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[music] >>Hello I'm Greg Bonnell to which is 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'll take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, will discuss the state of the economy and what the Bank of Canada may be focusing on ahead of tomorrow's rate decision with TD's Leslie Preston.
MoneyTalk's Anthony Okolie will have a look at the latest US auto sales data.
And in today's WebBroker education segment, Hiren Amin will take us through some of the fundamental analysis tools available on the platform.
And here's how you can get in touch with us, just email MoneyTalk Live a TD on him or fill out the viewer response box under the video player on WebBroker.
Before we get to our guest today let's take an update on the markets.
Starting with the TSX Composite Index down almost 260 points, more than a full percent as seeing some pressure on both mining and energy names. Among the most actively traded at this hour. Any of the gold miners really are any of the mining space, let's check in on Barrick Gold right now at 2253, down a little more than 5%. Also seeing the price of crude oil continuing to pull back since we had that OPEC+ meeting on the weekend, Suncor is down a little shy of 3% right now at 51 bucks at a penny a share. Now south of the border, further signs of a cooling US economy this time of the way the front and the markets what are they worried about?
They're worried about inflation and they knew there would be some economic pain. We are starting to see some economic pain and they appear to be worried about that now.
23 points about half a percent. The tech heavy NASDAQ, how is it pacing in the broader market, roughly the same amount.
Down 1/3 of a percent. And Exxon, the Canadian energy names under pressure with crude oil prices pulling back so to the big American company, hundred 11 bucks and changeand that's a market update The Bank of Canada is preparing to deliver a highly anticipated rate decision tomorrow, but while the markets are betting on a rate cut, what signals are we getting from recent economic data? Joining us now to discuss his Leslie Preston, Senior Economist with TD.
Leslie great to have you back in the show.
>> Pleasure to be here.
>> So we know the Bank of Canada and the governors will have a lot of economic data.
We've been watching the same data to. I want to start breaking some of it down.
When we start with Friday's GDP report.
>> Yeah well Canada's economy did rebound in the first quarter of the year off of a flat performance in the fourth quarter. So that was good news. Growth was still fairly modest, 1.7% in real terms, driven entirely by the Canadian consumer.
Consumer spending was up a solid 3%.
So decent growth overall in the first quarter but less than the Bank of Canada had expected in their last forecast in the monetary policy report.
>> When you take a look at GDP reported some of the details, would you expect it was a bounce back?
Not as firm as expected but you expect that strength to continue or is not a one off?
>> It's one of these "devil is in the details" situation because much like the headline disappointed a 1.7%, consumer spending was strong as expected.
Other brother hits, inventory and trade that weighed on the headline number. So we expect that to be a bit of a reverse situation of the second quarter. We think growth will be around 2% in the second quarter, which is a decent performance for Canada and stronger than Q1 but underneath that, we expect that 3% we saw in consumer spending to come down. That we were seeing a loss of momentum and the consumer in Canada so we do think that strong consumer spending in the first quarter will be a bit of a one hit wonder.
>> Is admitted of a head scratcher up to this point? Talking with the Canadian situation where you rise, raise the cost of borrowing to a point that is supposed to slow the consumer down and then after a month there looking at these data details saying "the consumer doesn't feel like they need to slow down.
>> I think in aggregate, Canadian consumers as a whole from a macro perspective was decent growth in the first quarter but if you look at an individual and per capita perspective, most Canadians have been cutting back.
But what we have is very strong population growth in Canada. So that's been helping to boost the aggregate numbers spot when we look at the data by household, we certainly see that individual Canadian households have been economizing. One thing that makes people feel good about spending as if they have a job.
We've seen some interesting data on that front as well. Perhaps the Bank of Canada would wish that the Friday jobs report would come before tomorrow's decision.
Let's talk about what we've seen in the labour market so far and where you think it's headed.
>> We've seen some big job numbers in Canada. I think we all need to adjust our frame for what a good job number is because we had such strong population growth.
That's now showing up in these larger month on month gains in employment. But I think what's important is to focus on the unemployment rate.
In the labour force survey.
So despite the very strong monthly job numbers, people likely quoted in the media, the unemployment rate was unchanged at 6.1%.
So for April, and as you say, we will get the main date on Friday, as a study issue goes in terms of the unemployment rates, but over the past year, we've seen that unemployment rate rise just over a percentage point. So the labour market, I don't like to say "softening".
It's been more coming back into balance.
Because in 2022 when the unemployment rate was at its post-pandemic low, the labour market was very tight.
So we've seen the unemployment rate drift up to 6.1 which is still below the 20 year average on Canada's unemployment rate.
Still a fairly solid labour market, just not as hot or intense as it was back in 2022.
> I know when we get the jobs data, every month I take a look at the TD Economics report.
Not only is it about the headline number, do we gain or lose jobs stuff about we start talking about hours worked in wages as well. What we see on that front?
>> We did see some encouraging signs on wage growth. It is cool and gradually which is something of the Bank of Canada is looking for and that again is emblematic of a labour market that is coming back into balance from being very overheated coming immediately out of the pandemic.
>> Okay so that is the access to the big question. What the fight is been about all along.
Since we discovered the inflationary picture was not transitory. All these aggressive rate hikes holding on for so long to try to bring back into balance.
What are we actually seeing and inflation?
>> We have seen inflation come down.
We look at the Bank of Canada's core measures with a focus on and there were 2.
8% in April.
So the Bank of Canada target's range of 1 to 3%. You know, Gov.
Macklem has clarified, he means to percent, the midpoint.
But at least were in the range now. 2.8%.
Coming down.
We expect inflation to get pretty close to 2% by the end of this year on that year on year measure.
But if you narrow the frame into the most recent three months, annualized, inflation is below 2%.
So we are fairly confident that that year on year measure is cooling towards 2%.
>> I know from reading the work of TD Economics as well, you've done some interesting work on this. A lot of talk about shelter inflation. When you take that component out of it, we sort of reached were we needed to be for quite some time.
>> Yes and this has been a sore point with economists.
Shelter inflation is at 6.
4% year on year.
Overall, inflation, CPI is 2.7.
If you strip out shelter, inflation is not much higher than 1.2%.
And the Bank of Canada has defended shelters is very important cost for all Canadians.
We can't, they do want to strip it out entirely but it's interesting that there their previous core inflation measure used to strip out mortgage interest costs.
So if you look at that measure, we are also a lot closer to 2% inflation. So this shelter component is really what's keeping inflation above the Bank of Canada's target.
And the Bank of Canada doesn't have a lot of room to influence that in the short run.
>> So that's the big economic data points.
We've seen them in you've gone through them with an analysis.
The Bank of Canada, what we get from them tomorrow?
> Well you know, it is a close call as we mentioned, financial markets are putting about 80% on Seneca tomorrow. Our view is we think the Bank of Canada will use tomorrow to T up a rate cut in July.
This is based on you know, we thought there was a case for rate cut in Canada for several months now. But, you know, this is been a very cautious Bank of Canada, you know, they are very conscious about, you know, potentially getting surprised by another leg up in inflation.
They were cautious when they started taking rates higher to.
Some viewers may recall that in January 2022, markets were also priced for a rating.
>> They were waving them in!
Ready for them.
>> The Bank of Canada opted to not hide rakes then.
They waited in the use that January meeting to signal what they were going to do.
So as I say, it's a close call.
We certainly think that the economic rationale is therefore a cut but just given what we've seen from this bang, we think they will sort of T up a cut in the first cut will come at the end of July. To set a date.
>> Interesting stuff and a great start to the show. We will get your questions about the economy in just a moment's time.
And a reminder that you can get in touch with us any time, just email MoneyTalk Live 18 or fill out the viewer response box under the video player on WebBroker.
Now here's an update on the top stories in the business world today and a look at how the markets are trading.
>>Shares of Park Lawn Corporation are in the spotlight today. This cemetery and funeral services operator is announcing a deal to go private at $26.50 per share.
The buyers are Birch Hill Equity Partners and an affiliate of Homesteaders Life Company. The deal is valued at $1.2 billion including debt.
You can see the shares up right now but 50% of the news.
Intel is announcing new artificial intelligence chips as it tries to play catch-up to its rivals. The once dominant chipmaker has been largely eclipsed by the likes of Nvidia and A-M-D. When it comes to supplying AI equipment to tech giants such as Meta and Microsoft. Intel's announcement comes just days after Nvidia and A-M-D also announced new AI chips.
when you put it together now you have Intel down 1/2 of a percent.
Toyota's headquarters in Japan have been rated by government officials as a scandal over full T safety data grows. The automaker has apologized for providing regulators with the faulty information it has suspended production of three models.
Toyota says the safety of vehicles already sold is not affected. Rival automakers Honda, Mazda and Suzuki have also admitted to providing faulty data for safety certification tests.
A quick check in on the markets. We have an oil under pressure, gold under pressure today, we are seeing the energy names of the miners giving a lot back today weighing a lot of the topline pretty substantially.
272 points more than a full percent in South of the border, let's check in the S&P 500, bond yields are coming back but concerns with the labour market, weaker manufacturing, you have 24 point deficit, nothing too dramatic, about half a percent of the S&P 500.
We are back with Leslie Preston taking your question about the economies. First one for you here Leslie, how much divergence might we see between the Fed of the Bank of Canada if we start cutting in July the Fed waits until the fall? How does it play out?
>> There already is some divergence between the Bank and the Federal Reserve.
The Federal Reserve's policy rate, the upper bound is 5.5% of the Bank of Canada is currently at five.
So right now you got half a percentage point in divergence. We expect the Bank of Canada to cut three in 325 basis points steps.
So 75 basis points of cuts. We don't expect the Fed to start cutting until the fourth quarter of this year with only one cut. So for 2024, we expect that divergence to wide into a full percentage point. And in then a first quarter next year as a Bank of Canada continues to cut, to wide into one of the quarter-point, so, we do expect that divergence to widen.
It's not a historically unprecedented divergence, if we were to think about the typical difference between the Fed and the Bank of Canada. This would be uncommon but not unprecedented. We have certainly seen divergences of this size before. The challenge is going to be for the Canadian dollar. Because this is one of the key forces that moves the Canadian dollar.
Because the Canadian dollar has been relatively weak for a little while now. We think it was $0.73. The last time I checked this morning.
And we see the Canadian dollar depreciating to the 70 priests percent mark at the end of the year. And we could see dips below that sort of key 70 sent US psychological level with an unexpected event happening, we would expect that 70 sent Mark to be tested.
>> Surprisingly we had a question for the audience. This is the condition, we see the divergence in a weakening in our currency, at what point does the Bank of Canada, they are not targeting the loonie.
I will point of a start looking at the currency moves based on what they're doing and say maybe we should think about what were doing?
>> They certainly are not gonna say that because the Bank of Canada has emphasized again and again that they don't target the currency.
I think that's a tricky question in terms of at what point with a start because all else equal, but weaker Canadian dollar does increase inflation in Canada because we import so much of what we consume so that would raise the price of imports and raise inflation.
It is so it's a bit tricky to put out too fine a point on it. But I don't think the Bank of Canada would be overly concerned with the Canadian dollar and $0.70 or a little below that.
>> We talk about the divergence to, the fundamental core, the most economic cases been made with the Bank of Canada has been made for cases been made for cuts but not quite in the states what's happening in this country that the Americans can say we are not quite there yet but Canada is?
>> US growth has been much stronger than candidates.
Canada's economy grew at 1.2% last year.
The US is closer to 3% so economic growth has been much stronger. Now why that is as Canada's economy has been much more sensitive to increases. We have Canadian households high debt levels assessments of the aconitum economists and analysts have pointed out for years.
Canadian consumers are highly indebted and it hasn't caused too much stress for the Canadian economy but with interest rates increasing here, it has seen the Canadian consumer become much more cautious as we were talking about Canadian's consumer spending has pulled back much less indebted with these interest rates increase it's affecting relatively less.
So we've seen the US economy do much better through the last year.
>> When it comes to consumer stress in Canada, newsfeed >> These of the headlines I'm seeing right now, what's the help of the housing market?
We need a new mortgage fairly soon.
>> Yes that is a big concern for many Canadians because most Canadians, with the current mortgage would likely lock those rates in at much lower levels of four, five years ago and are to be renewing into higher rates.
And that is a key factor in our forecast for Canadian growth to remain modest for some time. But in terms of the housing market, the spring market has been relatively soft in Canada, sort of consistent with what we were expecting. We had a bit of a burst of the beginning of the year and activity.
We think once the Bank of Canada cuts rates so by the third quarter this year, we will see activity pick up again. We don't expect more psychologically, once buyers start seeing cuts, who have likely been waiting on the sidelines, they'll come back.
But affordability is just so stressed that we don't expect a big leg up in prices.
We do expect prices on average nationally to rise through the remainder of the year it's not a big move. Largely because the deterioration and affordability we've seen through the pandemic is still very unaffordable, not a lot of room for prices to rise too far.
>> Longer-term, we know we have a bit of a structural problem in terms of being able to build new housing and make homes available.
We've heard a lot of announcements in different levels of government. What will it take to get there?
Ultimately people will try to solve his questions.
If we need more homes, let's build more homes. It's not that easy.
>> I think we would applaud all levels of government who now finally, we had a shortage of housing in Canada and housings but unaffordable for quite a while in Canada.
So it's great to see that governments are doing something tacked on it. They are facing constraints. There is only so many construction workers in Canada, materials cost so much the target's governments have said are very ambitious. That's not to say they shouldn't be acting.
We've also seen the province make Moose to try to make construction easier.
But the other, probably the more impactful thing the federal government has done is in terms of low reducing the lower non-permanent resident target numbers that they have brought down.
Canada coming out of the pandemic, Canada has had incredible population growth that we haven't seen in 50 or 60 years.
Which worsens the housing shortage. So the federal government is moving to bring those target's down which should help a bit but I think it's not a problem you can solve overnight absolutely.
>> Interesting issues facing this country.
As always at home make sure you do your own research for making investment decisions.
Will get back to your questions for Leslie Preston on the economy in just a moment.
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 any time.
just email moneytalklive@td.com.
Fundamental analysis is one thing you might consider when making a possible investment. Here to walk us through some of the methods available on WebBroker is Hiren Amin, Senior Client Education Instructor with TD Direct Investing. So Hiren, if were doing fundamental analysis we may want to look at a company's book value, walk us through what that means.
let's start with book value.
>> Absolutely Greg. Great to be back.
To start a conversation with on that topic is talking about the balance sheet first.
I'm in 1/2 is WebBroker.
We will make our way to get into book value. The example we will queue up today is using Apple since it's a company that is well familiar with a lot of our viewers.
Were going to go to our "fundamentals" tab of course because were talking about a top topic under fundamental analysis and we will head over to financial statements.
As we know in the investment world, these regulations, all companies have to release at least three financial statements or release the financial statements I should say and they are comprised of three income statement, cash flow statement with the balance sheet. We will focus on them balance sheet.
Essentially the book value which is what we are going to be talking about today.
Broken up into three parts. Assets, which are what the company owns, also it helps them generate revenue okay. So assets must generate revenue for the business and then you have two other components which is the liabilities, what it owes are essentially how it moves those assets along with shareholders putting into the company.
For example the money raised through that with the shared equity banner there. Once you have this the book value itself is a measure of telling us if the company were to liquidate meaning if it were to sell everything that it owns, the assets and pay off everything that it owns, how much would be left over for the shareholders?
This way the way the calculation is done is it takes the shareholder equity this moment in time, you want to take out the preferred shares because they usually are higher in the lineup.
It back to the common shareholders, dividing by the total outstanding shares and that gives us the book value.
We don't need to see that calculation on our own, just under the data over here, you will see that in the case of Apple, it's a four dollar book value.
If we want to talk about selling everything this is a common shareholders to be left over.
Keep in mind a reference point where the market prices, to really gauge where the stock is underpriced or overpriced and really it's more book values that are going to be higher in the market price.
Dive a bit deeper to look into what's actually causing that book value, that's a quick rundown of the book value there Greg.
>> We understand book> We understand book value and how an investor might take a look at it.
Let's talk about the current ratio.
What is it and how can it be used.
> I love the current ratio.
How much inflows come in and making sure we have enough to cover what we spend.
So we go back to our financial statements against of the current ratio is essentially a measure of taking a current assets.
If we go back to our current assets.
It means everything that can be turned to cash within a year. So if you look at this measure right here, total current assets would include cash the company owns.
It would include Accounts Receivable muscles of the things. Let's say in the case of Apple about 143 million in change.
It's taking that number and dividing it by the liabilities.
These are things the company owes.
Accounts payable, expenses, looking at this number, 145. You can see these two numbers are relatively close to each other but let's go back on how industry comparison and find that number. Because that number is given to us.
If we scroll down to the section right over here under financial strength, you can see the current ratio for Apple is sitting at one. It pretty much has enough current assets for ongoing liabilities.
Where you want to worry about it as if this ratio falls below one and how far below want to go is because that would signal to investors the company might be a little bit at the risk of default.
Anything more than one is usually in a healthy position and you don't want to that ratio be too high as well.
Maybe the company is not utilizing the assets as they should there.
So that's a quick rundown Greg.
>> Some great primers there for people getting fundamental analysis.
Always appreciated herein.
A pleasure Greg.
>> That was Hiren Amin, Senior Client Instructor with TD Direct Investing.
And for more educational resources you can check out the learning centre on WebBroker or use this QR code to navigate to TD Direct Investing's Instagram page where there are more informative videos.
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 is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live!
>> We are back with Leslie Preston taking your questions about the economy in a couple of them coming in of the past few moments.
(Greg reads the question)I know this was not TD Economics research.
Is the Bank of Canada taking a look at what's happening in terms of the consumer in the end that we are talking about?
>> The Bank of Canada's primary goal for monetary policies is targeting inflation.
So over the past couple of years they have been trying to bring inflation, which was skyhigh coming out of the pandemic, back down to their target. So that's their main goal. They also have responsibilities for, you know, sort of stability in the financial system.
They put out financial stability reports or financial system review, I always get that acronym.
>> I used to get that all the time and I thought to just remember the acronym.
>> That came out in May.
So the Bank of Canada is watching sort of the health of household debt very closely from a financial stability perspective.
And I think it's important to remember when you see certain delinquency rates rise that most consumer delinquency rates whether it's mortgages or auto loans, any kind a consumer loan, were very depressed during the pandemic. Governments had such generous support programs, SERB and subsidies so we saw delinquencies go right down. They have been rising. The question is is it higher yet that it was prior to the pandemic, the delinquency rates.
For certain things we are seeing things get a little higher which is not surprising given the Bank of Canada has raised interest rates. You will see some consumers struggling and the fact that the unemployment rate has risen.
With the Bank of Canada from a systemic perspective has not flagged that they are concerned about this yet.
>> The FSR when we talk about those issues, another question now (Greg reads the question) I think Jeff watches the show every day.
We appreciate the questions and the viewership Jeff.
> I think it's a very nuanced question.
We make it a Republican Pres. but do we make it a Republican Congress? Currently we have a Democratic Pres.
but the Democrats don't have a majority in Congress which significantly limits any Pres.'s ability to get their agenda passed through Congress.
So it's really going to depend on who controls Congress, Congress has the power of the person in the United States so if we do see a Republican Pres. Trump and a Republican House of Representatives and a Senate, then the Republicans have a lot more, they can do what they want. Now, what's been interesting in recent years is Republican sometimes struggled to agree on what they want. We saw that with when they were trying to choose a speaker not too long ago. So it's not… There's not a narrow consensus. Now, in the previous Trump administration, we certainly saw policies that were inflationary.
There were tax cuts, at the same time as there were spending increases and tariffs.
So those were all things that acted to increase inflation.
Certainly, hearing a lot of the same ideas now, I mean the deficit is larger now than it was prior so it will be interesting to see whether the ranking file Republican members of Congress and senators would be on board with tax cuts that expand the deficit further and ditto for spending, particularly in an environment where they've been previously critical of the current Democratic administration for fanning the flames of inflation. Certainly tariffs are likely to be on the agenda with Pres. Trump, that's one of his, you know, favourite policies. But you know, were seeing that from the Biden administration too.
So likely a greater extent of Trump. So it's tough to say cut or dry, will a Republican administration be inflationary.
Because it depends on the makeup of Congress and you know, which policies ultimately are pursued. But certainly we can look at the previous Trump administration and say that many of the policies overall were inflationary.
>> Writing on November and it will be a long Summer and early fall into that vote.
Another question from the audience, (Greg reads the question) you would expect if production comes back to these shores there would be some sort of boost.
>> Yeah, we hear a lot about onshoring and the even newer term, friend assuring that is club the past couple years, I think often we hear in Canada, it's really a phenomenon that we've been seeing more in the United States.
The Biden administration and even previous policies before that have passed incentives for American companies to bring production, more production onshoring the US and we have seen evidence that this is occurring.
Also a lot of government incentives in the green manufacturing, electric vehicle and semiconductors, all of this is help to spur things on. At the same time, there are cyclical forces that have been working against the manufacturing sector. Interest rates are high, economies are slowing also coming out of the pandemic, there has been a more normalization of goods consumption.
You know, manufacturing ultimately producing goods.
So interestingly yesterday we got the ISM manufacturing sentiment index for the US which is always a very closely watched indicator and it was a bit weaker.
So, you know, we have seen some of this onshoring occurring, overall for manufacturing, it is in a cyclical weak spot right now.
And Canada, a little bit more in the US, when you look at output for manufacturing in Canada and the US, the US has been pretty flat over the past six months to a year.
Canada is been down cyclically tougher times we would expect to start improving as interest rates start falling and growth in the overall global economy starts picking up again.
> Interesting stuff. We'll get back your questions with Leslie Preston on the economy in just a moment's time.
Always do your own research before making any investment decisions and a reminder that you can get in touch with us at any time.
the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live!
>>US new vehicle sales in May surprised to the upside amid higher incentives and improved inventory. Anthony Okolie joins us with a TD Economics report on the latest sales numbers and their outlook for the industry.
> Pretty good numbers in May.
US vehicle sales were up 7% month over month to just under 16 million annualized units.
When you look at the adjusted sales volumes, they were up nearly 5% above year levels.
This strong make points to industry momentum leading into the Summer.
Now, some of the key drivers, Greg mentioned them at the top of the show, a solid wage growth for one of the US, that's really helping improve affordability for many Americans.
Higher inventory levels as well.
We are seeing supply improvements, that is a day's supply of inventory, rising to 51 days of April.
That's up from 48 in March. Also seeing more aggressive dealmaking and incentives as well.
That is helping to bring more more consumers on board.
Those have those factors help push may sales and pace slightly above forecast for May.
That was reflected in the average daily selling rate which averaged about 55,000 cars sold over 26 days.
That's .8% above the same period of one year ago.
If we break it down by vehicle type, we are seeing some mixed numbers here. Taking a look at passenger sales, there down over 1% year-over-year.
However, light truck sales rep more than 6%.
That was really boosted by demand for crossovers and pickup trucks in the month of May.
Keep in mind, light trucks actually accounted for by 80% of last month sales.
That's up to 76% in shares just one year ago.
As a side, I want to talk a little about the EV space.
We are continuing to see greater competition of that space.
Also seeing slowing demand for electric vehicles because that's been a theme we've talked about here on the show.
That really hurt may sales for electric vehicle makers and we saw the likes of Tesla, including EV startups like… A year-over-year sales all posted lower.
As a result of the weakness in the EV sector we are seeing a lot of US automakers pivoting to producing and focusing more higher-margin hybrids as well as gas parts.
In conclusion overall, the US vehicle market continues to hold up well despite consumers pulling back on spending. But TD Economics is that affordability challenged will continue to be a her big hurdle for the industry particularly as the industry struggles to get to its pre-pandemic levels about averaging 17 million units during the year. Greg?
> Obviously cars are very big ticket purchase item.
What is TD Economics thinking in the near to medium term?
>> I think affordability continues to be an issue.
We've seen elevated financing costs plus cumulative hikes in auto prices over the past couple of years.
That's expected to keep potential buyers on the sidelines now.
With the Federal Reserve expected to hold interest rates steady through the next quarter, sales growth are likely to stay moderate over the coming months according to TD Economics.
>> Interesting stuff. Thanks Anthony.
MoneyTalk Live's Anthony Okolie.
Now for an update of the markets.
We are having a look at TDs advanced dashboard, a platform designed for active traders available through TD Direct Investing. Were looking at the heat map function here, which gives you a view of the market movers on the TSX 60 by price and volume.
TSX numbers under pressure, you are not seeing a lot of green on the screen. The price of gold down a percent, silvered animals 4%.
Copper down almost 3%. Getting the idea here.
The basic materials where you find the minors, seeing some fairly significant selling pressure here. TECK Ressources down second half percent for Barrick Gold is down more than 5% at this hour, First Quantum down more than 7%.
Definitely weighing on the top line.
Oil and gas sector is not doing us any favours today when it comes to the TSX Composite Index.
Suncor down a little bit more than that, it's interesting though even some of the uranium places Gullo Cameco represented, Denison Mines is not part of the TSX 60 but it is down about five or 6% of the last time I checked as well.
The financials are running to the rescue and you put all that together and have some significant downward pressure more than a percent right now with the TSX comp said.
Let's check in south of the border and see what's happening there.
Further signs of a weakening US economy whether it's a labour market or manufacturing and we were talking with Leslie just a moment ago.
Mixed bag down there for the S&P 500 doubt about 1/3 of a percent.
We are seeing particularly mixed technology spaces, AMD pulling back about 2% were as Nvidia, taking up so much territory.
Not doing much today.
Some weakness in the financials on Wall Street.
Back now is Leslie Preston from TD Economics.
Let's take another question now from the audience.
Someone wants to know if changes to student immigration policy in this country have a lasting impact?
>> I mentioned that campus population growth really surged coming out of the pandemic. We had expected population growth to slow over the next couple of years anyway but with the policy changes, the federal government's made, we expected to slow it a little faster.
So that will slow labour force growth it will also have an impact on the rental market, we do think that will help bring the tightness in the rental market down a little bit. Not a huge, it's not going to solve the problem. But it will help.
>> Longer-term, we know that demographically speaking, the boomers dominated everything. Because they were such a large cohort. At the end or into retirement now, depending on which end of the spectrum thereon, the whole point of the immigration was to make sure Canada has a population that thrives going forward.
Will they be able to bring all that stuff in the balance?
Too many people came in, big structure on our housing, but long-term this economy needs people.
>> It's absolutely about striking the right balance. I think it's important to know that there's different types of immigration.
Permanent residence in the growth recently has really been on the non-permanent residence side.
And the government has kept its immigration sort of official permanent resident immigration target syntax. They haven't brought those down. So it's a question of, you know, yes. I think everyone agrees the camera has an aging population. We need immigrants to keep our economy going, you know, people to work in sectors of the economy that are shortstaffed.
So it's just a question of finding that balance and so the previous immigration target's for permanent newcomers to Canada have not been changed.
And those target's are relatively solid.
If this nonpermanent student programs that have gotten a little bit out of hand but the numbers of gotten quite large. That they're bringing those back down.
>> We are out of time for questions but before we let you go obviously we are on the eve of a fairly significant Bank of Canada, whether a hawkish holder a cut or whether they gave us a high interest… >> Suffer tomorrow, we are expecting, we think there is a good chance of the Bank of Canada disappoints markets and keeps rates unchanged.
But we don't think Canadians left way too long for a cut. We do expect the Bank of Canada to cut rates in July. We think they will take the opportunity tomorrow to signal more directly that rate cuts are imminent.
>> Leslie always great having you here.
Enjoyed our conversation and look forward to our next one.
>> My pleasure.
>>Our thanks to Leslie Preston, Senior Economist with TD. As always be sure to do your own research before making any investment decisions. Stay tuned on Wednesday's show, Andrew Kelvin, head of Canadian and global rates strategy at TD Securities will be our guest breaking down that Bank of Canada rate decision. And a reminder that you can get a head start, just email moneytalklive@td.com.
Let's all the time we have for today's show. Thanks for watching and 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'll take you through what's moving the markets and answer your questions about investing.
Coming up on today's show, will discuss the state of the economy and what the Bank of Canada may be focusing on ahead of tomorrow's rate decision with TD's Leslie Preston.
MoneyTalk's Anthony Okolie will have a look at the latest US auto sales data.
And in today's WebBroker education segment, Hiren Amin will take us through some of the fundamental analysis tools available on the platform.
And here's how you can get in touch with us, just email MoneyTalk Live a TD on him or fill out the viewer response box under the video player on WebBroker.
Before we get to our guest today let's take an update on the markets.
Starting with the TSX Composite Index down almost 260 points, more than a full percent as seeing some pressure on both mining and energy names. Among the most actively traded at this hour. Any of the gold miners really are any of the mining space, let's check in on Barrick Gold right now at 2253, down a little more than 5%. Also seeing the price of crude oil continuing to pull back since we had that OPEC+ meeting on the weekend, Suncor is down a little shy of 3% right now at 51 bucks at a penny a share. Now south of the border, further signs of a cooling US economy this time of the way the front and the markets what are they worried about?
They're worried about inflation and they knew there would be some economic pain. We are starting to see some economic pain and they appear to be worried about that now.
23 points about half a percent. The tech heavy NASDAQ, how is it pacing in the broader market, roughly the same amount.
Down 1/3 of a percent. And Exxon, the Canadian energy names under pressure with crude oil prices pulling back so to the big American company, hundred 11 bucks and changeand that's a market update The Bank of Canada is preparing to deliver a highly anticipated rate decision tomorrow, but while the markets are betting on a rate cut, what signals are we getting from recent economic data? Joining us now to discuss his Leslie Preston, Senior Economist with TD.
Leslie great to have you back in the show.
>> Pleasure to be here.
>> So we know the Bank of Canada and the governors will have a lot of economic data.
We've been watching the same data to. I want to start breaking some of it down.
When we start with Friday's GDP report.
>> Yeah well Canada's economy did rebound in the first quarter of the year off of a flat performance in the fourth quarter. So that was good news. Growth was still fairly modest, 1.7% in real terms, driven entirely by the Canadian consumer.
Consumer spending was up a solid 3%.
So decent growth overall in the first quarter but less than the Bank of Canada had expected in their last forecast in the monetary policy report.
>> When you take a look at GDP reported some of the details, would you expect it was a bounce back?
Not as firm as expected but you expect that strength to continue or is not a one off?
>> It's one of these "devil is in the details" situation because much like the headline disappointed a 1.7%, consumer spending was strong as expected.
Other brother hits, inventory and trade that weighed on the headline number. So we expect that to be a bit of a reverse situation of the second quarter. We think growth will be around 2% in the second quarter, which is a decent performance for Canada and stronger than Q1 but underneath that, we expect that 3% we saw in consumer spending to come down. That we were seeing a loss of momentum and the consumer in Canada so we do think that strong consumer spending in the first quarter will be a bit of a one hit wonder.
>> Is admitted of a head scratcher up to this point? Talking with the Canadian situation where you rise, raise the cost of borrowing to a point that is supposed to slow the consumer down and then after a month there looking at these data details saying "the consumer doesn't feel like they need to slow down.
>> I think in aggregate, Canadian consumers as a whole from a macro perspective was decent growth in the first quarter but if you look at an individual and per capita perspective, most Canadians have been cutting back.
But what we have is very strong population growth in Canada. So that's been helping to boost the aggregate numbers spot when we look at the data by household, we certainly see that individual Canadian households have been economizing. One thing that makes people feel good about spending as if they have a job.
We've seen some interesting data on that front as well. Perhaps the Bank of Canada would wish that the Friday jobs report would come before tomorrow's decision.
Let's talk about what we've seen in the labour market so far and where you think it's headed.
>> We've seen some big job numbers in Canada. I think we all need to adjust our frame for what a good job number is because we had such strong population growth.
That's now showing up in these larger month on month gains in employment. But I think what's important is to focus on the unemployment rate.
In the labour force survey.
So despite the very strong monthly job numbers, people likely quoted in the media, the unemployment rate was unchanged at 6.1%.
So for April, and as you say, we will get the main date on Friday, as a study issue goes in terms of the unemployment rates, but over the past year, we've seen that unemployment rate rise just over a percentage point. So the labour market, I don't like to say "softening".
It's been more coming back into balance.
Because in 2022 when the unemployment rate was at its post-pandemic low, the labour market was very tight.
So we've seen the unemployment rate drift up to 6.1 which is still below the 20 year average on Canada's unemployment rate.
Still a fairly solid labour market, just not as hot or intense as it was back in 2022.
> I know when we get the jobs data, every month I take a look at the TD Economics report.
Not only is it about the headline number, do we gain or lose jobs stuff about we start talking about hours worked in wages as well. What we see on that front?
>> We did see some encouraging signs on wage growth. It is cool and gradually which is something of the Bank of Canada is looking for and that again is emblematic of a labour market that is coming back into balance from being very overheated coming immediately out of the pandemic.
>> Okay so that is the access to the big question. What the fight is been about all along.
Since we discovered the inflationary picture was not transitory. All these aggressive rate hikes holding on for so long to try to bring back into balance.
What are we actually seeing and inflation?
>> We have seen inflation come down.
We look at the Bank of Canada's core measures with a focus on and there were 2.
8% in April.
So the Bank of Canada target's range of 1 to 3%. You know, Gov.
Macklem has clarified, he means to percent, the midpoint.
But at least were in the range now. 2.8%.
Coming down.
We expect inflation to get pretty close to 2% by the end of this year on that year on year measure.
But if you narrow the frame into the most recent three months, annualized, inflation is below 2%.
So we are fairly confident that that year on year measure is cooling towards 2%.
>> I know from reading the work of TD Economics as well, you've done some interesting work on this. A lot of talk about shelter inflation. When you take that component out of it, we sort of reached were we needed to be for quite some time.
>> Yes and this has been a sore point with economists.
Shelter inflation is at 6.
4% year on year.
Overall, inflation, CPI is 2.7.
If you strip out shelter, inflation is not much higher than 1.2%.
And the Bank of Canada has defended shelters is very important cost for all Canadians.
We can't, they do want to strip it out entirely but it's interesting that there their previous core inflation measure used to strip out mortgage interest costs.
So if you look at that measure, we are also a lot closer to 2% inflation. So this shelter component is really what's keeping inflation above the Bank of Canada's target.
And the Bank of Canada doesn't have a lot of room to influence that in the short run.
>> So that's the big economic data points.
We've seen them in you've gone through them with an analysis.
The Bank of Canada, what we get from them tomorrow?
> Well you know, it is a close call as we mentioned, financial markets are putting about 80% on Seneca tomorrow. Our view is we think the Bank of Canada will use tomorrow to T up a rate cut in July.
This is based on you know, we thought there was a case for rate cut in Canada for several months now. But, you know, this is been a very cautious Bank of Canada, you know, they are very conscious about, you know, potentially getting surprised by another leg up in inflation.
They were cautious when they started taking rates higher to.
Some viewers may recall that in January 2022, markets were also priced for a rating.
>> They were waving them in!
Ready for them.
>> The Bank of Canada opted to not hide rakes then.
They waited in the use that January meeting to signal what they were going to do.
So as I say, it's a close call.
We certainly think that the economic rationale is therefore a cut but just given what we've seen from this bang, we think they will sort of T up a cut in the first cut will come at the end of July. To set a date.
>> Interesting stuff and a great start to the show. We will get your questions about the economy in just a moment's time.
And a reminder that you can get in touch with us any time, just email MoneyTalk Live 18 or fill out the viewer response box under the video player on WebBroker.
Now here's an update on the top stories in the business world today and a look at how the markets are trading.
>>Shares of Park Lawn Corporation are in the spotlight today. This cemetery and funeral services operator is announcing a deal to go private at $26.50 per share.
The buyers are Birch Hill Equity Partners and an affiliate of Homesteaders Life Company. The deal is valued at $1.2 billion including debt.
You can see the shares up right now but 50% of the news.
Intel is announcing new artificial intelligence chips as it tries to play catch-up to its rivals. The once dominant chipmaker has been largely eclipsed by the likes of Nvidia and A-M-D. When it comes to supplying AI equipment to tech giants such as Meta and Microsoft. Intel's announcement comes just days after Nvidia and A-M-D also announced new AI chips.
when you put it together now you have Intel down 1/2 of a percent.
Toyota's headquarters in Japan have been rated by government officials as a scandal over full T safety data grows. The automaker has apologized for providing regulators with the faulty information it has suspended production of three models.
Toyota says the safety of vehicles already sold is not affected. Rival automakers Honda, Mazda and Suzuki have also admitted to providing faulty data for safety certification tests.
A quick check in on the markets. We have an oil under pressure, gold under pressure today, we are seeing the energy names of the miners giving a lot back today weighing a lot of the topline pretty substantially.
272 points more than a full percent in South of the border, let's check in the S&P 500, bond yields are coming back but concerns with the labour market, weaker manufacturing, you have 24 point deficit, nothing too dramatic, about half a percent of the S&P 500.
We are back with Leslie Preston taking your question about the economies. First one for you here Leslie, how much divergence might we see between the Fed of the Bank of Canada if we start cutting in July the Fed waits until the fall? How does it play out?
>> There already is some divergence between the Bank and the Federal Reserve.
The Federal Reserve's policy rate, the upper bound is 5.5% of the Bank of Canada is currently at five.
So right now you got half a percentage point in divergence. We expect the Bank of Canada to cut three in 325 basis points steps.
So 75 basis points of cuts. We don't expect the Fed to start cutting until the fourth quarter of this year with only one cut. So for 2024, we expect that divergence to wide into a full percentage point. And in then a first quarter next year as a Bank of Canada continues to cut, to wide into one of the quarter-point, so, we do expect that divergence to widen.
It's not a historically unprecedented divergence, if we were to think about the typical difference between the Fed and the Bank of Canada. This would be uncommon but not unprecedented. We have certainly seen divergences of this size before. The challenge is going to be for the Canadian dollar. Because this is one of the key forces that moves the Canadian dollar.
Because the Canadian dollar has been relatively weak for a little while now. We think it was $0.73. The last time I checked this morning.
And we see the Canadian dollar depreciating to the 70 priests percent mark at the end of the year. And we could see dips below that sort of key 70 sent US psychological level with an unexpected event happening, we would expect that 70 sent Mark to be tested.
>> Surprisingly we had a question for the audience. This is the condition, we see the divergence in a weakening in our currency, at what point does the Bank of Canada, they are not targeting the loonie.
I will point of a start looking at the currency moves based on what they're doing and say maybe we should think about what were doing?
>> They certainly are not gonna say that because the Bank of Canada has emphasized again and again that they don't target the currency.
I think that's a tricky question in terms of at what point with a start because all else equal, but weaker Canadian dollar does increase inflation in Canada because we import so much of what we consume so that would raise the price of imports and raise inflation.
It is so it's a bit tricky to put out too fine a point on it. But I don't think the Bank of Canada would be overly concerned with the Canadian dollar and $0.70 or a little below that.
>> We talk about the divergence to, the fundamental core, the most economic cases been made with the Bank of Canada has been made for cases been made for cuts but not quite in the states what's happening in this country that the Americans can say we are not quite there yet but Canada is?
>> US growth has been much stronger than candidates.
Canada's economy grew at 1.2% last year.
The US is closer to 3% so economic growth has been much stronger. Now why that is as Canada's economy has been much more sensitive to increases. We have Canadian households high debt levels assessments of the aconitum economists and analysts have pointed out for years.
Canadian consumers are highly indebted and it hasn't caused too much stress for the Canadian economy but with interest rates increasing here, it has seen the Canadian consumer become much more cautious as we were talking about Canadian's consumer spending has pulled back much less indebted with these interest rates increase it's affecting relatively less.
So we've seen the US economy do much better through the last year.
>> When it comes to consumer stress in Canada, newsfeed >> These of the headlines I'm seeing right now, what's the help of the housing market?
We need a new mortgage fairly soon.
>> Yes that is a big concern for many Canadians because most Canadians, with the current mortgage would likely lock those rates in at much lower levels of four, five years ago and are to be renewing into higher rates.
And that is a key factor in our forecast for Canadian growth to remain modest for some time. But in terms of the housing market, the spring market has been relatively soft in Canada, sort of consistent with what we were expecting. We had a bit of a burst of the beginning of the year and activity.
We think once the Bank of Canada cuts rates so by the third quarter this year, we will see activity pick up again. We don't expect more psychologically, once buyers start seeing cuts, who have likely been waiting on the sidelines, they'll come back.
But affordability is just so stressed that we don't expect a big leg up in prices.
We do expect prices on average nationally to rise through the remainder of the year it's not a big move. Largely because the deterioration and affordability we've seen through the pandemic is still very unaffordable, not a lot of room for prices to rise too far.
>> Longer-term, we know we have a bit of a structural problem in terms of being able to build new housing and make homes available.
We've heard a lot of announcements in different levels of government. What will it take to get there?
Ultimately people will try to solve his questions.
If we need more homes, let's build more homes. It's not that easy.
>> I think we would applaud all levels of government who now finally, we had a shortage of housing in Canada and housings but unaffordable for quite a while in Canada.
So it's great to see that governments are doing something tacked on it. They are facing constraints. There is only so many construction workers in Canada, materials cost so much the target's governments have said are very ambitious. That's not to say they shouldn't be acting.
We've also seen the province make Moose to try to make construction easier.
But the other, probably the more impactful thing the federal government has done is in terms of low reducing the lower non-permanent resident target numbers that they have brought down.
Canada coming out of the pandemic, Canada has had incredible population growth that we haven't seen in 50 or 60 years.
Which worsens the housing shortage. So the federal government is moving to bring those target's down which should help a bit but I think it's not a problem you can solve overnight absolutely.
>> Interesting issues facing this country.
As always at home make sure you do your own research for making investment decisions.
Will get back to your questions for Leslie Preston on the economy in just a moment.
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 any time.
just email moneytalklive@td.com.
Fundamental analysis is one thing you might consider when making a possible investment. Here to walk us through some of the methods available on WebBroker is Hiren Amin, Senior Client Education Instructor with TD Direct Investing. So Hiren, if were doing fundamental analysis we may want to look at a company's book value, walk us through what that means.
let's start with book value.
>> Absolutely Greg. Great to be back.
To start a conversation with on that topic is talking about the balance sheet first.
I'm in 1/2 is WebBroker.
We will make our way to get into book value. The example we will queue up today is using Apple since it's a company that is well familiar with a lot of our viewers.
Were going to go to our "fundamentals" tab of course because were talking about a top topic under fundamental analysis and we will head over to financial statements.
As we know in the investment world, these regulations, all companies have to release at least three financial statements or release the financial statements I should say and they are comprised of three income statement, cash flow statement with the balance sheet. We will focus on them balance sheet.
Essentially the book value which is what we are going to be talking about today.
Broken up into three parts. Assets, which are what the company owns, also it helps them generate revenue okay. So assets must generate revenue for the business and then you have two other components which is the liabilities, what it owes are essentially how it moves those assets along with shareholders putting into the company.
For example the money raised through that with the shared equity banner there. Once you have this the book value itself is a measure of telling us if the company were to liquidate meaning if it were to sell everything that it owns, the assets and pay off everything that it owns, how much would be left over for the shareholders?
This way the way the calculation is done is it takes the shareholder equity this moment in time, you want to take out the preferred shares because they usually are higher in the lineup.
It back to the common shareholders, dividing by the total outstanding shares and that gives us the book value.
We don't need to see that calculation on our own, just under the data over here, you will see that in the case of Apple, it's a four dollar book value.
If we want to talk about selling everything this is a common shareholders to be left over.
Keep in mind a reference point where the market prices, to really gauge where the stock is underpriced or overpriced and really it's more book values that are going to be higher in the market price.
Dive a bit deeper to look into what's actually causing that book value, that's a quick rundown of the book value there Greg.
>> We understand book> We understand book value and how an investor might take a look at it.
Let's talk about the current ratio.
What is it and how can it be used.
> I love the current ratio.
How much inflows come in and making sure we have enough to cover what we spend.
So we go back to our financial statements against of the current ratio is essentially a measure of taking a current assets.
If we go back to our current assets.
It means everything that can be turned to cash within a year. So if you look at this measure right here, total current assets would include cash the company owns.
It would include Accounts Receivable muscles of the things. Let's say in the case of Apple about 143 million in change.
It's taking that number and dividing it by the liabilities.
These are things the company owes.
Accounts payable, expenses, looking at this number, 145. You can see these two numbers are relatively close to each other but let's go back on how industry comparison and find that number. Because that number is given to us.
If we scroll down to the section right over here under financial strength, you can see the current ratio for Apple is sitting at one. It pretty much has enough current assets for ongoing liabilities.
Where you want to worry about it as if this ratio falls below one and how far below want to go is because that would signal to investors the company might be a little bit at the risk of default.
Anything more than one is usually in a healthy position and you don't want to that ratio be too high as well.
Maybe the company is not utilizing the assets as they should there.
So that's a quick rundown Greg.
>> Some great primers there for people getting fundamental analysis.
Always appreciated herein.
A pleasure Greg.
>> That was Hiren Amin, Senior Client Instructor with TD Direct Investing.
And for more educational resources you can check out the learning centre on WebBroker or use this QR code to navigate to TD Direct Investing's Instagram page where there are more informative videos.
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 is driving the markets? Our guests are eager to answer your questions so send them to us here at MoneyTalk Live. You can send your questions two ways: you can send us an email any time at moneytalklive@td.com or you can use the question box at the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live!
>> We are back with Leslie Preston taking your questions about the economy in a couple of them coming in of the past few moments.
(Greg reads the question)I know this was not TD Economics research.
Is the Bank of Canada taking a look at what's happening in terms of the consumer in the end that we are talking about?
>> The Bank of Canada's primary goal for monetary policies is targeting inflation.
So over the past couple of years they have been trying to bring inflation, which was skyhigh coming out of the pandemic, back down to their target. So that's their main goal. They also have responsibilities for, you know, sort of stability in the financial system.
They put out financial stability reports or financial system review, I always get that acronym.
>> I used to get that all the time and I thought to just remember the acronym.
>> That came out in May.
So the Bank of Canada is watching sort of the health of household debt very closely from a financial stability perspective.
And I think it's important to remember when you see certain delinquency rates rise that most consumer delinquency rates whether it's mortgages or auto loans, any kind a consumer loan, were very depressed during the pandemic. Governments had such generous support programs, SERB and subsidies so we saw delinquencies go right down. They have been rising. The question is is it higher yet that it was prior to the pandemic, the delinquency rates.
For certain things we are seeing things get a little higher which is not surprising given the Bank of Canada has raised interest rates. You will see some consumers struggling and the fact that the unemployment rate has risen.
With the Bank of Canada from a systemic perspective has not flagged that they are concerned about this yet.
>> The FSR when we talk about those issues, another question now (Greg reads the question) I think Jeff watches the show every day.
We appreciate the questions and the viewership Jeff.
> I think it's a very nuanced question.
We make it a Republican Pres. but do we make it a Republican Congress? Currently we have a Democratic Pres.
but the Democrats don't have a majority in Congress which significantly limits any Pres.'s ability to get their agenda passed through Congress.
So it's really going to depend on who controls Congress, Congress has the power of the person in the United States so if we do see a Republican Pres. Trump and a Republican House of Representatives and a Senate, then the Republicans have a lot more, they can do what they want. Now, what's been interesting in recent years is Republican sometimes struggled to agree on what they want. We saw that with when they were trying to choose a speaker not too long ago. So it's not… There's not a narrow consensus. Now, in the previous Trump administration, we certainly saw policies that were inflationary.
There were tax cuts, at the same time as there were spending increases and tariffs.
So those were all things that acted to increase inflation.
Certainly, hearing a lot of the same ideas now, I mean the deficit is larger now than it was prior so it will be interesting to see whether the ranking file Republican members of Congress and senators would be on board with tax cuts that expand the deficit further and ditto for spending, particularly in an environment where they've been previously critical of the current Democratic administration for fanning the flames of inflation. Certainly tariffs are likely to be on the agenda with Pres. Trump, that's one of his, you know, favourite policies. But you know, were seeing that from the Biden administration too.
So likely a greater extent of Trump. So it's tough to say cut or dry, will a Republican administration be inflationary.
Because it depends on the makeup of Congress and you know, which policies ultimately are pursued. But certainly we can look at the previous Trump administration and say that many of the policies overall were inflationary.
>> Writing on November and it will be a long Summer and early fall into that vote.
Another question from the audience, (Greg reads the question) you would expect if production comes back to these shores there would be some sort of boost.
>> Yeah, we hear a lot about onshoring and the even newer term, friend assuring that is club the past couple years, I think often we hear in Canada, it's really a phenomenon that we've been seeing more in the United States.
The Biden administration and even previous policies before that have passed incentives for American companies to bring production, more production onshoring the US and we have seen evidence that this is occurring.
Also a lot of government incentives in the green manufacturing, electric vehicle and semiconductors, all of this is help to spur things on. At the same time, there are cyclical forces that have been working against the manufacturing sector. Interest rates are high, economies are slowing also coming out of the pandemic, there has been a more normalization of goods consumption.
You know, manufacturing ultimately producing goods.
So interestingly yesterday we got the ISM manufacturing sentiment index for the US which is always a very closely watched indicator and it was a bit weaker.
So, you know, we have seen some of this onshoring occurring, overall for manufacturing, it is in a cyclical weak spot right now.
And Canada, a little bit more in the US, when you look at output for manufacturing in Canada and the US, the US has been pretty flat over the past six months to a year.
Canada is been down cyclically tougher times we would expect to start improving as interest rates start falling and growth in the overall global economy starts picking up again.
> Interesting stuff. We'll get back your questions with Leslie Preston on the economy in just a moment's time.
Always do your own research before making any investment decisions and a reminder that you can get in touch with us at any time.
the bottom screen right here on WebBroker just type your question and hit "send". We will see if one of our guests can get you the answer right here at MoneyTalk Live!
>>US new vehicle sales in May surprised to the upside amid higher incentives and improved inventory. Anthony Okolie joins us with a TD Economics report on the latest sales numbers and their outlook for the industry.
> Pretty good numbers in May.
US vehicle sales were up 7% month over month to just under 16 million annualized units.
When you look at the adjusted sales volumes, they were up nearly 5% above year levels.
This strong make points to industry momentum leading into the Summer.
Now, some of the key drivers, Greg mentioned them at the top of the show, a solid wage growth for one of the US, that's really helping improve affordability for many Americans.
Higher inventory levels as well.
We are seeing supply improvements, that is a day's supply of inventory, rising to 51 days of April.
That's up from 48 in March. Also seeing more aggressive dealmaking and incentives as well.
That is helping to bring more more consumers on board.
Those have those factors help push may sales and pace slightly above forecast for May.
That was reflected in the average daily selling rate which averaged about 55,000 cars sold over 26 days.
That's .8% above the same period of one year ago.
If we break it down by vehicle type, we are seeing some mixed numbers here. Taking a look at passenger sales, there down over 1% year-over-year.
However, light truck sales rep more than 6%.
That was really boosted by demand for crossovers and pickup trucks in the month of May.
Keep in mind, light trucks actually accounted for by 80% of last month sales.
That's up to 76% in shares just one year ago.
As a side, I want to talk a little about the EV space.
We are continuing to see greater competition of that space.
Also seeing slowing demand for electric vehicles because that's been a theme we've talked about here on the show.
That really hurt may sales for electric vehicle makers and we saw the likes of Tesla, including EV startups like… A year-over-year sales all posted lower.
As a result of the weakness in the EV sector we are seeing a lot of US automakers pivoting to producing and focusing more higher-margin hybrids as well as gas parts.
In conclusion overall, the US vehicle market continues to hold up well despite consumers pulling back on spending. But TD Economics is that affordability challenged will continue to be a her big hurdle for the industry particularly as the industry struggles to get to its pre-pandemic levels about averaging 17 million units during the year. Greg?
> Obviously cars are very big ticket purchase item.
What is TD Economics thinking in the near to medium term?
>> I think affordability continues to be an issue.
We've seen elevated financing costs plus cumulative hikes in auto prices over the past couple of years.
That's expected to keep potential buyers on the sidelines now.
With the Federal Reserve expected to hold interest rates steady through the next quarter, sales growth are likely to stay moderate over the coming months according to TD Economics.
>> Interesting stuff. Thanks Anthony.
MoneyTalk Live's Anthony Okolie.
Now for an update of the markets.
We are having a look at TDs advanced dashboard, a platform designed for active traders available through TD Direct Investing. Were looking at the heat map function here, which gives you a view of the market movers on the TSX 60 by price and volume.
TSX numbers under pressure, you are not seeing a lot of green on the screen. The price of gold down a percent, silvered animals 4%.
Copper down almost 3%. Getting the idea here.
The basic materials where you find the minors, seeing some fairly significant selling pressure here. TECK Ressources down second half percent for Barrick Gold is down more than 5% at this hour, First Quantum down more than 7%.
Definitely weighing on the top line.
Oil and gas sector is not doing us any favours today when it comes to the TSX Composite Index.
Suncor down a little bit more than that, it's interesting though even some of the uranium places Gullo Cameco represented, Denison Mines is not part of the TSX 60 but it is down about five or 6% of the last time I checked as well.
The financials are running to the rescue and you put all that together and have some significant downward pressure more than a percent right now with the TSX comp said.
Let's check in south of the border and see what's happening there.
Further signs of a weakening US economy whether it's a labour market or manufacturing and we were talking with Leslie just a moment ago.
Mixed bag down there for the S&P 500 doubt about 1/3 of a percent.
We are seeing particularly mixed technology spaces, AMD pulling back about 2% were as Nvidia, taking up so much territory.
Not doing much today.
Some weakness in the financials on Wall Street.
Back now is Leslie Preston from TD Economics.
Let's take another question now from the audience.
Someone wants to know if changes to student immigration policy in this country have a lasting impact?
>> I mentioned that campus population growth really surged coming out of the pandemic. We had expected population growth to slow over the next couple of years anyway but with the policy changes, the federal government's made, we expected to slow it a little faster.
So that will slow labour force growth it will also have an impact on the rental market, we do think that will help bring the tightness in the rental market down a little bit. Not a huge, it's not going to solve the problem. But it will help.
>> Longer-term, we know that demographically speaking, the boomers dominated everything. Because they were such a large cohort. At the end or into retirement now, depending on which end of the spectrum thereon, the whole point of the immigration was to make sure Canada has a population that thrives going forward.
Will they be able to bring all that stuff in the balance?
Too many people came in, big structure on our housing, but long-term this economy needs people.
>> It's absolutely about striking the right balance. I think it's important to know that there's different types of immigration.
Permanent residence in the growth recently has really been on the non-permanent residence side.
And the government has kept its immigration sort of official permanent resident immigration target syntax. They haven't brought those down. So it's a question of, you know, yes. I think everyone agrees the camera has an aging population. We need immigrants to keep our economy going, you know, people to work in sectors of the economy that are shortstaffed.
So it's just a question of finding that balance and so the previous immigration target's for permanent newcomers to Canada have not been changed.
And those target's are relatively solid.
If this nonpermanent student programs that have gotten a little bit out of hand but the numbers of gotten quite large. That they're bringing those back down.
>> We are out of time for questions but before we let you go obviously we are on the eve of a fairly significant Bank of Canada, whether a hawkish holder a cut or whether they gave us a high interest… >> Suffer tomorrow, we are expecting, we think there is a good chance of the Bank of Canada disappoints markets and keeps rates unchanged.
But we don't think Canadians left way too long for a cut. We do expect the Bank of Canada to cut rates in July. We think they will take the opportunity tomorrow to signal more directly that rate cuts are imminent.
>> Leslie always great having you here.
Enjoyed our conversation and look forward to our next one.
>> My pleasure.
>>Our thanks to Leslie Preston, Senior Economist with TD. As always be sure to do your own research before making any investment decisions. Stay tuned on Wednesday's show, Andrew Kelvin, head of Canadian and global rates strategy at TD Securities will be our guest breaking down that Bank of Canada rate decision. And a reminder that you can get a head start, just email moneytalklive@td.com.
Let's all the time we have for today's show. Thanks for watching and we will see you tomorrow.
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