices for fertilizers but they have dropped during the first half of this year, creating a challenging market for the industry. Our Anthony Okolie has been digging into a TD Securities report on the space and brings us the details. Anthony.
> Thanks very much, Greg.
As you mentioned, fertilizer prices have fallen since the peak reached shortly after the start of the rough Ukraine crisis in February of last year. There are various reasons for this. Chief among them, raw material inputs like natural gas and ammonia are considered cheaper. Countries like Russia continued to export fertilizers over the past year despite sanctions, therefore increasing global supply. Now we her fertilizer prices has also had an impact on sector performance and TD Securities notes that the most recent performance, last month, fertilizer equities were generally lower, giving back strong gains that were realized in July and, on average, the fertilizer pier group that TD Securities covers was down 5% month over month and valuations were also weaker with group member multiples mostly lower month over month. Now, despite the recent weakness, TD Securities is seeing evidence of an upturn in prices, particularly in some regions like Brazil. Potash prices in Brazil began rising in late June after falling over the past year.
prices in Brazil were up a further 4%, building on a 5% gain in July.
August prices were up 12% in the US Midwest. And according to TD Securities, the TD Securities consulting group reported that strong demand entire supply point to a rebound in China support wholesale potash prices. So despite a slow start, TD Security says that there are signs that fertilizer prices are trending higher in some regions of the world.
>> When it comes to farming, fertilizer is a significant input cost.
What have the lower fertilizer prices meant for crop prices?
>> Fertilizers are a major cause for farmers for things like corn, wheat and rice.
They require things like nitrogen, phosphorus and potassium fertilizers. But crop prices were pretty mixed over the past month. Soybeans did gain first-rate month, they were up 4% month over month in August.
However, corn and wheat are both traded lower in August.
TD Security says that weather and crop conditions had a big influence on crop prices. In fact, US crop prices exhibited a degree of strength in July on concerns over dry weather but that by mid August, improve crop soil moisture was seen in various US growing regions. And while crop condition saw some improvements during the first half of August, the percentage of key crops, that's corn, soybeans and wheat, rated as good or excellent by the USDA actually dropped during the second half of the month.
Greg?
> Very interesting stuff.
Thanks, Anthony.
> My pleasure.
>> MoneyTalk's Anthony Okolie.
Now for an update on the markets.
We are having a look at TD's advanced software, platform design for active traders available through TD Direct Investing.
This is the heat malfunction giving a view of the market movers. We are looking at the TSX 60 and we are looking at price and volume. We will start the green on the screen. First Quantum, which would be FM, is the standout, a 4 1/2% following the 11th hour agreement to avoid a strike at its mine in Panama. Had a bit of an overhang on the stock last week soyou are seeing a rise of 4 1/2%.
Materials to the upside.
Appears to be a positive day across financials but mixed on the energy space. Some names up very modestly while some down just modestly as well.
We can use the heat malfunction to screen in a number of ways. We can look at the S&P 100 as well so let's check out what's happening south of the border.
You got a bit of a dominant name down there at the bottom part, taking up a lot of real estate.
That would be tesla up a little bit more than 9%. Some positive momentum for the name and sentiment on Wall Street today. But then you've got our TX, a bit covered by the TD symbol but you got some red, that's a former Raytheon.
It's down about 7% today.
It's warning about problems with engine sent to Airbus.
You can get more information by visiting TD.com/Advanced Dashboard.
We are back there with Leslie Preston from TD Economics.
it's one we've been worried about for a while.
One may we get a recession?
>> Since last summer when the yield curve inverted, that's really when a lot of forecasters started to call for a recession.
we haven't made a recession call in our forecast, although I think it's interesting as well, forecasters disagree on the whole, whether they are calling for a recession or not. Most forecasters do have a rising unemployment rate and therefore cost so the whole recession or not recession me feel a bit academic for those people living and working in the economy because what we are calling for is a prolonged period of subdued growth and rising unemployment rate which isn't gonna feel great, it's not going to feel like boom economic times either particularly for people who lose their jobs. So we don't see the conditions necessary to call for a recession but we called for a period of subdued growth.
>> I want to squeeze this one and before the end of the show because we didn't have a chance to go through this. What percentage do you think the cost of nonfarm payrolls or the labour productivity index plays when the US Fed sets its interest rates?
>> Apologies to the questionnaire if I get Robert what I think they're getting at is I think they're talking at the employment cost Index and sort of what the Fed's preferred wage measure is that they watch.
the Fed is looking for her services inflation to come down. We have seen goods inflation come down and now they are focused on services inflation and a key part of that is the labour market. As the labour market weekends and people's demand for services it reduces, that will help inflation.
So a wage measure they like to look at is the employment cost Index because it corrects for compositional shifts in the labour market and sothose measure of wages are important to the Fed when they set monetary policy but sort of through that in direct path, they are looking at wages is an indication of the labour market or the job market going down which should help with cooling down inflation.
>> We ask the right person the question. Leslie, it was great to have you back on the program.
Hope to have you back again soon.
>> Sure thing.
> Our thanks to Leslie Preston, Senior economist at TD.
As always, make sure you do your own research before making any investment decisions.
stay tuned for tomorrow show. Andres Rincon, head of ETF sales and strategy with TD Securities will be our guest taking your questions about exchange traded funds.
A reminder, course, you get a head start with your questions by emailing moneytalklive@td.com.
That's all the time we have for the show today. Thanks for watching. We will see you tomorrow.
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